Western sanctions hit all sectors of Russian economy Business

Goldman Sachs analysts note that 6 million of the 7.3 million barrels of crude and petroleum products exported daily by Russia travel by sea – routes now largely closed, given the war along the coast of the black Sea.

“Even a redirection of oil flows eastward would further tighten global markets, as it would require a 12-day increase in transit time, the equivalent of losing 90 million barrels,” they said.

This puts a dent in the industry’s income, and therefore in Moscow’s finances.

Industrial metals sales are already taking a serious hit: Even with sanctions exemptions, exports “have also been sharply reduced over the past week as Western buyers remain equally hesitant amid sanctions uncertainties,” says Goldman.

Retail, luxury and travel

The fall of the ruble and the lack of bank support have a direct impact on Russian households, which buy heavily imported goods, from foodstuffs to cars and durable consumer goods.

Capital Economics’ Peach predicts inflation could spike to between 15% and 20% as the extra cost of buying foreign goods with devalued rubles is passed on to households almost instantly. Not only the price, but also the supply of imports could be affected, due to the difficulty of processing payments through Russian banks.

Meanwhile, Russians’ ability to travel has also been severely curtailed as Europe and Canada have closed their airspace to flights from the country, and the United States has banned its pilots from flying over much of western Russia.

This effectively prevents the Russian airline industry from flying on many of its most lucrative routes. Most of the passenger revenue of national carrier Aeroflot, for example, came from its international operations. Before Covid, about a quarter of its revenue from scheduled flights came from travel within Europe, with a further 5% of that to North and Central America.

Even shipping is affected, with container companies such as Maersk and MSC announcing a boycott of new bookings to Russia, further isolating it from supply chains. The UK government also bans “Russian owned, operated, controlled, chartered, registered or flagged” from its ports.

Meanwhile, the oligarch class is set to be hurt by the loss of international travel and access to luxury goods, with private jets also banned in countries like the UK – removing a key privilege from the elite Russian, to travel where and when they want.