The US –led war campaign against Russia, includes financial warfare. USA has complete dominance of the global financial network. Sanctions were put in place in order to financially asphyxiate Russia and “destroy Vladimir Putin”
Political and Military Analyses
Source: Here’s how Obama’s sanctions will destroy Vladimir Putin
The timing was particular painful as it coincided with the fall in oil prices. The sanctions, however, have backfired in at least two ways:
Unintended consequence #1: Boosting of an emerging global “gold hub”
It is important to note a particularity in the Russian market: Unlike in other countries, Russian gold miners cannot directly sell their gold abroad. A domestic financial institution must be used as an intermediary for Russian gold transactions.
Source: Polyus Gold mining company article in LBMA
VTB Russia’s leading bank (but also SBER bank) absorbs the bulk of this gold, and then sells it on to the Central bank or international bullion banks.
Source: Russian central bank buys up domestic gold output as sanctions bite
VTB is a member of the London Bullion Market Association and also had a diversified client base before the sanctions. [source]
However, when the US government blacklisted VTB, many of their foreign partners implemented special control over all the Russian banking operations, including gold.
Source: VTB head says keeps good ties with U.S: Banks after sanctions
Foreign Banks, which used to purchase gold from Russian Banks, are holding off their purchases, even though gold miners are not intended targets of the sanctions.
Source: Russian central bank buys gold
Source: Russia’s central bank buying isn’t quite what you think it is
In the search for other markets for Russian gold, VTB has turned to China: VTB has now received member status the Shanghai Gold Exchange (SGE) with direct access to China’s coveted domestic market and the Shanghai Free Trade Zone.
Source: VTB Press NEWs Release
So thanks to sanctions, we now have the world’s no. 1 (China) and no. 3 (Russia) gold producers selling the bulk of their gold in one place: The Shanghai Gold Exchange (SGE).
How long until Shanghai imposes its own gold price on the world market?
Unintended consequence #2: Boosting the Moscow Stock Exchange (MOEX)
Since the start of the financial sanctions, Russian government officials have encouraged Russian companies to delist from western stock exchanges citing issues of “economic security”.
Source: Russian Bonds Gain With Stocks as Finance Ministry Pulls Auction, Paragraph “Economic Security”, Shuvalov
The “push effect” of Western sanctions was combined by a “pull effect” on the Moscow Stock Exchange which has assumed a very customer-oriented approach, adopting international standards and improving their infrastructure.
The attractiveness of the Moscow Stock Market was also enhanced by the drop in the ruble (also caused in-part by Western Santions) which made Moscow a more competitive and cost effective place to list as opposed to London or New York.
The decline of the rouble had the added benefit of boosting stock price performance. An example of this Uralki’s shares, whose shares “dropped 11% on the London market over the last year, but soared 34% on the Russian stock exchange”.
Source: Here’s why Russian companies are leaving London
Uralki is now looking to delist from the London Stock Exchange due to the fact that the volume of deals of the company’s shares on the Moscow stock exchange has been higher than the volume of deals on the LSE (London Stock Exchange).
Source: Uralki approves new buyback, may delist from LSE
Companies that have delisted from London, or are in the process of doing so are, include Polyus, FK Otkrytie, Rose Group to name a few.
Source: Russia’s London exodus as companies look east
Source: Russian companies abandon the London stock exchange in favor of Asia
Not all, companies that delist from London Stock Exchange relocate to Moscow Stock Exchange. Some are doing private deals; others are also looking to Shanghai. However, Moscow has seen increased activity, and earlier this year Moscow’s aggregate stock index had the best performance of all major stock markets. (27% MOEX, Bovespa Brazil 4%, S&P 3%) [source]
It’s most recent 3rd Q 2015 numbers show total operating income rose 52.9% Year on year , EBITDA increased 66.9% YoY, Net profit increased 71.7% YoY.
Source: Moscow Exchange 3Q2015 results
The CEO of MOEX Alexander Afanasiev stated: “We see a strong trend for trading more in Russia and more original shares”.
Source: Crimea-Induced Trading Surge Stokes Moscow Exchange Rally
So sanctions have created a thriving domestic stock market in Russia which means Russian companies no longer need to go west to raise capital…