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Tuesday, March 19, 2024
March 19, 2024

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Russia’s central bank vows to support banks hit by new sanctions

The Columbian
Published:

MOSCOW — Russia’s central bank on Wednesday promised to support banks that have been slapped with new U.S. and European sanctions, a step that could tax the Russian economy in the face of hard-hitting measures designed to punish the country for its actions in Ukraine.

The move came a day after U.S. and EU officials unveiled wide-ranging steps targeted at Russia’s oil, finance and defense industries, key pillars of the country’s economic prosperity. The sanctions include restrictions on the export of key Western-produced technology that is crucial to unlocking new sources of oil for Russia’s energy-dependent state budget. And they constrict medium and long-term borrowing for most of Russia’s state-affiliated banks, which could slow economic growth as banks find it harder to finance new investments and borrowing.

“Appropriate measures will be taken in support of these organizations in order to protect the interests of their customers, depositors and creditors,” the Bank of Russia said Wednesday in a statement.

The central bank last week raised interest rates for the third time this year, to 8 percent, in an attempt to combat inflation and to encourage money to stay parked in Russia.

Russia’s benchmark MICEX stock index was up 2 percent in midday trading, a sign that investors were brushing off the consequences of the sanctions that were announced long after markets closed the previous day.

Russian officials have sent mixed signals about how they will respond to the ever-tightening sanctions regime. Foreign Minister Sergei Lavrov said Monday that it was beneath Russia to engage in tit-for-tat measures against countries that were putting restrictions on trade with Russia.

“We have no intention of following the ‘eye for an eye, tooth for a tooth’ principle,” Lavrov told reporters in Moscow on Monday. “We have politicians who are calling for that, but we still want to stay sober in this situation, and the president has stated his opinion, which we, of course, cannot help but take into account. However, becoming hysterical and striking back is probably inappropriate for a large country.”

Still, one legislator on Tuesday proposed a new law to designate nations that have applied sanctions on Russia as “aggressor countries” and to restrict the operations of their countries on Russian soil. The law, which legislator Yevgeny Fyodorov told the Izvestia newspaper he would soon propose in Russia’s lower house of parliament, would initially focus on banning U.S. consulting and auditing firms from doing business in Russia.

One of the banks whose financing has been newly restricted said Wednesday that it would continue to function normally — but that it reserved the right to ask for support from the Russian government.

“The bank is stable and does not expect a negative impact on its activities from the introduced sanctions,” the Russian Agricultural Bank said Wednesday in a statement. But “like other banks that have come under sanctions, the Russian Agricultural Bank may apply to the government of the Russian Federation with a request for support, which would be fully normal.”

Fighting has escalated in eastern Ukraine in recent days, and U.S. officials have accused Russia of providing support to rebels there and even firing directly onto Ukrainian military positions from across the border, charges Russia has denied. The first round of sanctions against Russia were issued in March after it annexed the Crimean Peninsula. The latest moves come after the downing of Malaysia Airlines Flight 17, which EU and U.S. officials say was done by an antiaircraft missile fired from rebel-held territory, provided by Russia to the pro-Russian rebels.

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