The announced moves are the same as those mentioned in media reports in recent days. We understand that the action against the banks is along the lines of the framework established by the US on 16 July (i.e. limited to a prohibition on transactions in new equity and new debt of longer than 90 days maturity). Otherwise, the significance of the EU action is that it opens the way for a broadening of US sanctions. Otherwise, casting a broader net just two weeks after the pervious sanctions action is surprising, and shows that it would be imprudent to call an end to the current cycle of sanctions escalation. Sanctions on the financial sector are the most consequential from the standpoint of the broader macroeconomic impact. Thus, the risks to the already unexciting domestic economic growth outlook for 2H14-2015 are becoming more pronounced, and the downward pressure on RUB is set to continue.
The main source of discontent for us is that Western officials continue to threaten further sanctions. Namely, both UK Prime Minister David Cameron and US Secretary of State John Kerry made statements yesterday to that effect. The Russian financial markets are likely to remain unsettled until a credible ‘steady-state’ is attained, and investors are able to assess the impact on the macro outlook and the circumstances of individual issuers.