Russian Central Bank Unlikely to React to Sanctions Over Ukraine

Bank Rossii probably won’t revise its policies in response to sanctions, central bank First Deputy Chairman Ksenia Yudaeva said, after the U.S. stepped up pressure on Russia over its incursion into Ukraine.

“The main problem we’ve had is not about the sanctions, but the psychological reaction in response to threats to impose the new ones,” Yudaeva said in an interview today in Washington. “So for the central bank the situation is going to be little changed.”

Treasury Secretary Jacob J. Lew warned last week the U.S. was “prepared to impose additional significant sanctions on Russia if it continues to escalate the situation in Ukraine.” A day later the U.S. Treasury Department added six Crimean separatist leaders, a former Ukrainian official and the natural gas company Chernomorneftegaz CJSC to the list of those sanctioned.

An expansion of sanctions against Russia would risk stoking capital flight to as much as $150 billion this year, Russia’s Deputy Economy Minister Andrey Klepach said last week. Outflows from the $2 trillion economy reached $63 billion in 2013.

“There is a situation of high uncertainty,” Yudaeva said. “So it’s important to have policies in place that won’t be affected by a range of scenarios.”

Having annexed Crimea and deployed thousands of troops along the border, Russian President Vladimir Putin has threatened to halt gas shipments to Ukraine. Ukrainian security forces earlier today battled pro-Russian gunmen in the eastern town of Slovyansk with both sides suffering casualties.

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