Analysts: impact of US sanctions will have on oil and gas, but the economy will survive

© Fotolia / Anton GvozdikovРоссийские rubles. Archival photoAnalysts: impact of US sanctions will have on oil and gas, but the economy will survive© Fotolia / Anton Gvozdikov

The US government chose the fuel and energy sector of Russia, the main pain point for new sanctions. It can create risks for the implementation of new oil and gas projects, not only in Russia, but may also affect Europe’s energy security, analysts say, business and government officials.

The last three years has taught the Russian economy to live in terms of external constraints, companies and banks used to operate in terms of sanctions, without giving up financial plans.

Economists do not expect the violent reaction of the ruble and the mass flight of investors from Russian assets in response to new round of US sanctions, the consequences of the financial market can be marginal and short term.

«There are a number of sanctions, which toughen an order of financing of banks, impose additional restrictions on the energy sector. But, in principle, given the fact that already occurred in 2014, the new sanctions are not so terrible», — says the chief analyst of Bank «URALSIB» Alexei Devyatov.

The essence of the new sanctions

The US President Donald trump on Wednesday signed a package of anti-Russian sanctions, which, in particular, expands the number of sectoral sanctions.

In particular, the new law reduces the maximum term of financing of Russian banks under US sanctions, up to 14 days, oil and gas companies, up to 60 days (now 30 days and 90 days, respectively).

In addition, the adjusted round deep water and Arctic offshore projects and oil and gas projects with hard to recover reserves that are not allowed to supply equipment and technology. If earlier it was about all these projects on the territory of the Russian Federation with the participation of sanctioned physical and legal persons, the sanctions now apply only to new projects but without georeferencing. Under the restrictions includes all new projects, in which Russian sanctioned companies owns 33% or more.

New US sanctions imply that the President can impose sanctions on persons who invest in the construction of Russian export pipelines over $ 5 million a year or $ 1 million lump sum.

In addition, sanctions can be imposed for the provision of services, technology, information support in the construction and modernization of Russia’s export pipelines, including the existing ones. The draft law separately States that the United States will continue to oppose construction of the pipeline «Nord stream-2».

Provided restrictive measures against entities that invest more than $ 10 million, or that such investments, if these investments help Russia privatize public assets for illicit enrichment of officials of the Russian government, their families and loved ones.

The Chairman of the Board German Wintershall Mario Mehren, who has opposed new sanctions, the US believes that sanctions against Russia should not be used to promote their own interests, for example, sales of American liquefied natural gas.

«I think now geo-Economics sets the rules, and we, the company, whose interests and projects she touches serve only the ball ping-pong table in it,» Meren said earlier.

The head of RSPP Alexander Shokhin also believes that the sanctions regime has used the United States as an element of unfair competition to displace Russian companies, primarily Gazprom, Europe’s energy market.

According to Deputy head of the analytical Department of the investment company SOVLINK Olga Belenkaya, although the sanctions blow aimed at the energy, even the oil and gas sector, its impact will be limited because the sanctions already apply to development on the continental shelf, the extraction of shale oil, new projects.

«A lot will depend on whether it will be possible to find contrahent within that same European or Asian company would participate in financing and technological support for these projects. If not, it will be quite negative. But for the economy as a whole – there will be a severe blow, but unpleasant,» she said.
Financial risks

The Minister of Finance of Russia Anton Siluanov expressed the hope that a significant outflow of investor funds from the Russian securities under new sanctions will not.

Buyers of a considerable part of Russian securities, including OFZs, are foreign investors, but not speculators, and institutional investors, particularly pension funds, which hold a fairly conservative policy for a long time and hold the acquired assets.

The new sanctions also provide that within six months (180 days) after the adoption of the law on sanctions against Russia, the US Congress will meet to discuss the possible expansion of restrictive measures on Russian debt.

«What can be really frustrating is the possibility of banning foreigners to hold our sovereign debt — if that happens, it will lead to a significant outflow of capital, even if these sanctions will affect new debt. It is clear that many will decide to get rid of old debt and to reduce the portfolio of Russian assets, not only OFZ,» said Devyatov of «URALSIB».

According to the head of research and forecasting ACRES of Natalia Gunpowder, the Russian economy has largely adapted to the US sanctions, and every new extension has less impact on its sustainability. The financial sector, she said, is also adapted: the share of its external debt has decreased from 13.5% in 2014 to 9% in 2017, so the impact of new restrictions on it will be negligible.Analysts: impact of US sanctions will have on oil and gas, but the economy will survive© RIA Novosti / Alexei to Dancespace in fotoboeken: sanctions helped Russia to pay attention to economic problems

«On the foreign exchange market, perhaps, after all, we can say that the market reaction is not excessive, and, perhaps, after all, there is the expectation that the Central Bank will be partly to neutralize these negative pulses for the ruble,» — says the program Director of the Valdai club Yaroslav Lissovolik.

He explained that given the fact that the weakening of the ruble could give a new impetus to inflation, the Central Bank will try to extinguish it by toughening their rhetoric and maintain relatively high interest rates. «In principle, I think that due to the actions of the Central Bank suggests that the exchange rate of the ruble is probably significantly weaken will not, thanks to this rather tough and well thought-out position of the Central Bank», — said the economist.

«The expectation that this law will be signed, and the passage in Congress was already being watched by the market, have already put pressure on the ruble. Even at relatively high oil prices, the ruble remained under pressure because of sanctions — is the geopolitical risk, the tension that may adversely impact and affect the exchange rate. In the future, this factor will exert pressure on the ruble, but much will depend on market conditions, oil prices,» — said Belenkaya from SOVLINK.
Sanctions growth is not a hindrance

Western sanctions have helped Russia to pay attention to the internal problems of the economy, which entered a phase of active growth, despite the persistence of low oil prices, said Tuesday the Minister of economic development of Russia Maxim Oreshkin.Analysts: impact of US sanctions will have on oil and gas, but the economy will survive© RIA Novosti / Alexei to Dancespace in fotobanka can suspend sanctions on the defense sector of Russia

According to him, the sanctions in the last few years, Russia has learned that it is necessary to rely primarily on themselves, to develop their own industries, development of small and medium — sized businesses- something that will not influence the external environment.

«In fact, macroeconomic policies have been designed in such a way that external shocks associated with the sanctions, had a very serious impact on the Russian economy. Therefore, it is necessary to solve their own problems, to look at what we have going on and how to develop our businesses, try to help them. And only together we will achieve success, and the sanctions we will transcend,» he said.

The Russian economy is largely already adapted to difficult external conditions and the recent extension of U.S. sanctions against Russia will not cause a substantial and irreversible damage agree the adviser of Institute of modern development Nikita Maslennikov.

«Of course, we don’t get because of the sanctions, maybe a few tenths of the annual GDP growth rate. But, nevertheless, still we can state a certain adaptation of Russian economy to these difficult external conditions», — concluded the expert.