Sanctions on Russia Hurt Everyone, Yet Americans Still Approve

While the Russian government and people are suffering from worldwide boycotts, they are not the only ones feeling the pinch. European bank stocks have dived this week as an increasing number of finance companies give Russia the cold shoulder.

Investors and lenders have been breaking their ties to Russia and hurting their own portfolios while others scramble to reassure shareholders that they will not do the same.

French asset managers and British financial service providers are among the long list of money institutions cutting links to Russia. Carmignac, also said they will not buy Russian securities and plan to divest in Russian assets they now hold. Multiple executives at the top of Russian companies have quit over the growing crisis of trust as Russian banks have been scrambling to adapt to sanctions from both governments and private institutions.

Last week, Reuters reported that regulators are getting ready for the closure of the European branch of VTB. At the same time, the German regulator, BaFin prohibited the branch from taking new Russian clients. Most recently Credit Agricole, a leading French bank, said it will examine its exposure to Ukraine and Russian accounts, valuing their current connections at $6.9 billion.

The banking index for the Eurozone plummeted 9.5% as a result of the mass pull-out from Russian financial ties and as companies begin pairing losses.

Banks have been hit the hardest and investors are looking for ways to patch over their losses. Both the US and Europe are considering a sweeping ban on Russian oil imports. Analysts say the move could drive energy costs even higher, something American voters are unlikely to favor. However, they seem to believe pressuring Russia out of Ukraine is worth it.

These divestments are just the current phase in a global push to isolate Russia on the international finance stage. Last month, the Society for Worldwide Interbank Financial Telecommunication (Swift) voted to cut certain Russian banks out of their global network. Swift is a primary mechanism for the financing of international exchange.

Russia has been feverishly looking for workarounds for the Swift ban, and as further voluntary dissociation by many independent financial institutions in Europe, the country’s financial connections crisis is reaching catastrophic proportions.

Arguably, it is the Russian working class that is being hurt the most. Russian citizens have been lining up around city blocks to pull euros and dollars out of their banks before their savings vanish. Local banks have even encouraged this. Russian citizens are facing higher prices for fuel, food, and other goods, and the punishment is not expected to stop there. Now, even Russian gold is being elbowed out of the global market.

The Kremlin warned that Americans will feel the consequences of sanctions, and its prediction is proving true as gas prices continue to rise. Despite this, between 50% and 70% of Americans say they support sanctions as a means to dissuade Putin from continuing his assault on Ukraine. At the same time, a majority of Americans say they do not trust former vice president Joe Biden.

Job growth in the US has surged as COVID restrictions carry increasingly less weight. This gives Americans reason to breathe more easily, but it seems that we are going from one financial crisis into another.

The timing of US interest in Russia comes at the very moment when fears of the disease are at their lowest point since March 2020. Just as news that the Omicron variant is as good or better than the vaccines and as Canadian truckers leverage their own sanctions against COVID mandates, the Biden administration’s interest in war kicks in at just the right time to keep the economic pressure on.

Amid all of this, Putin’s actual goals and his stated reasons for invading Ukraine get little attention. He has said that “globalist Nazis” are exerting control from their headquarters in Ukraine. With the misadventures of the Biden family in that country in mind, it does not seem unreasonable to consider the possibility that Putin does not at least believe that he is doing the right thing.

After everything we have learned since 2015 about the administrative state and its connection to DAVOS, we think a more circumspect assessment of the situation is called for.