This article will cover the reasons behind the US sanctions on Moscow Exchange.
Sanctions were designed to choke the financial lifelines of Russia and its global engagements, and thus its means and prospects for potentially waging war against Ukraine’s territorial integrity and sovereignty.
Why US Sanctions Moscow exchange
A report from 15 August 2024 provides a detailed explanation of how one of the UK’s largest brokers was sanctioned across the board in the United States and how members, directors, and employees encoded European Union values for Russians at the Moscow exchange.
According to a report by Reuters on June 12, 2024, the Moscow Exchange’s ability to use US dollars and euros was mainly targeted to undermine Russia’s ability to continue waging war against Ukraine.
Political Motivations Behind the Sanctions
The main political objective is to contain Russia’s behaviour, especially as regards its military engagement in Ukraine.
Sanctions penalize Russian officials, prevent the country from participating in the international financial order, and eventually compel it to change its behaviour globally.
In targeting the Moscow Exchange, the U.S. aims to dismantle Russia’s financial networks, decrease mortgage availability, and embrittle the nation’s economy, which should change Russia’s actions on the global map.
How sanctions are used as a tool of foreign policy
Sanctions represent an approach to foreign policy designed to achieve multiple objectives across several nations, entities, or individuals as they look to influence the affairs of those being sanctioned.
This, as earlier annunciated, may fulfil the following purposes:
Coercive: Use them to enforce a change in behaviour or policy of the relevant target.
Deterrent: Through the threat of possible sanctions, undesirable postures or behaviours are abated before they occur.
Punitive: Such actions seek to punish violators of international norms or laws.
Penal: Such aims prevent any target from being manifested and operationalized internationally.
Communicate: Actions are taken to let the nation project a stance on particular postures and receive endorsements from other countries.
It is also important to note that sanctions can include restrictions on travel, freezing of the target country’s assets, trade sanctions, and arms embargo, among others; these apply when the government has acted acceptably, including terrorism, violation of human rights, activities relating to the proliferation of nuclear weapons, aggression against other nations, etc.
Effects on the Moscow Exchange and Russian Markets
Explain the effects of sanctions on the Moscow exchange and the Russian markets:
Separation from International Capital Market and Institutions: The international sanctions permanently severed the Moscow Exchange from the global dollar economy; therefore, it does not operate within US dollars and euros.
Currency Market Isolation: The Russian currency market is a complete mess due to the sanctions. Only a pair of currencies are still in circulation, and there are only a few currencies to trade. Thus, the difference between buying and selling prices increases, making currency trading less effective.
Disruption of Trade Relations: These sanctions have led to interruptions in Russia’s trade relations with its overseas counterparts, more than a hundred million of trade;
Transaction Costs Increase: Now, transactions are conducted directly in currencies between the buyers and sellers, and in this o…
Currency Regulations: The Russian central bank controls the ruble, dollar, and euro rates today, and the dollar and euro rates are based on bank reports and transactions.
Time Value of Money: More so, the sanctions have increased regarding the economic constraints on Russia, making it worse for Russia in the war in Ukraine.
The sanctions affect the Russian economy and its ability to conduct international trade and transactions.
Global Consequences of the Sanctions
The sanctions imposed on the securities of the Moscow Exchange and the Russian markets as a whole had some global implications, which are outlined here:
Rising Commodity Prices
With sanctions came disturbances in global offerings, consequently pushing the prices of essential commodities such as oil and gas to unprecedented levels. This aspect further aggravated inflation and instability in the world economy.
Financial Markets Structure Dependency
These targets have, in the past few months, changed the trend of global financial market compartmentalization as nations and corporations have tried to find other market and payment solutions.
Economic Persona of Russia
The positions taken by Western countries have significantly dented the economy of Russia, rendering it hard to aggregate resources for its conflict in Ukraine.
Global Trade Impact
Trade between Russia and its foreign partners has broken, worth over one hundred million dollars.
US Dollar Offshore Structure Shift
This target has changed the structure of the currency markets in the past, with nations like China aggressively penetrating the markets in Russia.
The implications prove that sanctions have severe consequences for the country to which the sanctions have been directed and the global economy. Or do you have any concerns in mind regarding these global impacts?
Conclusion
To sum up, the June 12, 2024, sanctions on the Moscow Exchange by the US authorities aim to limit Russia’s ability to finance the ongoing military action in Ukraine.
These operations are intended to block financial flows, deny access to international markets, and economically alienate Russia.
The sanctions, which abandon U.S. dollar and euro trading in the exchange, greatly affect the Russian economy, especially the foreign exchange market, trade, and the nation’s economy as a whole.
The international effects of these sanctions further illustrate the scope of their impact. They can go beyond Russia and affect international commodity prices, trade patterns, and even financial systems.
In US foreign policy, such sanctions have always been viewed as an effective instrument for achieving objectives geared toward encouraging or preventing actions that breach international rules.
