The EU plans to widen economic sanctions against Russia, but London, already on rocky ground with the EU, would be hit the hardest if tougher restrictions are slapped on Russia’s big state banks.
If agreed, EU sanctions would apply to all Russian banks that are
more than 50 percent state-owned. Sberbank, VTB, the country’s
two largest lenders, are both listed on the London Stock Exchange
and have offices there.
If Russian banks get hit the ripples will be felt across the
English Channel and in the heart of the world’s financial center-
the City of London.
Between 2004 and 2008, Russia’s top two lenders raised $16.4
billion in floatations, and a ban would cost London hundreds of
millions of pounds, The Times reports.
“The real question is, why is so much of the burden — even if
it is not a massive one — falling on the UK? France and Germany
might be talking tougher, but they do not quite seem to be
following through with actions,” Raoul Ruparel, a senior
analyst at Open Europe, a think-tank, told The Times.
London has more than 50 companies that have operations in Russia
on its $3.6 billion Stock Exchange. Russian companies often
choose London for their initial public offerings, and borrow debt
from London-based banks.
“The impact on Russia would likely be mixed. It would force
companies to shift to much shorter financing and force the state
to back them up even further. Russia might also respond to try to
keep capital in Russia inside some of these companies. In any
case, there would be a hit but it wouldn’t be a killer
blow,” Ruparel said.
The new proposed sanctions also include a ban on ‘sensitive
technologies’, arms sales and energy, which Germany, France, and
Italy are closer tied to. But Britain has the most intimate
financial relationship with Moscow.
“Much of it all depends on
international cooperation. If other countries join in on shutting
off capital markets then it could be effective. But €7.5 billion
of bonds to be sold elsewhere is not a huge amount if Singaporean
and Hong Kong markets are still open to them,” Ruparel explained.
In preparation for more Western sanctions, some of Russia’s
biggest players have been setting up shop in the East. Gazprom,
the country’s largest producer of natural gas, set up Singapore listing in June.
Russia’s ambassador to Britain, Alexander Yakovenko, said
expanding sanctions to major banks in Moscow will have a
contagion effect on London, and the world economy.
More sanctions “will trigger a long anticipated endgame of
the present global crisis”, and called them “illegal,
unreasonable and counter-productive,” said Yakovenko.
In Brussels on Thursday, ambassadors discussed more sanctions
against Russia over its involvement in Ukraine, and announced
they extended the sanctions black list to 15
individuals and 18 companies.
The UK is already on the brink of making a very public exit from
the European Union after Jean-Claude Juncker was appointed President at the European
Commission, much to UK Prime Minister David Cameron’s annoyance.The UK has threatened to leave the
EU, and will hold a referendum on the matter in 2017.
Article source: http://rt.com/business/175576-eu-sanctions-uk-russia/
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