Federal State Budget Institution of higher education

«FINANCE UNIVERSITY
UNDER THE GOVERNMENT OF THE RUSSIAN FEDERATION»

Chair of «Macroeconomic regulation»

Essay

Moscow
2014

Introduction 3 Main part 4 The impact of sanctions on the financial sector 4 The impact of sanctions on the industry of the Russian Federation 6 The impact of sanctions Russia in the nearest future 7 Conclusion 9

Introduction

The first sanctions against Russia were introduced on 6 March 2014, but they had a more symbolic and looked more like a friendly gesture from the West than on a real blow to the economy. The following steps restrictions for the Russian Federation have become much more significant and can cause serious damage to the Russian economy in the medium term. The effect of the sanctions were government officials, major banks, energy companies and the defense, in addition from European, American, Japanese, Canadian and Australian companies made a decision to limit the supply of technologies, weapons, minerals and other goods to the Russian market.

According to analysts, in the current conditions on the results 2014 because of the sanctions, Russia will lose about 23 billion euros, or 1.5% of GDP, in 2015, almost 75%, which will further affect the economy and will account for almost 5% of GDP. It is important to note that in such conditions greatly slow down the inflow of foreign investment in Russia, 75% of them falling on the country's membership of the European Union.

Main part

The impact of sanctions on the financial sector

Quicker just to positive and negative changes in the economy reacts financial sector. Since the beginning of the 2014 national currency in Russia fell by 17.5%. Exchange rate cash ruble against the U.S. dollar increased from 32 rubles 65 kopecks to 58 rubles 35 kopecks, as for the Euro, the exchange rate rose from 45 rubles and 5 kopecks to 72 rubles 66 kopecks.

Not long to wait and the stock exchange, which is sharply reacted to the imposition of sanctions, falling more than 200 points in just a few days. Such spikes were temporary and were mainly attributable to panic moods. In General, since the beginning of 2014, the MICEX index slipped slightly more than 70 points, in turn indicators RTS more pessimistic and approximately 270 points for 9 months.

In the middle of the summer, the Central Bank of Russia for the third time since the beginning of the year raised the interest rate to 8% per annum, which was the biggest jump since 2009. This decision was justified by the growth of consumer prices by 7.8% instead of 6.5%, which is considered the maximum in 2014 and inflation at 7.5% instead of 4% is planned.

Foreign exchange reserves of the Central Bank of the Russian Federation have decreased since the beginning of the year to $459,9 billion against $509,6 in the beginning of the year. Such negative dynamics occurs only the second time in the history of Russia since 1991 and for the first time since the end of 2009.

Significant was the decision of the Ministry of Finance on a moratorium on admission to NSPF pension contributions of Russians and extend it to 2015. Thus, due to the retirement savings of the population of Russia, the government plans to support national banks and oil & gas companies, which were under sanctions. Various sources also claim that some of this money can go to the Crimea, because the region has a population of almost 2 million people - requires a significant fiscal cost. It argues that the size of the reserve Fund of the retirement savings can range from 100 to 350 billion rubles, depending on the situation.

The impact of sanctions on the industry of the Russian Federation

The effect of sanctions on raw materials, mining, processing industries and the engineering has more long-term in nature, and can occur only after some time. It is still not possible to give specific cases significant impact of sanctions on the industry, in most situations, it all comes down to individual cases, when Russian companies are facing difficulties at work due to the lack of access to certain technologies. Most often this applies to oil and gas production, as in the exploration and drilling of Russian companies frequently resort to the services of foreign partners. So, in the middle of September, it became known that the American company Exxon and Russian Rosneft has suspended drilling in the Kara sea in connection with the sanctions. However, confirmation of this fact in the official sources are not found, later it became known that with the permission of the U.S. government, the company will continue to work until 10 October 2014, after which will curtail their activities.

Despite the sanctions, the index of industrial production in Russia in 2014 than in relation to the previous year, the negative dynamics was observed only in February and September, which is quite natural for these months.

The impact of sanctions Russia in the nearest future

In a rapidly growing population of the world and the globalization of the economy has become the most important component of any state. World markets interact and evolve as a single organism, able to respond quickly to changes. Practice typing sanctions against individual States showed that, despite the importance of their economies in the global system, "body" quickly enough to adapt to new conditions, in case of loss of a particular market.

Given the scale of the economy, to completely exclude Russia from the international system of economic relations (such as North Korea) is impossible, largely due to the raw material base. But to rely on the demand for minerals, as a fundamental matter, the entire economy is absolutely not true, and not only because they are not unlimited resources. Today, the resource-based economy is considered the most primitive and, as can be seen in practice, the greatest success in achieving those countries where private resources are largely or partially restricted.

In simple language, with a powerful resource base on the planet, Russia has a large potential for the development of the strongest economies in the world, the build process which can be severely hampered and slowed down because of sanctions. For development it is extremely important not only markets, but also new technologies, access to which may be partially or completely blocked due to restrictions.

In general, Western sanctions do not threaten the collapse of the Russian economy and is not able to greatly affect the country's further development in the near future. But still, in many respects, their action has a negative impact on future prospects and in the present circumstances the government should either negotiate with countries that have entered and joined the sanctions, or review the economic model of the entire country. In the long run, if the present trends continue, the penalties can be very "painful" to hit on the Russian economy, and ordinary Russians.

Conclusion

The Russian economy is mainly based on natural resources, and, like other resource-based economy, it is heavily dependent on the conditions of commodity markets. Low-level processing leads to a low share of value added in the final product, which severely limits the growth rate of GDP and GNP. Actually, the slow positive dynamics of these key macroeconomic indicators we are seeing now (despite the fact that sectorial limitations has not yet entered).
What are fraught sectorial sanctions against Russia, the EU and the USA? * First, it will hit industries with a high level of processing and innovative sectors of the economy and not enough developed that will lead to the aggravation of the structural imbalances; * Secondly, can suffer and energy sector of the Russian economy - the Central, basic level (EU and US are willing to withdraw previously imposed economic restrictions with Iran, which may affect the dumping energy prices).