Russia's central bank: sanctions 'from hell' not to surpass 2014 crisis

Russia's central bank: sanctions 'from hell' not to surpass 2014 crisis

Head of the Russian central bank’s research department Alexander Morozov, speaking at the Vedomosti forum, compared the effect of possible new sanctions against the Russian economy with the 2014-2015 situation. "In most scenarios, the effect on the economy will be much weaker than the effect we observed in 2014-2015," he said.

“We are not ready to say that all the negative consequences we will face will be painless,” TASS cited Morozov as saying. "But the effect cannot be overestimated," urged the head of the Russian central bank’s research department urged.

Morozov pointed out that the Central Bank has the necessary tools to stabilize the financial market in various situations. The regulator "can provide liquidity to the financial system, and further to the real sector, using ruble and currency refinancing," he noted. The head of the Russian central bank’s research department stressed that there are no problems with using these tools. "We have resources, our foreign exchange reserves are high," he assured.

Morozov added that the bank may halt foreign exchange purchases until the end of the year, if necessary.

The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking with Vestnik Kavkaza, urged to make a distinction between the voiced sanctions and their real impact on the economy.

“The Central Bank is absolutely right that the sanctions have not yet had any significant impact on the Russian economy. Most of the observed effects were cause by investors' concerns about sanctions, not sanctions themselves. The very sanctions have hardly touched on the Russian economy," he explained.

According to him, so far neither the banks, nor the financial structures under the sanctions, have needed any emergency assistance from the Central Bank. "More precisely, the problems of certain financial structures or businessmen are rather indirectly related to sanctions. Many companies have already received help from the state, but not because of the sanctions. Theoretically, sanctions can create difficulties for Rusal, for some structures linked to Vekselberg. But these sanctions have not yet been adopted," Sergey Hestanov noted.

"Paradoxically, but nothing scary going on so far. However, there are no guarantees that we avoid it in the future," the expert concluded.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, agreed that the Central Bank's liquidity cushion will largely help mitigate the impact of sanctions, but drew attention to the fact that the main risk is the perception of the situation by business. "Business has long-term interests, while investment is driven by an understanding of long-term prospects, not short-term rates," the expert said.

He said that it's not likely that banks and businessmen under sanctions will receive much help from the regulator. “The banking system is now frozen due to a rather high rate and the availability of a sufficient amount of ruble liquidity. Therefore, it seems to me that large injections will not be needed in the short-term period," Alexander Abramov noted.