Today is the day when new European sanctions on Russia will kick in today. European leaders have taken this to a completely different level this time, by putting restriction on the most sensitive sector which can backfire. The new sanctions announced will stop oil firms from raising capital in Europe. Moreover, the European firms such as Technip & Saipem, which help in the oil-drilling process are also banned to provide any services to Russian companies.
However, the European leaders have been careful in choosing the sub sector within the energy sector, as no gas company was touched at all. Given that winter is on our door step, I am sure that Russia knows how to use its leverage and despite the fact there were no gas companies involved, Russia can cut off its gas supply to Europe.
The Scottish referendum can have its own impact, although a “NO” vote is once again in the lead, according to the new polls, but due to the notorious nature of these polls and the vast majority of undecided voters, the final outcome can swing either way. It is important to state that 80% of oil is coming from Scotland to England and given that the United Kingdom is the biggest producer of oil in Europe, a “Yes” vote could make things a lot worse for the country. The success of “Yes” vote in Scotland could also stimulate a similar movement in the eastern part of Ukraine.
Mr. Cameron has taken the lead when it comes to imposing sanctions, but the important aspect is that the London market is purely inflated by foreign money, and a big part of that is Russia, so if you are going to target the most wealthy Russians, they are hardly going to invest their hard earn money in your economy.
Finally, we all know that how weak and fragile the growth is in Europe, if any, and Mr Draghi has been under immense pressure to stimulate this nest, further sanctions which could be answered by Russia by counter sanctions are only going to make matters worse.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam