Market Wire - Biden Applies Additional Sanctions on Russia, Avoids Hitting Energy Sector

Karl Schamotta - Chief Market Strategist, karl.schamotta@corpay.com

US President Joe Biden has imposed another set of sanctions on Russian entities this afternoon, but stopped short of using several “nuclear option” tools that might inflict pain on the broader global economy. In a speech given at the White House shortly before 2 pm today, the President said blocking restrictions would be applied against five financial institutions - including VTB and Sberbank - that control over a trillion in assets, along with a number of wealthy Russians and their family members. No sanctions were imposed directly on Vladimir Putin.

Oil markets remained a clear area of sensitivity: Biden said, “Our sanctions package is specifically designed to allow energy payments to continue. We are closely monitoring energy supplies for any disruption,” before pledging to consider a release of inventories from the Strategic Petroleum Reserve in the event of a rise in prices. He warned oil companies not to “exploit this moment or raise prices”.

Earlier today, the United Kingdom froze assets belonging to all major Russian banks operating in the country, and applied additional sanctions against more than a hundred individuals, businesses and subsidiaries. The European Union is expected to take similar actions after a meeting this evening.

But, defying extensive speculation, authorities are not trying to restrict access to the Society for Worldwide Interbank Financial Telecommunications (SWIFT) interbank messaging system. SWIFT is an international body, headquartered in Belgium, and as such, is not directly subject to US law. Nor would such an approach be terribly effective - the SWIFT system provides a mechanism for banks to communicate transfer instructions, but does not manage the movement of funds itself. China and Russia have each developed alternatives that would likely gain market share if either country were to lose access.

Global oil prices fell, with West Texas Intermediate giving up the day’s gains as the President spoke. The ruble fell below 86 per dollar this morning, but stabilized and climbed toward the 85 mark after the Russian central bank confirmed intervening in the currency markets to support it.

In the meantime, Russian forces have reportedly reached the outskirts of Kyiv, with military experts expecting the capital to fall within hours. Earlier intelligence reports suggested that a “kill list” has been established, authorizing the assassination of key figures among the Ukrainian political establishment.