Russia: Sanctions remain one of the biggest risks – ABN AMRO

Nora Neuteboom, economist at ABN AMRO, suggests that the unpredictability of further US sanctions against Russia continues to dampen investor confidence.

Key Quotes

“Currently, markets expect a mild second phase of penalties, such as further restrictions on specific individuals and companies. However, more severe sanctions, such as cutting off trade or targeting sovereign debt and Russian state banks, could bring a major shock.”

“The extent and harshness of new sanctions in 2019/2020 will largely depend on US domestic policy developments and the position of President Trump. If the draft legislation entitled Defending American Security from Kremlin Aggression Act (DASKAA) is pushed through in its current form and sanctions on Russian sovereign debt become a real option, this will pose a severe risk for Russia’s ambitious borrowing programme, which foresees raising USD 13bn on international markets.”

“The second main risk to Russia’s growth forecast is a sharp drop in oil prices. Although unlikely, such a scenario could be triggered by a strong disappointment in oil demand growth. An unexpected fast rebound in Venezuelan crude production or Libyan oil exports, or a further loosening of sanctions against Iran could potentially also cap any upside in oil prices.”