Sanctions against Russia tightened

The Biden administration has announced a ban on fossil fuel imports from Russia: oil, gas, coal. The British government has taken the same decision concerning oil only. The EU cannot for the moment follow suit. For Russia, these sanctions concern about 10% of oil exports, but the EU’s share is 60%. However, it is clear that this is only the beginning of a process that will eventually deprive Russia of its main source of income. While the EU is not currently in a position to impose an embargo, it has presented a plan to drastically reduce its need for Russian gas.

These measures have a cascading effect on all sectors where Russian production and exports are preponderant. This is the case for nickel, which is essential for the production of stainless steel and batteries for electric vehicles. Its prices soared to the point of triggering a short squeeze that led to the suspension of trading on the London Metal Exchange and then in Shanghai.

The market fears both embargoes on these exchanges and retaliatory measures by Russia (the world’s 3rd largest producer) aimed at blocking the production of major Western car manufacturers, for example. For example, Toyota announced this morning that it would have to revise its production targets downwards due to supply problems, particularly for metals. 

  Equity markets continued to decline yesterday, but long term yields are rebounding as inflation expectations rise sharply. The US dollar lost some ground against the euro, with the EUR/USD exchange rate back above 1.09.