Strategy

Ukraine-Russia Crisis Now Part Of The New "Geopolitical Normal" - Citigroup

Tom Burroughes Group Editor London 7 March 2014

Ukraine-Russia Crisis Now Part Of The New

The US bank so far sees little chance of major sanctions being imposed on Russia due to the Ukraine crisis; wealth managers will continue to gauge the chances of such measures.

Tensions between Ukraine, Russia and the West are part of the new “geopolitical normal” and so far any sanctions likely to be imposed against Russia for its actions in Crimea look set to be limited in scope, according to Citigroup.

The US-headquartered bank, in an analysis of the unfolding crisis in Ukraine following Russian forces’ occupation of Crimea, said Russian military intervention looks “set to go largely unchallenged by the US and Europe, despite initial warnings of unspecified consequences”.

“However, the situation appears to remain fragile, with risks of ethnic tensions within Ukraine sparking a return to instability and further Russian military incursions,” the bank’s analysts said.

As the situation has developed, one concern relevant to the wealth management industry – which holds money from Russian clients, among others – is whether any sanctions or actions against the regime of Vladimir Putin would affect their own business. So far, concrete details of what might happen have been scarce.

“Initial suggestions that Russia would be "politically and economically isolated" now seem overplayed. Proposed sanctions floated in press reports ranged from ejecting Russia from the G8 and WTO, to imposing sanctions on Russian banks and limiting the export of high-tech equipment for energy exploration,” Citigroup said.

“Barring a further escalation by Russia, we expect US sanctions will be de minimis, along the lines of the Magnitsky Act passed by Congress in 2012 which black-listed Russian officials linked to a fraud case. This week, President Barack Obama issued an executive order that would allow visa bans on Russian and Ukrainian officials involved in the current imbroglio, but no specific names have been sanctioned and no asset freezes have been announced as of yet,” the bank added.

To view more reactions from wealth managers about the Ukraine/Russia crisis, see here.

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