02/03/2022, 11.00
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War hysteria costs Moscow and Kiev dearly

by Vladimir Rozanskij

Ukraine has lost billion in flight of capital. Since the beginning of the year, the Moscow Stock Exchange has seen a 12% drop. Threat of inflation looms while Ukrainian president urges against exaggerated tones. The US prepares sanctions for Putin and his acolytes.


Moscow (AsiaNews) - The escalation of threats and sanctions over the past month between Russia and Ukraine is already costing both countries dearly. The authorities in Kiev are speaking of losses of over 12 billion dollars due to the flight of capital. Stock exchange indices in Russia have lost about 12% since the beginning of the year, equivalent to 8 trillion roubles. The two economies are suffering from rising inflation, currency devaluation, collapses in the financial markets and the flight of foreigners from government bonds.

Both are preparing to live out the rest of the year in perpetual pre-war hysteria, which could last several months before resolving itself one way or the other. Russia can boast low public debt, ample financial reserves and access to energy sources. Ukraine, on the other hand, can only rely on financial help from Western countries, otherwise it will suffer an even more catastrophic economic collapse than Russia.

The imminent start of the war, predicted above all by the Western media, is pushing up commodity prices. According to the Bloomberg Commodity Spot Index, it rose by 0.9%, reaching its highest level at 543.21 points. Since the beginning of the year, it has shot up 8.15%. The index considers 23 futures contracts (deferred to a future date) on energy sources, metals and agriculture.

The biggest concerns on the markets are related to the possibility of interruption of Russian gas supplies to Europe. Forecasts speak of further growth in food commodities around the world, while many nations are already in critical condition. Ukraine and Russia are world leaders in the trade of wheat, maize and sunflower oil, with large exports to Asia, Africa and the Middle East particularly at risk for bread and meat. The price of fuel also looks set to rise further, with the price of oil likely to exceed 0 a barrel in the event of war.

All experts seem to agree on the dire predictions, from Bloomberg to JP Morgan to the International Monetary Fund. And yet, not even the rise in the prices of traditional export items is likely to do the two warring countries any good, since inflation is not increasing the savings of the population, which is being increasingly affected by unstable prices. The average salary of Russians is three times higher than that of Ukrainians, but still does not guarantee a sustainable standard of living.

Ukrainian President Volodymyr Zelensky's appeals not to exaggerate in the face of the Russian threat are also motivated by an attempt to contain the levels of the crisis. According to his recent statements, 'it is the media that spread the idea that the war is already going on, troops are on the move and people are running away. In fact the increase of Russian troops on the border was widely expected, we don't need this panic'.

The Russians are also disturbed by the 'war rhetoric', as was especially evident on 'Black Tuesday' on 18 January, when the Moscow Stock Exchange index plummeted by 6% in one fell swoop, losing all the assets of the previous year. Russian billionaires have been "impoverished" to the tune of some billion since the beginning of the year; the owner of Novatek (the largest producer of liquefied gas) and the Sibur petrochemical company, Gennadij Timčenko, has lost the most, with .5 billion less. His Novatek co-owner Leonid Mikhelson, Russia's richest man, also had a shortfall of .7 billion, not to mention many other oligarchs in crisis.

The US Congress is now expected to act on the promised sanctions against President Putin and members of his family, including his unofficial wife, Olympic gymnastics champion Anna Kabaeva. The measures threaten 35 other personalities in the Kremlin's circle of power, officials, entrepreneurs and businessmen.

The war has indeed begun, but instead of weapons, money is making victims, and the accounts are still far from a final tally.

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