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.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.