Aurelia Butler

It’s an idea that would appeal to Dick Fuld’s famously inflated ego — but it is valid nonetheless. To assess the potential impact on the global economy of international sanctions against Vladimir Putin’s Russia, it is instructive to look back to the 2008 financial crisis and the fall of Lehman Brothers.The treatment and behaviour of Lehman, which Fuld had led for 14 years, showed how hard it is to predict the consequences of financial interventions with systemic implications. Even if made for a moral imperative, the ramifications can be far more dire than foreseen.On Wall Street in early September 2008, Lehman was on the brink of collapse as nervousness mounted and interbank funding dried up. Unlike many banks around the world that were bailed out by governments, Lehman infamously was allowed to fail — in part at least as retribution for past perceived misdeeds.To be clear, Lehman’s collapse did not cause the financial crisis, but it undoubtedly worsened it. So the thinking that led Hank Paulson, then US Treasury secretary, to push the group into bankruptcy rather than find a rescue solution, was significant — world-changing even.Remember that Bear Stearns had been shepherded into a rescue takeover earlier in the year, and other banks were bailed out in the massive US Tarp programme only weeks later. Why, then, was Lehman sacrificed?Some have claimed personal animus between Fuld and Paulson might have contributed to the decision-making, stemming from the rivalry between Lehman and Goldman Sachs where Paulson had been chief executive for seven years right up until his stint as Treasury secretary.But there was also a specific business trigger for the hostility towards Lehman, harboured across Wall Street — and one that takes us full circle back to the last Russian crisis in 1998, and the consequent failure of a systemically important hedge fund, Long-Term Capital Management.When Moscow defaulted on its debt in August 1998, LTCM’s $120bn of borrowing and $1tn of investment positions spiralled out of control. The government arm-twisted Wall Street into a bailout to prevent a full-scale crisis. But Fuld was a rare holdout.A decade later, and the government held out on him. But the Shakespearean revenge on Lehman led to the disorderly collapse of one of the most interconnected financial institutions in the world. This undoubtedly magnified the severity of the 2008 crisis and escalated the scale of interventions required by governments and central banks.Punishing Putin for his barbaric acts in Ukraine through stiff sanctions — on Russian companies, oligarchs and energy exports — is necessary and more than justified on moral grounds. There is some recognition that there will be blowback for the rest of the world — higher petrol prices, for example, and further inflation in domestic energy costs.But I am not sure the potential impact for the world outside Russia has been fully acknowledged. Most obviously, of course, it could provoke further military aggression from Putin. But other financial and economic consequences certainly stretch far beyond the petrol pump. The spiralling cost of wheat, grain, nickel and a host of other commodities is threatening the affordability of everything from daily bread to climate disaster mitigation. En route, they could take out financial market operators, large and small, mainstream and marginal — witness the suspension of nickel trading at the Hong Kong-owned London Metal Exchange, amid huge losses suffered by China’s Tsingshan Holding. Russian bonds may default in the coming days and weeks. Supply chains that involve Russian goods will be disrupted.Quite how this crisis plays out could prove harder to chart than even the 2008 collapse. Then, most risks were contained within a banking sector that was, theoretically at least, closely regulated. Banks this time look more robust, but murkier risks have mounted elsewhere, endangering less supervised parts of the financial system. A world that has been awash with free money under central bank policies to stem the full financial impact of 2008 and the Covid crisis looks more than a little vulnerable given how asset prices have been inflated and how debt levels have risen to new records. Be under no illusion: Russians will not be the only ones to suffer under Russian sanctions. The world should remember Lehman and brace for a global financial and economic [email protected] More

The Bank of England is poised to raise interest rates to their pre-Covid level this week, according to economists, but they cautioned it could push back against financial markets’ expectations that borrowing costs will continue to climb steadily over the year ahead.The renewed surge in energy prices since Russia’s invasion of Ukraine has cemented the case for the BoE Monetary Policy Committee to raise interest rates for the third time since December owing to soaring inflation, economists said.Most forecasters predict the MPC members will on Thursday support a quarter-point increase, from 0.5 per cent to 0.75 per cent, taking the benchmark rate back to the level it stood at in January 2020. This will not prevent inflation scaling new heights in the short term and staying high for longer: economists at Goldman Sachs estimate it will reach 9.5 per cent in October, when the energy price cap is due to rise again. Economists at KPMG forecast inflation will peak in double digits.Consumer price inflation rose to an annual rate of 5.5 per cent in January: its highest level in 30 years.The big worry for MPC members is that higher inflation will become an entrenched feature of the UK economy, should businesses and households come and see it as normal and raise their prices and wage demands to match. The risk of persistently higher inflation therefore makes it likely the BoE will want to act decisively now.“If necessary we need to take action to prevent that kind of persistence setting in,” said Dave Ramsden, a BoE deputy governor, last month. Catherine Mann, an external MPC member, said this month the committee’s strategy should be “to front-load rate hikes . . . to offset or counter inflationary expectations”.The UK economy rebounded rapidly from the slowdown induced by the Omicron variant of coronavirus, with gross domestic product increasing by 0.8 per cent in January compared with the previous month. Official data released on Tuesday are likely to show that workers are well-placed to press for higher wages in a booming labour market.But the new energy shock places the MPC in a difficult dilemma, because it will deal a painful blow to household incomes and business sentiment, compounding the BoE’s weak outlook for economic growth in the medium term.“It is a huge shock that is going to have a big hit,” said Silvana Tenreyro, an external MPC member, as she warned this month that an attempt to return inflation to the BoE’s 2 per cent target too quickly could destabilise the economy and result in higher unemployment.“War in Ukraine really worsens that policy trade-off: inflation is well above target and GDP growth is falling further out,” said Paul Dales, at the consultancy Capital Economics.He added the path on interest rates would depend on whether the BoE was more worried about inflation or growth.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Markets are betting that concerns over inflation will dominate the MPC’s deliberations, pricing in a tightening of monetary policy that would take the benchmark rate to 1.5 per cent by late summer and 2 per cent a year from now: a level it has not reached since the global financial crisis.Dales said these expectations could well prove correct given existing evidence that higher inflation was leading businesses to raise prices and workers to step up wage demands.But both he and other economists said the worsening GDP growth outlook had already killed the case for a sharper, 50 basis-point rate rise on Thursday, and that MPC members would want to push back against any assumption of protracted tightening of monetary policy.“Inflation should stabilise rather than spin out of control,” said Fabrice Montagné, economist at Barclays. He saw grounds for MPC members to raise interest rates in May to 1 per cent, but said the case for going further was “slim at best”, with the economy set to stall in the final quarter of 2022, and “even more intense downside risks to growth in 2023”.Samuel Tombs, at the consultancy Pantheon Economics, said the MPC “might emphasise that higher energy prices represent a terms of trade shock that will squeeze the domestic economy and will ultimately be deflationary”.Anna Titareva, economist at UBS, said she expected interest rates to rise again by 25bp in May, but that increases beyond that would be “highly data-dependent” given the “significant uncertainty around energy prices and their negative impact on real incomes and demand”.Even those economists who take a more optimistic view of the UK’s GDP growth, and therefore expect a more sustained tightening of policy, think the BoE will be careful to keep its options open.This would match the course adopted last week by the European Central Bank, which announced it would accelerate its exit from quantitative easing in response to rising inflation, but gave itself more flexibility on the timing of a potential interest-rate rise once bond-buying ends.“Substantial risks to growth do remain,” said Steffan Ball, economist at Goldman Sachs, adding poorer households faced “significant hardship” over the coming months, and the cost-of-living crunch could lead to a “more acute” slowdown in consumer spending if people on middle incomes chose not to run down savings they had accumulated during the pandemic.Rather than repeating its previous message that further monetary tightening would be required, added Ball, the MPC was likely to highlight these risks and “move to emphasising data dependence and flexibility”. More

The Federal Reserve is set to raise interest rates for the first time since 2018, but faces a dilemma over how aggressively to tighten monetary policy as war in Ukraine threatens to dent growth and worsen the highest inflation in 40 years.At this week’s meeting of the Federal Open Market Committee, US central bankers are all but guaranteed to raise the federal funds rate by a quarter of a percentage point — their most forceful step to date to shift monetary policy away from the ultra-loose settings put in place at the onset of the pandemic.The move comes despite a sharp escalation in geopolitical tensions following Russia’s invasion of Ukraine, which has attracted some of the most punitive financial sanctions ever from the US and its allies.Energy prices have soared higher as a result, with the international oil benchmark at one point topping $130 a barrel after the US moved to ban Russia’s imports. It has fallen back somewhat, but the impact of oil prices well above $100 a barrel is likely to mean higher headline inflation and more constrained consumer spending. “This is probably one of the hardest times for the central bank,” said Aneta Markowska, chief financial economist at Jefferies. “We’ve obviously had big events in the past like the pandemic and the global financial crisis, but the direction of policy was clear. It was to cut [rates] and the only questions were how much and how quickly.“This time you have two-sided risks, with downward pressure on growth but upward pressure on inflation. The question is which one does the Fed go with?”Economists are broadly of the view that concerns about inflationary pressures will far outweigh any fears of a growth slowdown — especially given the strength of the labour market — and compel the Fed to proceed with a series of interest rate increases this year.“If this shock had happened when inflation was running at 1.5 per cent, the Fed would likely have looked past the inflation effects and worried more about growth,” said Brian Sack, director of global economics for the DE Shaw group and a former senior Fed official. “Obviously, we’re now in a different environment.”Alan Detmeister, another ex-Fed staffer who now works at UBS, says that in terms of the inflation outlook, the war is “all upside”. He reckons the current surge in oil prices could add as much as a percentage point to price levels as measured by the consumer price index and push the annual rate above 8 per cent in March. Depending on how long these gains are sustained, the magnitude by which inflation moderates this year may also be curtailed.Detmeister expects the Fed to revise higher its year-end forecast for core inflation, which is based on the personal consumption expenditures price index, to above 3 per cent.In December, the last time the Fed published the individual economic projections of its top officials, a majority thought core inflation would settle at 2.7 per cent in 2022 before dropping to 2.3 per cent the year after. It currently hovers at 5.2 per cent. Economists also anticipate officials will shift lower their forecast for economic growth this year, having previously projected a 4 per cent expansion. The median estimate could drop to 3.3 per cent, according to Barclays.

Back then, officials expected to deliver only three quarter-point interest rate increases this year, a pace that is now seen as far too slow given the economic backdrop. The meeting will yield yet another update to the “dot plot” of individual interest rate projections, with five increases potentially pencilled in for this year and four more next year. Market expectations have run slightly ahead of what is expected to be signalled, with at least six adjustments scheduled for 2022.In congressional testimony this month, Jay Powell, the Fed chair, endorsed a steady shift towards tighter monetary policy, including a “predictable” reduction in the $9tn balance sheet. Further details on the Fed’s plans to do so are also expected this week.While Powell vowed the Fed would be “careful” about how it conducted monetary policy given the vast uncertainty clouding the outlook, he has also kept more aggressive tools on the table should inflation fail to ebb. He told lawmakers the central bank may need to raise interest rates above “neutral”, a level that neither supports nor constrains economic activity. The median forecast among Fed officials as of December was 2.5 per cent.And to get there, he said the Fed would consider revisiting a tactic last used in 2000 and raise interest rates by double the typical quarter-point cadence at one or more meetings. Betsy Duke, a former Fed governor, warned a half-point rate rise could “all of a sudden signal alarm” and send the message that the Fed has seriously misjudged the inflation situation and the appropriate policy response. She said it may also signal their estimate of neutral is higher, meaning more interest rate increases than currently anticipated.For Bill English, a Yale professor and former director of the Fed’s division of monetary affairs, the risks of a policy mistake are uniquely high.“If they move too quickly now and it turns out that the economy is just slowing a lot for the reasons they already anticipated and maybe also because of the Russia-Ukraine [crisis], they could end up with a recession a year from now,” he said.“But I’m sure they’re also worried that if they don’t react now . . . and they’ve got to push back against inflation that seems to be settling in well above their target and tighten a lot, then they’ve got a recession maybe in 2024.” More

Asia’s tech industry is scrambling to figure out how to comply with US sanctions on Russia, which potentially apply to shipments of everything from telecom equipment and smartphones to PCs and gaming consoles.Trade restrictions were slapped on Russia days after its invasion of Ukraine; they took immediate effect and could cover any product made with American technology. The suddenness and sweeping scope of the rules caught many Asian tech companies off guard. This has been especially true for those not caught up in the US crackdown on Huawei Technologies.“We quickly set up a team of eight people to study the economic sanctions and US export laws,” James Hwang, chair of Taiwan’s Getac Holdings, told Nikkei Asia. “They are so difficult, complicated and vague. I even had to look up the term ‘dual-use’, and we still aren’t very sure if our products fall into the scope of the controls.”Dual-use technologies and products serve civilian and military uses. The label is a key criterion in determining whether shipments are subject to export controls.Getac, the second-biggest maker of “rugged” computers in Europe, is one of many Asian electronics companies that make sales or products in Russia.South Korea’s Samsung and China’s Xiaomi have leading shares in Russia’s smartphone market, while Taiwan’s Acer and Asus as well as China’s Lenovo are major PC players in Russia. LG Electronics, another South Korean company, produces and sells home appliances in Russia, while Japan’s Sony sells electronics there.At issue is the Foreign Direct Product Rule, a key tool in the US’s trade control arsenal. It is used to block goods containing or developed with American technologies from being shipped to designated entities, even if those products are made by non-US companies. The FDPR was used to cut off Huawei’s access to global chip suppliers.This time, experts say, the scope of restrictions goes far beyond semiconductors and other components to include telecommunications and information security equipment, sensors, lasers and computers — and possibly consumer electronics like laptops and smartphones.“A broad range of consumer electronic and telecommunication devices could be subject to the expanded export controls on Russia, with the exception of some consumer communication devices going to certain Russian end users,” said Clinton Yu, a Washington-based partner specialising in international trade and export control regulations at business law firm Barnes & Thornburg.A senior Taiwanese trade official told Nikkei Asia that high-end PCs, such as gaming computers with advanced graphic processing functions, could fall within the scope, based on a preliminary evaluation of the sanctions document.The logic is that the computing power and high-end components of these devices could be harnessed for military purposes.The first step in determining if a product or component is subject to the FDPR is to find its relevant Export Control Classification Number (ECCN), which is then cross-referenced with US trade regulations.But this is not a straightforward task.“Not all manufacturers have classified their products, and therefore some will not know which ECCNs would apply to their products,” said international trade lawyer Christopher Timura of Gibson Dunn. “When this occurs, we sometimes work with a buyer or a manufacturer to determine the ECCN of a product.”

Destroyed Russian military vehicles are seen on a street in the settlement of Borodyanka, Ukraine © Maksim Levin/Reuters

Typically, he added, this required “sitting down with an engineer or developer to learn about a product and determine whether it has characteristics that are described under an ECCN”.For standard consumer electronics like smartphones, shipments to Russia will not be subject to export controls if companies can be sure the end users are civilian, non-government and non-military users, a spokesperson at the Department of Commerce told Nikkei Asia.Timura, however, pointed out another hurdle. “In practice, it can be very difficult to identify military end users who are not specifically identified by the [Department of Commerce],” he said. “Companies will not always be willing to answer questions that you may ask regarding their past support of military end-uses or may even be blocked by domestic law from answering questions that relate to the US export control laws.”Like Getac, many of the more than a dozen Asian electronics makers interviewed by Nikkei Asia said they were still working through the implications of the new US rules.“We are still evaluating whether we need to hire external counsel to help us check the new export control regulation while keeping close contacts and attention to fit our local government’s regulation,” said Eric Chen, president of general management at Advantech. This is despite the industrial computer maker’s business in Russia accounting for only about 1 per cent of revenue.Representatives at other companies say they are keeping quiet regarding the status of their operations in Russia.“We would prefer to keep our heads down on this matter, and I am sure many of our peers feel the same,” said a manager at an Asian PC company. “It’s dynamic, and we don’t want to say the wrong thing.”In another sign of caution, Taiwan’s MSI, the biggest gaming PC maker in Russia, has quietly followed Intel and Advanced Micro Devices of the US in halting sales of its products in the country to avoid any violations, a source with direct knowledge of the matter told Nikkei Asia.Failure to comply with US trade rules, experts say, can result in harsh penalties.“It’s not uncommon to see companies pay hundreds of millions of dollars in fines for non-compliance,” Barnes & Thornburg’s Yu said. “Even companies that are entirely outside the US should care about potential consequences since failure to comply can result in . . . being placed on one of the US’s ‘blacklists’.”Pulling out of Russia would bring business consequences as well.Samsung’s smartphone shipments in Russia grew 14 per cent in 2021, and Xiaomi’s swelled 29 per cent, Counterpoint Research’s data shows. Samsung also provides telecom equipment to the country, as do Huawei and China’s ZTE, according to research agency Lightcounting.HP of the US, Lenovo, Acer and Taiwan’s Asustek Computer lead Russia’s PC market, which is relatively small in global terms. HP and Acer have participated in bidding for government contracts in Russia.The cautious response of many Asian tech companies contrasts with that of western peers such as Apple, Google and Microsoft, which were quick to condemn the war and suspend operations or sales in Russia. HP also told Nikkei Asia that it has paused sales and marketing activities in the country.LG says it is paying “careful attention to the situation”. Sony told Nikkei Asia that sales of its electronics products in Russia not directly managed by the company are continuing but said it will respond promptly to any change in the situation.Acer and Asustek declined to say if they had suspended business in Russia. Lenovo and Xiaomi did not respond to Nikkei Asia’s requests for comments. MSI declined to comment.“Compared with their western counterparts, we can totally understand why Asian and Taiwanese tech companies are generally more reluctant to disclose their relations with Russia and how they cope with sanctions, as they may not have strong governments behind their backs,” a chip industry executive who dealt with the US’s clampdown on Huawei told Nikkei Asia.The executive described a quandary that these companies suddenly find themselves in. “They don’t know how long the war will last and they are not only wary of later retaliation from Russia and its partners and their customers there,” the source said. “They also harbour concerns of potential geopolitical consequences from China, one of Russia’s strongest allies.”Additional reporting by Kim Jaewon in Seoul.A version of this article was first published by Nikkei Asia on March 4. ©2022 Nikkei Inc. All rights reserved.Related storiesSoutheast Asian companies brace for impact from Ukraine invasionJapan Inc. steps up fast to offer support to Ukraine refugeesSingapore sanctions 4 Russian banks, blocks crypto loopholeUkraine urges 70 tech firms to help in digital fight against Russia More

Russia has asked China for military ​equipment to ​support its invasion of Ukraine, ​according to US officials, sparking concern in ​the White House that Beijing ​may undermine western efforts to help Ukrainian forces defend their country. US officials said that Russia had requested military equipment and other assistance since the start of the invasion, reported the FT’s Demetri Sevastopulo. Officials declined to give details about what Russia had requested. Another person familiar with the situation said the US was preparing to warn its allies, amid some indications that China may be preparing to help Russia. Other US officials have said there were signs that Russia was running out of some kinds of weaponry as the war in Ukraine extends into its third week. The White House did not comment. Liu Pengyu, the Chinese embassy spokesperson in Washington, said he was unaware of any suggestions that China might be willing to help Russia. “China is deeply concerned and grieved on the Ukraine situation,” Liu said. “We sincerely hope that the situation will ease and peace will return at an early date.”The revelation comes as Jake Sullivan, US national security adviser, heads to Rome for talks with Yang Jiechi, China’s top foreign policy official. The gathering is set to be the highest level US-China face-to-face meeting since the Russian invasion began.

Follow our updated maps for a visual guide to the conflict.More on UkraineLatest news: Russia has launched its most deadly attack yet on western Ukraine, striking a military base near the Polish border in a warning to Nato.Sanctions: The US has ruled out offering any sanctions relief to Russia in order to clinch its support to revive the Iran nuclear deal. Meanwhile, the EU is preparing a fresh round of restrictions on Russian business people, with Roman Abramovich among the intended targets.Explainer: Russia’s failure to win its war swiftly opens up a range of possible outcomes. Could Ukraine neutrality offer a way out?Technology: China’s internet companies and technology platforms have become propaganda tools in Putin’s war.Agriculture: Global consumers will feel the “enormous impact” of Russia’s war on Ukraine through sharply higher food prices and significant disruption to agricultural supply chains, industry executives and European officials say.Refugee crisis: Poles have launched a huge civic mobilisation as the country struggles to help and house a flood of Ukrainian refugees. Opinion: New Delhi’s decision not to speak out against Russia could imperil US relations, writes our editorial board. Five more stories in the news1. Iran claims strike on Israeli target in Iraq Iran’s Revolutionary Guards have claimed responsibility for a missile attack on what the elite force said was an Israeli intelligence centre in northern Iraq, adding to tensions in the region as world powers seek to revive stalled talks with Tehran on the Islamic republic’s nuclear ambitions.2. Rival Libya leader sets sights on Tripoli to replace administration The leader of a new Libyan government, Fathi Bashagha, has vowed to relocate from the country’s east to Tripoli within “days” to replace a rival administration, despite concerns that such a move risks stoking a fresh bout of fighting in the oil-rich north African state.3. El Salvador prepares to launch bitcoin bond The central American country’s “bitcoin bond” is set to launch this week, but with institutional investors reluctant to participate and the price of bitcoin in decline, the launch may not be a success. “If this is a failure, a lot of doors close,” said Carlos Acevedo, a former president of El Salvador’s central bank.4. Kirin’s $870mn push into healthcare and pharma The Japanese brewer will invest about ¥100bn ($870mn) in its healthcare and pharmaceutical businesses over the next three years, as Kirin pushes beyond the shrinking beer market at home and setbacks to its core businesses in Asia.5. US warns of North Korea’s growing military power The US has warned of a “serious escalation” in North Korea’s military capabilities, after concluding that two recent missile tests involved “a relatively new” system that could send warheads greater distances than previous launches.

A South Korean news broadcast regarding the North Korean missile test. Pyongyang launched two missiles — one on February 26 and the other on March 4 © AFP via Getty Images

Coronavirus digest JPMorgan has accelerated plans to relocate some of its top investment bankers in Hong Kong to mainland China as draconian pandemic restrictions have made travelling from the territory to meet clients almost impossible.Mainland China is struggling to contain its biggest coronavirus outbreak since the pandemic erupted in Wuhan two years ago.A new coronavirus variant that fuses elements of Delta and Omicron was identified last week, according to the World Health Organization and GISAID. Its detection, say experts, highlights the importance of genomic surveillance.The days aheadIndia February CPI data Consumer price index figures are set to be released. Explore our global inflation tracker for more on rising prices around the world.

Britons paid to house Ukrainian refugees A website will be launched today for Britons to register their interest in providing accommodation under the Homes for Ukraine scheme that will offer households £350 a month to provide accommodation for an expected influx of Ukrainian refugees. What else we’re reading SMBC Nikko scandal threatens future of equities division What started as a routine inspection has evolved into a sprawling investigation that threatens to sink Nikko’s equities division as institutional clients sever their relationships. Japanese TV crews, tipped off by prosecutors, captured footage of a late-night raid on the company headquarters.Warwick tops online MBA ranking For the fifth consecutive year, Warwick Business School is number one in the Financial Times ranking of online MBAs. Alumni salary is again the main factor in Warwick’s success: an average of $194,864 three years after completion — a 36 per cent increase over that period. See the full list here. The metals ‘visionary’ who brought the nickel market to a standstill Self-made billionaire Xiang Guangda has been regarded as the Steve Jobs of metals. But he’s in the spotlight for another reason — a huge wrong-way bet that has brought global nickel trading to a halt and plunged the London Metal Exchange into turmoil.WeWork co-founder Adam Neumann on his next steps After a fall as spectacular as his rise, the charismatic salesman is back. This time he plans to found start-ups, fund others and create a new property empire.The worry of what to wear to work is shifting In the wake of the pandemic, men now face the tyranny of choice that women have suffered for years, writes Pilita Clark. Having discovered the pleasures of the polo shirt at home, many wonder if they really have to gussy up in a suit and tie again.TravelThe inaugural Marrakesh International Storytelling Festival, a week-long event in Morocco, has emerged as a silver lining from the difficult past two years of pandemic living.

© Matthew Cook More

WASHINGTON (Reuters) -Russia may default on its debts in the wake of unprecedented sanctions over its invasion of Ukraine, but that would not trigger a global financial crisis, International Monetary Fund Managing Director Kristalina Georgieva said on Sunday.Georgieva told CBS’s “Face the Nation” program that sanctions imposed by the United States and other democracies were already having a “severe” impact on the Russian economy and would trigger a deep recession there this year.The war and the sanctions would also have significant spillover effects on neighboring countries that depended on Russian energy supplies, and had already resulted in a wave of refugees compared to that seen during World War Two, she said.Russia calls its actions in Ukraine a “special operation.”The sanctions were also limiting Russia’s ability to access its resources and service its debts, which meant a default was no longer viewed as “improbable,” Georgieva said.Asked if such a default could trigger a financial crisis around the world, she said, “For now, no.”The total exposure of banks to Russia amounted to around $120 billion, an amount that while not insignificant, was “not systemically relevant,” she said.Asked if Russia could access the $1.4 billion in emergency IMF funding approved for Ukraine last week if Moscow won the war and installed a new government, Georgieva said the funds were in a special account accessible only by the Ukrainian government.An IMF official said that referred to the “internationally recognized government of Ukraine.”The IMF last year blocked access to Afghanistan’s funds by the Taliban after they seized control of the government, citing lack of clarity over recognition of the Taliban rulers within the international community.Georgieva last week said the IMF would downgrade its previous forecast for 4.4% global economic growth in 2022 as a result of the war, but said the overall trajectory remained positive.Growth remained robust in countries like the United States that had been fast to recover from COVID-19 pandemic, she told CBS.The impact would be most severe in terms of driving up commodity prices and inflation, potentially leading to hunger and food insecurity in parts of Africa, she said. More