Russia Subject to Sanctions, Calm Euro and Mighty Oil

The West and Japan imposed new sanctions on Russia in retaliation for Putin's decision to recognize the independence of Ukraine's two separatist regions.

The euro held in the range of 1.1325 against the US dollar in Asian trading this Wednesday (23/February), but the Ukraine crisis is getting more critical. Western countries and Japan imposed new sanctions on Russia in retaliation for Putin's decision to recognize the independence of two of Ukraine's separatist regions. Meanwhile, the planned meeting of the US and Russian Foreign Ministers was cancelled.

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The Beginning Of The Russian Invasion?

The United States, the European Union, the United Kingdom, Australia, Canada and Japan last night announced sanctions against Russian banking and elites. Germany has also suspended the Nord Stream 2 pipeline project worth USD 11 billion which was initiated by the Russian Oil and Gas BUMN, Gazprom.

Satellite monitoring shows a significant increase in the number of troops and ammunition in western Russia, as well as more than 100 vehicles at a small airport in southern Belarus on the border with Ukraine. The escalation of the situation prompted US Secretary of State Antony Blinken and French Foreign Minister Jean-Yves Le Drian to cancel plans for separate meetings with Russian Foreign Minister Sergei Lavrov.

"Simply put, Russia has just announced that it is chipping away large chunks of Ukrainian territory," US President Joe Biden said Tuesday, "This is the start of a Russian invasion."

Biden announced plans to strengthen the military security of a number of countries around the point of the Russia-Ukraine conflict, namely Estonia, Latvia and Lithuania. Among them by distributing 800 infantry soldiers and 8 F-35 fighter jets to locations on the eastern wing of NATO.

Kremlin spokesman, Dmitry Peskov, claimed Putin did not watch Biden's speech and Russia will see the steps the US is taking before responding. Putin has always been open to discussions for a diplomatic solution, but "Russia's interests and the security of our citizens are unconditional for us."

Europe's Energy Crisis Will Get Worse

The news of the termination of the Nord Stream 2 pipeline project became the main highlight among all the sanctions imposed on Russia. This is because this step has the potential to exacerbate the energy crisis on the European continent which has been going on for the last five months.

The Nord Stream 2 pipeline project was previously prepared to overcome the problem of supply shortages and soaring European gas prices. A number of countries, especially the US, rejected the project because it could increase Europe's dependence on energy supplies from Russia. However, the suspension of projects amid the current price spike could further strain Europeans' pockets. German Economy Minister, Robert Habeck, even warned that gas prices in Europe would increase again in the short term.

At the time of writing, Brent and WTI crude prices were holding multi-year highs at around USD 97.05 and USD 93.72 per barrel, respectively. The upheaval was not too sharp because these sanctions had been calculated beforehand. Market participants also seem to be waiting for further developments from the Ukrainian crisis, particularly regarding the potential for frontal war to break out.