Raphael Stevens

Traders on the floor of the NYSE, Feb. 24, 2022.
Source: NYSE

U.S. stock futures moved lower in overnight trading on Sunday as investors grew concerned about the economic ramifications of the fighting between Russia and Ukraine.
Dow futures dropped more than 500 points. S&P 500 futures fell 2.12% and Nasdaq 100 futures lost 2.37%.

U.S. and global equities experienced volatile trading last week as geopolitical tensions between Russia and Ukraine escalated. Early Thursday morning local time, Moscow launched military action in Ukraine.
Throughout the weekend, the Russian advance into Ukraine continued. Russian military vehicles entered Ukraine’s second-largest city Kharkiv with reports of fighting taking place and residents being warned to stay in shelters.
Russian President Vladimir Putin put his country’s nuclear deterrence forces on high alert Sunday amid a growing global backlash against the invasion. Ukraine’s Defense Ministry said representatives for Ukraine and Russia have agreed to meet on the Ukraine-Belarus border “with no preconditions.”
U.S. West Texas Intermediate (WTI) crude future rose more than 4%to around $95.60 per barrel on Sunday. The April Brent crude futures contract also rose 4% to near $102 per barrel.

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Last week, President Joe Biden reacted to the attack by announcing several rounds of sanctions on Russian banks, on the country’s sovereign debt and Putin and Foreign Minister Sergey Lavrov. 

The U.S., European allies and Canada agreed Saturday to remove key Russian banks from the interbank messaging system, SWIFT.
“Some Russian banks being removed from SWIFT (energy transactions exempt) and the freezing of the Russian central bank’s access to its foreign currency reserves held in the West clearly increases economic tail risk,” said Dennis DeBusschere of 22V Research.
However, he believes Russia can still sell oil and there could be “loop holes” in Russia’s frozen assets, which “might limit the disaster in markets for a few days.”
The Russian ruble was set to tumble at least 19% with banks offering it at about 100 rubles per dollar, according to Reuters. It closed Friday at 84 rubles per dollar.
“Traders will be watching for any signs of resolution on the Russian crisis (negotiated peace or a signs of a near-term victory for either side) or for signs tensions could be worsening raising the chance of a world war involving NATO members,” said Jim Paulsen, chief investment strategist for the Leuthold Group. “As news trickles out supporting either thesis, expect daily stock market action to remain volatile.”
Despite the market volatility, the Dow experienced its best day since November 2020 on Friday.
Last week, the Dow notched its third week of losses. The S&P 500 and Nasdaq ended the week in green, rising 0.8% and 1.1%, respectively.
The Nasdaq Composite is still in correction, about 15% from its record close. The Dow and S&P 500 are just outside of correction territory.
Federal Reserve Chairman Jerome Powell testifies before Congress twice in the coming week, and he will be followed closely for any signal on whether geopolitical events are likely to impact Fed rate hikes.
Investors will also get a update on the labor department later in the week as the February jobs report is expected Friday. In January, 467,000 payrolls were added.

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ON MONDAY, as financial markets began trading in Asia, the value of the Russian rouble collapsed. The cause was harsh Western sanctions introduced over the weekend. In effect these freeze Russia’s foreign currency reserves and begin to lock Russian banks out of the SWIFT network for arranging international transactions. The US dollar rose by as much as 40% against the rouble, taking the Russian currency from its Friday closing level of around 84 to the dollar to as high as 118, a new record.The move will be one of the largest one-day slumps in the Russian currency’s modern history, similar in scale to the one-day declines recorded during the worst moments of the country’s financial crisis in 1998, when Russia defaulted on its debt. In mid-morning in Moscow, the Russian central bank raised its key interest rate from 9.5% to 20% in an effort to stem the rouble’s slump, and the country’s finance ministry ordered companies with foreign-currency revenues to convert 80% of their income into roubles.The rouble’s collapse shows how isolated the government has become. Its functional exclusion from international financial markets could do the economy grave harm. A plunging currency makes imports of everything from cars to medical products dramatically more expensive. External debts, much of which are denominated in dollars, will be more difficult to service. The rouble’s decline will further reduce the falling quality of life for the Russian middle class, and it will harm any company that has to pay for overseas goods and services.The country’s central bank has ordered financial institutions to reject the instructions of foreign clients attempting to sell Russian securities, a move that may be the beginning of controls to prevent massive outflows of capital. Any ban on foreign investors from getting out their money could sour what little is left of the country’s reputation as an investment destination. Over the weekend, Russian citizens queued outside banks to withdraw their money. Panic about the stability of Russia’s financial system could yet lead to bank runs.Oil prices climbed higher, on worries about disruptions to supply, possibly because of embargoes. On Monday-morning trading in Asia, they rose to just short of $100 per barrel, up by around 5% compared with their levels at the end of last week. As a huge exporter of oil and gas, Russia would usually gain from higher energy prices. But the plunge of the rouble suggests that the extra revenue from commodity sales is expected to pale in comparison to the damage done by sanctions.The spillover in other markets was muted in early trading on Monday, with benchmark equity indexes in Hong Kong, Shanghai and Tokyo not far from their levels at the close on Friday. European market indices were lower, but not drastically so. But as investors scramble to work through the knock-on effects of the conflict for assets around the world, more frenetic trading activity may yet be to come.The threat of more severe sanctions has become increasingly real since financial markets closed for the weekend on February 26th. The announcement that America, Britain and the European Union would target the Russian central bank and its ability to sell its $630bn in foreign-exchange reserves, much of which are held in overseas custody, could frustrate Russia’s ability to defend the value of its currency. On Monday morning, the EU prohibited all transactions with the Central Bank of Russia.Russian banks’ bid-and-ask quotes for US dollars—the prices at which a dealer will buy or sell—widened dramatically during the weekend, demonstrating both uncertainty about what lies ahead and also how keen holders of dollars are to hang onto hard currency. Sberbank, Russia’s largest bank, quoted a spread of around 22% between purchases and sales of dollars even before Monday’s enormous move in the exchange rate. One week ago, the spread was just 5%.The Russian government has made efforts in recent years to protect itself from the full impact of any further international sanctions. In 2014 the central bank established an alternative financial messaging system to SWIFT, called SPFS. Last year it boasted that the system’s message volume exceeded 20% of SWIFT’s levels in 2020, with around 400 institutions connected to the system, including several foreign companies.But recent international sanctions mean that banks overseas will hesitate to participate in any workarounds that could violate incoming sanctions. In 2020, when the American Treasury Department imposed sanctions on political and security figures in Hong Kong, even Chinese banks in the territory would not hold accounts for those who had been targeted. The reason is that they were fearful of losing access to dollar-denominated payment and settlement.Direct exposure between the Russian financial system and the rest of the world is slim, but not non-existent. Banks based in Russia record $134bn in liabilities owed to institutions abroad, according to data from the Bank for International Settlements, around 0.4% of the global total. Four-fifths of the country’s 15.5trn-rouble government bond market is held domestically. That means there is less risk of direct financial contagion from a Russian financial crisis.A handful of European banks—Hungary’s OTP, Austria’s Raiffeisen, France’s Société Générale and Italy’s UniCredit—have meaningful exposure to Russia or Ukraine, according to S&P global ratings, a credit-rating agency. But there is no obvious current equivalent to Long-Term Capital Management, the American hedge fund which collapsed in 1998 as a result of highly leveraged bets on Russian government bonds, threatening to take much of Wall Street with it.Instead, the most important effects of Russia’s financial distress could flow through real economic channels. The rising price of oil will exacerbate inflation which has already surged in most of the Western world. And Chicago wheat futures for delivery in May rose by around 7% during overnight trading, to a little over $9 per bushel. As a staple foodstuff across much of the world, more supply disruptions will mean higher food prices, too. According to Rabobank, a Dutch bank, Russia and Ukraine account together for 30% of global wheat exports. The reaction of the Federal Reserve to the market ructions adds another element of uncertainty. Until the conflict erupted, expectations that the Fed might signal its intention to whip inflation with a 0.5 percentage point interest-rate increase were growing. Based on market pricing, investors still expect the American central bank to raise rates at its mid-March meeting, but by a more restrained 0.25 percentage points.If the weakness of the rouble endures and efforts to prevent capital from leaving the country continue, the financial damage to Russian businesses and livelihoods could be lasting. The diversification of Russia’s economy away from commodities would have been set back by years. Just as Vladimir Putin, Russia’s president, has made himself a pariah by invading the country next door, so the Russian economy could end up being isolated, too.Our recent coverage of the Ukraine crisis can be found here More

NOT LONG ago prospective homebuyers in China would find large maps on the walls of property marketing offices. On display were not only the housing projects for sale. The maps also showed the parcels of government land surrounding the projects and their expected future prices, which were nearly always higher than the home units for sale per square metre. The implication for the anxious buyer-to-be was clear: buy now, or regret it forever. Very soon land prices would be far higher next door.The maps tell the story of China’s decade-long build-up in property debts. These seemingly endless increases in prices were made possible only because developers had access to almost unlimited credit. Ample loans, offshore-dollar bonds and deposits from buyers once made it easy for them to enter bidding wars that pumped up land values. The winner was sure to turn a huge profit if they held onto the parcel and waited for the price to rise. Local governments, too, happily gorged; land sales contributed 43% of their revenues in 2021.Homebuyers are seeing a very different picture now. Xi Jinping, China’s president, has been fearful of runaway unaffordability and untenable debt. He has turned off the tap of easy credit by capping developers’ ratios of liabilities-to-assets, net debt-to-equity and cash-to-short term debt (known as the “three red lines”). This has pushed the Chinese property sector to the edge. A dozen developers, including Evergrande, one of the world’s most indebted property groups, have defaulted on bonds since July 2021, or have come close. Companies recently deemed safe bets for investors have suddenly started looking wobbly. One of those, Shimao, missed trust payments on February 24th. Zhenro Properties stunned creditors on February 21st when it said it may not repay creditors in early March.The implications go far beyond the offshore bond market. Construction has stalled in places. Some developers are now selling assets to patch up their cash flows. Many have stopped buying land, causing the value of parcels sold by local governments to crater by 72% in January year on year. Home prices are falling in many cities, turning off speculators looking for the guaranteed huge gains once advertised on sales-office maps. Families looking for flats wonder if they can even be built.Whether the central government holds firmly to its red lines is unclear. If it does, the property market will be forced to make a monumental adjustment to better match supply with real household demand for homes. The annual supply of homes is now three times that of future urban-household formation, reckons Rhodium, a consultancy. Sales must fall from around 15m units per year to about 10m.As the bubble deflates the effects are rippling through the Chinese economy. Senior leaders have yet to issue an economic growth target for 2022 but many economists expect them to draw a line at 5% (China’s GDP grew by nearly 6% in 2019). This will be a difficult rate to defend should the property sector, which makes up an estimated 25% of GDP, continue to crumble. A major slowdown, in turn, would hamper a global economy already hobbled by soaring inflation and geopolitical clashes.Policymakers in Beijing must fulfil three major tasks if they are to avoid catastrophe. First they must make sure offshore defaults do not spiral out of control, closing out Chinese issuers from the dollar bond market. A second task is to ensure firms continue to build homes and families continue to buy them. This is crucial for economic growth this year. A third daunting challenge is to formulate a long-term plan that brings some stability to the market over the next decade.Mr Xi probably did not anticipate such a rapid rise in offshore defaults. Altogether some $100bn in debts needs to be repaid this year. Evergrande, the group with $300bn in liabilities, has been the biggest worry. It defaulted in December and has become one of the largest restructuring cases in history. Investors are tracking the case for reasons to be optimistic. The group is now thought to be under a high degree of government control. It has promised to deliver a restructuring plan by July. State involvement is good because it will help avoid a total collapse, says one person involved in the restructuring. It also means that stability will be the main priority, not speed or efficiency.Resources are running low. Legal expertise on such cross-border situations involving China are limited and, so far, many Chinese defaulters have not been willing to cough up for high-quality advice. Accounting firms have abruptly resigned from auditing developers’ books. The early restructuring plans for a few Chinese developers have made little room for offshore creditors, says a lawyer working on a case. Evergrande’s offshore bonds currently trade at 15 cents on the dollar—a gloomy signal on what investors expect to get back. High-yield dollar bond issuance by Chinese companies—an important source of credit for them—has fallen substantially.A second task for the Communist Party will be to keep developers building and buyers buying. Sales for the 100 biggest firms came down by about 40% in January year on year. Investment in property fell by 14% in December. Prices in the biggest cities have declined. A trade body said domestic sales of excavators nearly halved in January compared to the same month last year.Policymakers are fidgety. Like global hedge funds, they want to avoid ugly incidents at companies such as Zhenro. The sudden shocks arise because developers have not been giving a clear picture of their total cash positions. They include billions of yuan held tightly in escrow accounts by local governments who want to ensure the money is used to build homes, not pay creditors. When payments come due, the companies cannot access all the cash they say they have. Fitch, a ratings agency, downgraded Ronshine, another large developer, on February 22nd on concerns that it would fail to access such funds.Trapped cash is also halting some construction. Many workers have laid down their shovels after going unpaid. Evergrande has claimed it can build 600,000 homes this year—music to officials’ ears. Yet on February 16th a court froze 640m yuan ($101m) of the company’s cash after it could not pay a state-owned construction group.The central government plans to standardise escrow accounts so that less of the developers’ cash is locked into them. But that will not be enough to rescue the sector. Investors hope that Beijing blinks and reverses some of its tough policies. Some local governments have already flinched. The city of Guangzhou cut mortgage-loan rates by 20 basis points on February 22nd. Banks in Shanghai have made similar cuts.If more cities follow, developers may avoid facing up to the reality that household demand is lower than they want—at least for a bit longer. Analysts still have big questions on developers’ true levels of cash and debt. Many are thought to have huge off-balance-sheet debts that have gone unreported, says Luther Chai of CreditSights, a research firm. Eight large developers with offshore bonds currently have far less unrestricted cash than short-term debts. Evergrande has just 40% of the cash it would need to pay its known short-term debts. Another large developer, Golden Wheel Tiandi, has just 20%.Mr Xi is fond of saying that the Chinese people face “three great mountains” between them and their prosperity. Those are education, health care and housing. The first two are already dominated by the state. Housing is still largely controlled by tycoons. From the government’s perspective, it would make sense if much more of the property sector eventually became state-run, says Robin Xing of Morgan Stanley.This appears to be part of the long-term plan—the Communist Party’s third work in progress. The state is already getting involved in two ways. The first is through state-owned asset management companies (AMCs) that buy up bad debt on command. One of those, Cinda, is already working with Evergrande. But others are said to be quietly absorbing bad debts from developers, in effect acting as a buffer for the banking system. This has ruled out the need for a major state bailout because the AMCs are drip-feeding support to many companies, says a credit investor.The state is also set to take a more direct, long-term role in the property market through buying up subsidiaries of private developers. In late January Sunac, once an aggressive private acquirer of property assets, sold a 40% stake in a local subsidiary to state-run Huafa Group. Regulators are encouraging the trend by asking banks to loosen up on lending for mergers and acquisitions. State banks plan to issue about $4bn in bonds to fund property mergers, according to Caixin, a financial magazine. State developers are also buying up swathes of land to help shore up local government finances. Given state firms’ reputation for inefficiency, the potential for waste is huge.Tax could also become a bigger part of future housing policy. In theory a housing tax would serve two purposes: discouraging speculation and generating local revenues. But experts have noted that those targets conflict. A tax that discourages investment will also limit governments’ income. A tax pilot in Shanghai is set as low as 0.4% of the latest sales price. This has neither deterred investors nor generated much revenue for local officials. There is no neat solution for delinking local revenues from land sales. Few local officials want to make a shift away from easy land sales and receive a “sucker’s payoff” in return, says Adam Liu of the National University of Singapore.More extreme fixes are being floated. In January Evergrande’s former chief economist, Ren Zeping, said China should bankroll 50m births over the next decade by printing 2trn yuan in new cash for family handouts, effectively creating millions of future homebuyers. The idea got him blocked from posting on Weibo, a Twitter-like platform. But it also highlighted the desperate nature of China’s demographic shortfalls.If policymakers stick to their guns on limiting developer leverage, the property market must hew to real demand from families in the coming decade. That will mean a much smaller market. New housing starts peaked in 2019 at around 1.8bn square metres, doubling from 2008. In a highly optimistic scenario in which 65% of China’s roughly 170m people currently aged 16-25 eventually live in cities, and 90% of those enter the housing market, that still only creates demand for about 50m homes over the next decade, according to Allen Feng and Logan Wright at Rhodium.Even if each of those new households bought two homes, the current rate of building would fulfil that demand in just five and a half years. “Supply needs to adjust,” Mr Wright says. Not the other way around. For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Ukraine’s government has raised more than $10 million in cryptocurrency donations, according to blockchain analytics firm Elliptic.
Total crypto donations to the Ukrainian government and NGOs supporting the military now stand at $16.7 million, Elliptic said.
The development shows how Ukraine is turning to crypto for assistance during Russia’s military offensive in the country.

Ukraine’s President Volodymyr Zelenskyy holds a press conference on Russia’s military operation in Ukraine, on Feb. 25, 2022 in Kyiv.
Anadolu Agency | Getty Images

Ukraine’s government has raised more than $10 million in cryptocurrency donations, turning to an unlikely crowdfunding method to help it get through a brutal invasion from Russia.
The official Twitter account of the Ukrainian government on Saturday posted addresses for two crypto wallets, one accepting only bitcoin and the other taking ether and tether, a token that tracks the value of the U.S. dollar.

As of Sunday, those wallets have attracted $10.2 million worth of crypto, according to research from blockchain analytics firm Elliptic. That’s on top of the millions in digital currency donated to nongovernmental organizations supporting the Ukrainian military.
About $1.86 million of the money donated to Ukraine’s government was generated through the sale of a non-fungible token, or NFT, originally intended to raise funds for WikiLeaks founder Julian Assange, Elliptic said.
NFTs are unique digital assets designed to represent ownership of virtual items, such as artwork or video game characters.

The development shows how Ukraine is turning to crypto for assistance during Russia’s military offensive in the country, which began on Thursday.
Come Back Alive, an NGO that provides equipment to the Ukrainian military, has accepted crypto donations since 2018. It has raised millions of dollars worth of digital currency since Russia’s invasion began.

Total crypto donations to the Ukrainian government and NGOs supporting the military now stand at $16.7 million, according to Elliptic.
“Cryptoassets such as Bitcoin have emerged as an important alternative crowdfunding method,” Tom Robinson, Elliptic’s chief scientist, wrote in a blog post on Sunday. “They allow quick, cross-border donations, which bypass financial institutions that might be blocking payments to these groups.”

Come Back Alive had its Patreon fundraising page suspended this week, with the company saying it “does not allow any campaigns involved in violence or purchasing of military equipment.” Patreon lets users receive a monthly income through paid subscriptions.
The Ukrainian military initially suggested it could not accept funds in digital currencies on bitcoin, with a statement on the government’s website saying “national legislation does not allow the Ministry of Defense of Ukraine to use other payment systems (‘Webmoney,’ ‘Bitcoin,’ PayPal,’ etc.).”
The government appears to have relaxed this stance, however.
Separately Sunday, Ukrainian Minister of Digital Transformation Mykhailo Fedorov called on major crypto exchanges to block payments to Russian users.
“It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians but also to sabotage ordinary users,” Fedorov tweeted.
The U.S., European allies and Canada on Saturday agreed to remove certain Russian banks from Swift, the interbank messaging system. They also agreed to prevent Russia’s central bank from deploying its international reserves in ways that may undermine sanctions.

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EVER SINCE Russia seized Crimea in 2014 Western sanctions have failed to bite or act as a credible deterrent against Russian aggression. The new measures targeting Russia’s financial system announced by America, the EU and other allies on February 26th change that. They have come too late to prevent an invasion of Ukraine but they are capable of triggering financial mayhem in Russia because they target its central bank and may lead to the freezing of its $630bn of foreign-exchange reserves. This could trigger a run on Russia’s banks and currency, and will cause shudders in global markets and a further spike in energy prices. It may also trigger Russian retaliation. On February 27th Russia said the sanctions were “illegitimate” and indicated that Russia’s nuclear forces had been put on a heightened level of alertness in response. The West’s deployment of this economic weapon will also be watched with slack-jawed shock in China, which has $3.4trn of reserves and which will now be rethinking how to resist Western pressure in the event of a war over Taiwan.Up until now Western sanctions have been long on macho rhetoric about crushing Russia but short on clout. For example, the penalties on oligarchs and their offshore wealth have led some tycoons to call for an end to the bloodshed, but not changed decision-making in the Kremlin. Meanwhile limits on Western technology and industrial exports to Russia will take months or years to have an effect. Even American sanctions announced on February 24th against Sberbank and VTB Bank, which together hold 75% of the Russian banking industry’s assets, were a serious but not killer blow, particularly since energy transactions were exempted. Russia’s “fortress” financial system looked capable of withstanding the economic weapons that the West dared to use.The salvo on February 26th goes much further. Many of the headlines in America and Europe have dwelled on the decision to cut off some Russian banks, probably Sberbank and VTB, from SWIFT, the global cross-border payments messaging system. In fact the SWIFT decision is incremental rather than a game-changer. It will make all counterparties, not just Western ones, wary of dealing with these firms. If they choose to do so, they will have to resort to using email and phone to communicate, adding a layer of hassle.Instead, the really big step is to target the institution at the heart of Russia’s fortress economy, the central bank. It holds $630bn of foreign reserves, equivalent to 38% of Russia’s GDP in 2021 (the sanctions may also cover other government-run funds). Officials in the Biden administration say that they, acting with Europe, will prevent the central bank from using these reserves to undermine the impact of sanctions. As part of the fortress strategy Russia has shifted the composition of its reserves away from dollars: as of June 2021, it held only 16% in greenbacks, versus 32% in euros, 22% in gold and 13% in Chinese yuan. However, it is likely that the majority of its holdings of securities, bank deposits and other instruments, regardless of the currency they are denominated in, are held in accounts with financial institutions or in jurisdictions that will enforce Western sanctions. That means some, or even much, of Russia’s national war chest can be frozen. Responding to the new measures the central bank said on February 27th that it had all necessary resources and instruments to maintain financial stability. But the implications are daunting. If the central bank does not have instant access to the reserves it will be hard for it to intervene in the currency market by using foreign cash to support the sagging rouble, as it has done in the past few days. The central bank may be unable to offer foreign-currency liquidity to banks that are under sanctions, in turn increasing the probability that they may default on their foreign-currency obligations to counterparties. And it will be unable to act as a middle-man for such banks, making or receiving foreign payments with foreign counterparties on their behalf, which is one theoretical way of evading sanctions.That all points to an intensifying panic in Russia’s financial system. So far the damage from the war has been severe but tolerable. The currency has fallen by 10% year-to-date, the stockmarket by 35% and the share prices of the biggest banks by over 50%. As of February 25th the cost of insuring against a Russian government default was on a par with Turkey. Now the pressure is likely to intensify. Ordinary Russians may lose confidence in the banking system, although providing their withdrawals are denominated in roubles the central bank can offset this by offering rouble loans to the banks. Thanks to its oil earnings, Russia runs a current-account surplus, earning more from abroad than it buys from abroad. But if there is panic and capital flight, without access to its reserves, it could be forced to introduce tight capital controls to prevent a currency collapse. It may also choose to temporarily close the financial markets (short-selling of shares has already been banned).So far, while there have been some signs of Chinese banks steering clear of dollar-denominated transactions with Russian firms, there has been little sign that China or many other Asian countries intend to enforce Western sanctions. But now, with a higher risk of default on foreign-currency obligations by Russian banks, firms and the government, all of their counterparties, not just Western ones, will be more wary of them. The new measures are sufficiently severe that they may be treated by Russia as something close to an act of war, and lead to it retaliating. On February 27th it said that it had put its nuclear forces on a “special regime of duty”, which means a heightened level of alertness. This is designed to signal that the Kremlin does not believe that there is a neat boundary between economic and conventional warfare. The West may now have to alter its nuclear posture in response. There are other ways for Russia to retaliate. One path is intensifying cyber-attacks on Western institutions. Another is for it to limit gas supplies to Europe. Up until February 25th the supply of gas from Gazprom through Ukraine had been boosted back to normal levels, according to Bloomberg. But Russia could now taper down supply. This would have only a moderate financial impact on Russia (oil exports are far more important to its economy) but would lead to higher energy prices and consumer bills in Europe. In this scenario the West would still have other economic weapons with which to escalate, including blocks on consumer internet services or sanctions on Russian oil. Whether the West’s newfound resolve succeeds in inflicting a devastating blow on Russia’s economy before Russia inflicts a devastating military blow on Ukraine remains to be seen. But the new measures will inflict heavy damage on Russia. And they also represent a rubicon that will fundamentally alter how sanctions and the global economy work. That is because plenty of other countries that pursue foreign policies that America does not agree with hold large sums of reserves. The largest of all is China, much of whose vast savings are held in Western financial instruments or through Western firms. It will be watching and learning from Russia’s financial squeeze, and how Russia retaliates, and trying to assess how it can avoid becoming crushed by the West’s financial vice. ■Our recent coverage of the Ukraine crisis can be found hereFor more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter More