Russia: Sanctions and Exclusion from SWIFT May Trigger Central Bank Liquidity Flood

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Western powers announced the nuclear option of imposing sanctions on the Russian central bank coupled with blocking Russian banks from SWIFT global payment system that led to a bank run in Russia. The Ruble has effectively been devalued by 50% over the weekend. There will be a bloodbath in the Russian market as investors divest from Russian equities. Sanctions on Russia will affect flows of energy, metals and crops. Europe is heavily reliant on Russian energy and Russia is reportedly shutting down the pipelines to the EU.

The Western financial system will be roiled by the loss of the Russian market as its exclusion from SWIFT will lead to missed payments. Financial expert Zoltan Pozsar postulated that the Federal Reserve may try to stabilize markets with its most powerful intervention: a spike in liquidity swaps, which are currently at zero. He concluded that it appears that the Ukraine war has translated into yet another Fed balance sheet-boosting crisis just like Covid, and “so the Fed’s balance sheet might expand again before it contracts….”

In a remarkable show of force and unity, western powers cast aside all their previous concerns about Russian energy export dominance, and uniliaterally announced the nuclear option of imposing sanctions on the Russian central bank coupled with targeted exclusions from SWIFT of key Russian banks.


The move has sparked a bank run in Russia, as locals scramble to pull out whatever hard currency they can get their hands on before it runs out, and is certain to trigger chaotic moves in FX and commodities when markets reopen on Monday. Already some Russian banks are offering to exchange rubles for dollars at a rate of 171 rubles per dollar on Sunday, compared to the official closing price of 83 on Friday before the European/US announcement about targeting the Russian central bank. In other words we are looking at a 50%+ devaluation of the Ruble. Additionally, widespread announcements of divestments in Russian equities by the likes of BP pls and the Norwegian sovereign wealth fund mean that the Russian market will be a bloodbath on Monday.

As Bloomberg notes, commodities are also heading for a manic start to the week as investors scramble to assess how the West’s latest sanctions on Russia will affect flows of energy, metals and crops.

The coming days are fraught with event risk for crude, even aside from the sanctions fallout. There’s a midweek meeting of OPEC+ on output; the Biden administration may tap stockpiles; and Iranian nuclear talks look to be nearing a conclusion. On top of that, American crude inventories at the key Cushing hubcould sink to the lowest since 2014 if there’s another modest draw.

Meanwhile, Goldman Sachs said that despite the rally in prices, it’s unlikely OPEC+ will choose to quicken the pace at which the alliance has been restoring supplies, citing Russia’s “essential role” in the grouping.

And while Europe’s moment of unity is certainly inspiring, it doesn’t answer the question just how the continent will replace the massive amount of energy that flow every single day via the countless Russian pipelines into Europe, which are now for most intents and purposes shut.

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Jon Nellis
Jon Nellis
11 months ago

Well, it is a little uncanny if one has seen the script before, in other words follow the money. Humanity is blessed with specific gifts that lead to liberty. Liberty is susceptible to atrophy. We all have the power of our Minds, as we think as we are, what we choose to put in is what presents itself outwardly. A reflection and addendum to this by extension is the power of our Mouths. These attributes tell the world around us where we stand toward our fellow humans and both of these are creating our environment. Muscle is how we directly… Read more »

11 months ago
Reply to  Jon Nellis

Looking at live web cam in Kiev and don’t see any war going on. WTF