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The Kremlin and INF Reports: How will they change the economic and political calculus?
Relatively calm 2017. Although 2017 saw a deterioration in US-Russia political relations, it was a relatively good year for foreign businesses in Russia. The Kremlin stuck by its mantra of separating bad politics from good business.
2018 will be a lot more dangerous. The indications are that the relationship between the two countries is about to become even worse. The catalyst for this deterioration is expected to be the publication of the so-called Section 241 and 242 reports, which are required to be submitted to Congress by 29 January as per the terms of the 2 August “Countering America’s Adversaries Through Sanctions Act” (CAATSA). The Section 241 report will be a list of individuals and entities identified as being at risk of being sanctioned in the future while Section 242 will examine the consequences of adding Russian sovereign debt to sanctioned credits.
In Context: Foreign Investors in Russia
We analyzed the results of the fifty largest foreign companies operating in Russia. On average, listed companies’ stock prices have risen by 58% over the last five years, outperforming their indices by an average 1.5%. The finding disproves the notion that working in Russia has, in general, hurt foreign companies during this difficult period. This is despite the fact that the economy started to slow in 2012 and 2013 and has been in a semi-crisis mode since early 2014.
In Context: Brexit Impact for Russia
The UK’s decisions to leave the EU will have no direct impact on the Russian economy over the short term. However, the uncertainty created by the decision will unsettle global markets for years and that will have indirect consequences for all developing economies. After two years of adjusting to sanctions and the lower oil price, the Russian economy and the ruble are relatively well insulated from further weakness even if growth in the UK and or the EU slides on the back of the UK exiting the union and the uncertainty that created.