ASSESSMENTS

New U.S. Sanctions on Russia Make It Personal

Apr 19, 2018 | 09:00 GMT

Russian President Vladimir Putin (left) shakes hands with Vladimir Bogdanov, CEO of Surgutneftegas oil and gas company, in Moscow on April 30, 2016.

Russian President Vladimir Putin (left) shakes hands with Vladimir Bogdanov, CEO of Surgutneftegas oil and gas company, during an awards ceremony at the Kremlin in Moscow on April 30, 2016. Bogdanov is one of the oligarchs hit by the latest U.S. sanctions.

(SERGEI KARPUKHIN/AFP/Getty Images)

Highlights

  • Recently passed U.S. sanctions against key Russian oligarchs and officials probably won't have a major effect on the Russian economy, but they will hurt key companies such as aluminum producer Rusal.
  • Given Rusal's importance to the global aluminum industry, the effects of the U.S. sanctions will extend beyond Russia, and Chinese companies are the logical replacement for the Russian giant on the international market.
  • Russia will offer financial support to relieve the affected companies and oligarchs while pushing back against the U.S. sanctions, not only through political and economic means but also potentially on the battlefield in Syria and Ukraine.

Moscow has had time to adjust to and anticipate economic restrictions in the four years since the European Union and United States first imposed sanctions. Though the latest sanctions' announcement drove the ruble down to its lowest point since December 2016 and brought the Russia Trading System index down 13 percent, both recovered within a few days. The Russian economy is stabilizing after years of recession, and the country's National Wealth Fund stood at $65.9 billion as of April 1. Finance Minister Anton Siluanov, in fact, has said that the Kremlin may actually wind up with a budget surplus this year, depending on energy revenues. The targets of the sanctions will be the ones bearing the brunt of the new restrictions, but that detail doesn't mean the Kremlin won't respond....

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