Russia Injects Cash in to Sanctioned Companies

January 5, 2015 Share Print 0

The Russian government is pumping money into big companies that are being starved for cash by Western sanctions.

In the past week alone, it invested 100 billion rubles ($1.7 billion) in Russian bank VTB and nearly 40 billion rubles ($680 million) in Gazprombank.

The two banks are among Russia’s biggest financial institutions and were barred last year from raising funds from U.S. and European markets.

The government has also reportedly given 150 billion rubles ($2.6 billion) to support a major natural gas project owned by Novatek, a massive Russian energy firm that has also been hit with sanctions.
Russia’s economy is shrinking, its currency has plunged by over 40% in the last year, and inflation is running rampant as the country struggles with Western sanctions and a drop in oil prices.

Many investors and depositors are pulling money out of their Russian accounts — weakening capital levels at the banks. This, in turn, means Russian financial institutions have less to lend to local companies, a trend that threatens to further squeeze the fragile economy.

via CNN

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.