India and Russia have suspended efforts to settle bilateral trade in rupees, after months of negotiations failed to convince Moscow to keep rupees in its coffers, Reuters reported. This would be a major setback for Indian importers of cheap oil and coal from Russia who were awaiting a permanent rupee payment mechanism to help lower currency conversion costs.
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Russia
Russia's economy contracted by 2.2% in the first quarter of 2023 in annual terms, the economy ministry estimated on Wednesday, down from growth of 3% in the same period last year, Reuters reported. The ministry estimated that gross domestic product (GDP) fell 1.1% year-on-year in March, an improvement on a revised 2.9% drop in February. Russia's GDP is expected to rebound marginally this year from a 2.1% annual decline in 2022, the result of Western sanctions against Moscow after it despatched troops to Ukraine in February 2022.
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President Vladimir Putin on Tuesday signed a decree establishing temporary control of the Russian assets of two foreign energy firms, signaling Moscow could take similar action against other companies if need be. The decree - outlining possible retaliation if Russian assets abroad are seized - showed Moscow had already taken action against Uniper SE's Russian division and the assets of Finland's Fortum Oyj. The decree said Russia needed to take urgent measures to respond to unspecified actions from the United States and others it said were "unfriendly and contrary to international law".
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The European Union is set to propose a ban on many goods from transiting through Russia as the bloc attempts to tighten the screws on the enforcement of sanctions imposed over the past year, Bloomberg News reported. he transit ban would extend to numerous technologies and other goods, including several types of vehicles, but not all items would be barred from traveling via Russia en route to third countries. The ban would be part of a new package of sanctions that’s being prepared by the European Commission. Moscow has been able to get around restrictions on several sanctioned technologies.
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The Russian ruble fell Thursday to its lowest level in a year as Moscow’s weakening oil revenues and fears over capital flight weigh on the currency, the Wall Street Journal reported. The ruble was recently down 1.7% against the U.S. dollar and was on track for its lowest closing level since April 21, 2022, with 81.6 rubles buying $1. The currency has fallen 4.4% this week against the dollar and 5.2% against the euro. The ruble’s weakness runs counter to a broader trend among global currencies, which have gained against the dollar in recent weeks.
The opening months of Russia’s invasion of Ukraine last year drove an increase in oil and natural-gas prices that brought a windfall for Moscow. Those days are over, the Wall Street Journal reported. As the war continues into its second year and Western sanctions bite harder, Russia’s government revenue is being squeezed and its economy has shifted to a lower-growth trajectory, likely for the long term. The country’s biggest exports, gas and oil, have lost major customers. Government finances are strained. The ruble is down over 20% since November against the dollar.
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Ukraine won a significant boost in its attempt to set aside a $3 billion defaulted bond after the UK Supreme Court ruled that judges need to consider the backdrop of Russia’s campaign of threatening behavior in the run-up to the annexation of Crimea, Bloomberg News reported. Britain’s top court declared that a judge should pore over Russian attempts to strong-arm Ukraine into issuing the bond, giving the green light to a full-blown London trial.
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President Biden and his top officials vowed this week to introduce additional sanctions aimed at impeding Russia’s war efforts against Ukraine. But the administration’s focus is increasingly shifting to the role that China has played in supplying Russia with goods that have both civilian and military uses, the New York Times reported. As one of the world’s biggest manufacturers of products like electronics, drones and vehicle parts, China has proved to be a particularly crucial economic partner for Russia. Beijing has remained officially unaligned in the war.
Financial leaders of the Group of Seven (G7) will meet on Feb. 23 to discuss measures against Russia that will put pressure on it to end the Ukraine war, Japan's Finance Minister Shunichi Suzuki said on Tuesday, Reuters reported. Japan will chair the meeting of finance ministers and central bank governors from the G7 nations in the Indian city of Bengaluru. The meeting will come almost a year since Russia invaded Ukraine, calling it a "special military operation". The war has raged on despite a slew of punitive measures G7 and other countries have taken against Russia.
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Russia’s economy contracted 2.1% last year, defying the worst fears of a major recession as surging commodity exports helped offset the impact of US and European sanctions imposed over President Vladimir Putin’s invasion of Ukraine, Bloomberg News reported. The preliminary result was better than the 3% decline officials expected as recently as the early fall and far short of the 10% drop some forecasters saw when the sanctions first hit just over a year ago.
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