Economy

WASHINGTON (Reuters) -Russia’s war in Ukraine has “horrified” the World Bank’s shareholders and will have lasting consequences for Russian President Vladimir Putin and Russia’s standing on the global stage, the global lender’s president said on Friday.World Bank President David Malpass told Fox Business Network that China’s reaction to the war and the Western sanctions imposed on Moscow would be influential in determining how Russia’s future trade relationships develop.”There’s a global outpouring in favor of Ukraine, and that will have lasting consequences, whatever the outcome of the war,” Malpass said, citing what he called “a very clear focus on Putin being the source of the problem.”He listed previous Russian invasions, including of Hungary in 1956, Czechoslovakia in 1968 and Georgia in 2008 and the annexation of the Crimea region of Ukraine in 2014, but said the current war was far broader.”This is an order of magnitude worse in terms of the decimation and the deaths that are occurring, so I think there will be lasting consequences,” he said.SPEEDING FUNDS TO UKRAINE Malpass said he would speak with Ukrainian President Vododymyr Zelenskiy later on Friday and planned to submit to the World Bank’s board on Friday a loan package for Ukraine that has been expanded with country contributions and has been coordinated with “people that are in bunkers in Ukraine.”Reuters reported on Thursday that the package had grown to 460 million euros ($503 million). Malpass said the goal was to get the money to Ukraine as early as next week. Malpass, a former U.S. Treasury official, said the financing for Ukraine would be “for payment of the ongoing – call it war effort – the ongoing development effort and the medicine efforts that they need to do as a government.”Russia’s global financial isolation intensified on Friday as the London Stock Exchange suspended trading in its last Russian securities and as Europe, the United States and othe countries continued to roll out financial sanctions on Russia.Malpass said the raft of sanctions were having a significant impact on Russia’s interactions with financial markets, while raising questions about its dependence on China and delivering a huge supply shock to world energy and food markets.China, a major shareholder in the World Bank, had to be “horrified at where this is developing,” Malpass said, adding, “That’ll be an important issue in how world trade develops. They buy oil from Russia when the sanctions are in place, but can the companies really remain part of the world system when they’re so engaged with Russia? We’ll have to see how that evolves.” More

(Reuters) – It was just a hint of something good on the horizon, Richmond Federal Reserve President Thomas Barkin said this week, but in his recent conversations with business officials they have been suddenly upbeat about the number of applicants for open jobs.He wasn’t ready to call it a trend, but “you can hear the first glimmers of the labor market starting to ease,” Barkin told a Baltimore business group. It’s an observation that if it holds up could mean the pandemic backlog of too many open jobs and too few workers may be on the verge of thawing, with implications for the path of inflation, wages, and the Fed’s own policy debates.Employment data released on Friday showed that glimmer may in fact be a bright light and the first solid evidence the Fed has had in recent months that some of the key economic aftershocks from the pandemic are starting to wane.Workers did in fact surge into jobs: Firms added 678,000 new positions, and the unemployment rate fell to 3.8%.But just as notably for the Fed wages were flat, relieving fears of an inflationary “wage price spiral” and redeeming somewhat the Fed’s hope that over time workers would set aside their pandemic fears, find ways around childcare or other constraints, and return to work.The employment-to-population ratio, watched by many Fed officials as an overall barometer of labor market health, rose again, to 59.9%, and is now just 1.3 percentage points below where it was before the pandemic; an additional 300,000 people were either working or looking for work in February versus the month before, and the labor force has now grown by 2.3 million in the last five months – the type of net flow back into work or jobseeking officials have been waiting for. Pandemic fiscal support for households has now largely expired with the end of childcare tax credits in January, wages are higher than they were, and businesses have reported using a variety of incentives like benefits and more flexible work arrangements to fill jobs with employees who have become more selective about working conditions.”If we see more numbers like this moving forward, we can be optimistic about this year,” said Nick Bunker, research director at job site Indeed, who noted that many core labor market statistics are in striking distance of where they were before the pandemic. The total number of jobs is just 2.1 million below February 2020, a gap that could be filled by the start of summer at the current pace of hiring; the unemployment rate is just three-tenths of a percentage point higher; and the number of unemployed, at 6.2 million, is just around half a million more than before the pandemic.It wasn’t time yet to declare the labor market healed from the pandemic, Labor Secretary Marty Walsh said in an interview. “We still have work to do,” he said noting the still- elevated Black unemployment rate of 6.6%. But he also predicted that within the year some of the pandemic-related gaps will have closed and “we will be back to normal job day numbers.” NORMALIZATION THE ‘TOP PRIORITY’The employment report for February likely keeps intact the Fed’s current plans to raise interest rates at its meeting in two weeks to confront high inflation. Fed Chair Jerome Powell said he would support an initial 0.25-percentage point increase from the current near-zero level, with more increases expected during the year.But it may also give some relief, at least for now, against calls for faster or bigger rate hikes. The last few job and inflation reports showed both prices and wages accelerating, and pushed the Fed’s current policy – crafted to battle the pandemic – further out of step with a quickening economic rebound.The pause in wage increases coupled with strong hiring and a growing labor force showed a dynamic at work that policymakers hope will take root across the economy: Improvements in the supply of goods and services, in this case labor, helping meet strong demand without excessive price hikes. The war in Ukraine has added a new layer of uncertainty to the outlook, as Powell noted in congressional testimony this week.Analysts noted as well that overall hiring remains so strong that one month of flat wages may not mean much. The annual increase remains a robust 5.1%.”We are inclined to look through the reported wage weakness,” wrote Jefferies Chief Financial Economist Aneta Markowska. “The labor market is hot and inflation is likely to accelerate” to perhaps as high as 8% by March from 7.5% in January.”Policy normalization remains the top priority for the Fed,” she said.The employment data arguably showed a step back towards normal, with job gains spread widely through the economy, including in some of the service industries most harmed by the pandemic. A broadening set of industries have fully rebounded to pre-pandemic employment levels, with the hardest hit leisure and hospitality sector still 9% below but improving.High frequency data have shown steady improvement as well with momentum for more to come. Air travel has been on the rise as has in-person restaurant dining, bellwether activities marred for two years by fears of the virus.Payroll manager UKG said recent shift data showed the impact of January’s Omicron wave, which had kept millions of workers off the job at its peak, had all but faded, and that employment gains seemed to be gaining steam in the most troubled sectors.”It’s very clear that people are increasingly coming off the sidelines,” wrote UKG Vice President Dave Gilbertson. More

Ukraine has long been known as Europe’s breadbasket. The country’s vast fertile plains of black soil made it, along with south-western Russia, one of the best places on the continent to grow wheat and other staple crops. Russia’s invasion of its neighbour — just ahead of the sowing season — risks extending the humanitarian catastrophe in Ukraine to the rest of the world. Staple food prices, as well as energy costs, have spiked, raising the prospect of pushing millions of people towards poverty and hunger. Commodity prices, more generally, increased at close to the fastest pace for over half a century last week. Sanctions on Russian financial institutions have led many traders to shy away from doing business with the country, even for energy. While there may be an exemption from the trade restrictions for oil and gas, insurers and dealers have decided that the risks, reputational or otherwise, of continuing to do business with the country are not worth the benefits. Oil prices rose to just shy of $120 a barrel on Thursday, the highest level since 2012, while wheat prices have risen around 50 per cent since the start of the invasion, close to record levels. More obscure commodities where Russian exports make up a large portion of global supply, such as neon gas — used in the production of semiconductors — and palladium, used in making catalytic converters for cars, are also likely to run short. That will raise consumer prices further in countries where living standards are already under pressure. Sanctions on Belarus, Russia’s main ally in the war, could exacerbate the squeeze: it is one of the world’s largest producers of potash, a component of fertiliser.According to futures markets the effect of the war on commodities is likely to persist, even if it eases slightly. Prices have risen for wheat deliveries in a couple of years, as well as immediately. That indicates traders believe there will be a reduction in supply for some time to come. A prolonged occupation of Ukraine and continued violence would, clearly, be bad for harvests, and damage may already have been done to potential yields.For richer countries the challenge will be ensuring that the most vulnerable are shielded from the higher costs. Some measure of national solidarity will be vital, as wealthier taxpayers must take some of the burden to ensure their compatriots do not go hungry and stay warm. Investing to reduce import dependency — whether of fuel or food — will take time. The EU must act to prevent a repeat of the beggar-thy-neighbour policies seen in the early stages of the coronavirus pandemic, as countries rushed to get hold of a limited international supply of personal protective equipment and other medical supplies. In poorer countries, especially those already facing financial stress from the coronavirus pandemic, higher food prices risk being devastating. Commodity exporters may get a dividend — although only if they do not rely on Belarusian potash — but importers that rely on buying essential food and fuel on international markets could struggle to get hold of the foreign currency they need. Much of Ukraine and Russia’s black soil plains are no longer solely Europe’s breadbasket but also an important source of supplies for Asia, Africa and the Middle East. Those trying to relieve famine-stricken parts of the world such as Yemen, Afghanistan and Ethiopia, will face an even more daunting task. When food prices rose in 2008 it helped to spark the Arab spring and, eventually, civil war in Syria. Russia’s invasion of Ukraine has sown the seeds of a crisis that will be felt well beyond European borders. More

Households are increasingly feeling the effects of inflation on their personal finances, leading some to spend their savings to cope with big rises in the costs of energy, food and fuel.Four-fifths (81 per cent) of adults quizzed in a regular official survey last month said their cost of living had risen over the month, up from 62 per cent of adults in November. The research, published on Friday by the Office for National Statistics, suggested inflation — which hit an annual 5.5 per cent in the January consumer prices index — is affecting people’s ability to pay for essentials. One in five (22 per cent) are spending their savings and 21 per cent of under-50s are borrowing more on credit cards or loans to manage their cost of living. The most common cost rises reported by those surveyed were in the price of food (92 per cent), gas and electricity bills (80 per cent) and the price of fuel (76 per cent). Energy bills are set to rise in April, when the regulatory price cap will jump by 54 per cent, pushing up the average bill to £1,971 a year. More than half (51 per cent) said they had reacted to price rises by cutting down their spending on non-essentials, while over one-third (37 per cent) said they were using less gas or electricity at home to save on costs.One in five said they were raiding their savings, rising to over one in four (27 per cent) for the under-30s age group. The ONS survey also asked its 4,500 respondents how they would cope with an unexpected but necessary bill of £850. Fewer than six out of 10 (59 per cent) said they would be able to pay it. Regular earnings went up by 3.6 per cent in the quarter to December 2021, implying a real-terms pay cut after accounting for higher inflation. The cost-of-living crisis triggered by inflation and the energy crunch is only set to worsen, according to forecasts by consultancy Capital Economics.

“The rise in energy prices that has resulted from the war in Ukraine means inflation will be higher for longer, spiking at over 8 per cent in April,” said Andrew Wishart, an economist at Capital Economics, on Thursday. The consultancy suggested inflation would fall back to 5 per cent by December 2022, compared with 4.4 per cent in its previous forecast. Savings made under lockdown, when pandemic restrictions limited the opportunities for spending on leisure activities, travel and restaurants, meant more people had extra cash as prices soared. But Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said this was “not a long-term solution”. “If you eat away at your emergency savings safety net instead of significantly cutting your costs, then months down the line you’ll be left with exactly the same problem in making ends meet, but having destroyed your emergency savings so you’re far less financially resilient,” she said.The high proportion of respondents under the age of 50 saying they had turned to borrowing to make ends meet was a further worry. Coles said: “It’s never a good idea to borrow to pay the bills. It feels like an easy solution, but you’re actually adding to the problem, because next month you’ll still have the same impossible bills, but you’ll have debts and interest to cover too.” More

Wheat prices have hit record highs on intensifying concerns of a supply shortage because of the war in Ukraine, raising the spectre of soaring global food inflation.Ukraine and Russia account for about 30 per cent of the world’s traded wheat and still have crops from last year to ship. “There is no end in sight to the upswing because 30 per cent of the world’s wheat exports have been cut off from the global market,” said Carsten Fritsch, analyst at Commerzbank.Wheat traded in Chicago, the international benchmark, has jumped more than 50 per cent since Russia invaded Ukraine. Prices rose to as high as $13.40 a bushel on Friday, while European milling wheat in Paris hit a record of €406 per tonne.Food and agricultural experts have warned of increasing food insecurity in poorer countries, many of which are already suffering from high hunger levels because of the coronavirus pandemic. Food inflation is also expected to rise. In January, average food inflation around the world hit 7.8 per cent, the highest level in seven years, according to the IMF.The big price increases were already curtailing the ability of grain-importing countries to purchase wheat. Turkey, a leading buyer of Russian wheat, was forced to reduce its volumes for an international tender from its original targets.Demand was also shifting to alternative grains, said Commerzbank, leading to a significant rise in corn over the past few days. Corn traded in Chicago has risen almost 10 per cent since the Russian invasion.Russia’s war in Ukraine had disrupted global grain and energy markets, which would push up food prices with poorer food-importing countries experiencing the most serious consequences, said Caitlin Welsh at US think-tank Center for Strategic and International Studies.“Russia’s war on Ukraine has the potential to exacerbate food insecurity around the world,” she said.

Grain exports have been halted by a lack of transportation because of port closures, while paying Russia has become more complex due to sanctions imposed by the west. Leading agricultural traders, including Archer Daniels Midland and Bunge, which buy and sell grains around the world, have closed their operations in Ukraine. Analysts and traders are concerned about the planting of this year’s spring crop, including wheat, corn and barley. The winter wheat planted during the European autumn may not be harvested in the summer.In addition to grain prices, farmers around the world are likely to feel the impact of rising costs as Russia and Belarus are the leading fertiliser producers. The Russian Industry and Trade Ministry recommended that fertiliser producers temporarily halt exports, according to Interfax. “Both potash and phosphate are still some way off the record prices hit in 2008, but that record may well be tested over the coming weeks,” said Chris Lawson, head of fertilisers at consultancy CRU.Brazil’s agriculture minister Tereza Cristina said this week the country, which is the fourth-largest consumer of fertilisers, had sufficient stocks until the start of the next harvest in October. She plans to visit Canada this month in order to negotiate more potash supplies. The South American nation imports around 80 per cent of its fertilisers. Russia is the biggest source, providing around one-quarter. More

Nonfarm payrolls rose by 678,000 in February and the unemployment rate fell to 3.8%.
Wall Street had been looking for respective figures of 440,000 and 3.9%.
Wages were little changed on the month and up 5.1% for the year, well below expectations.
Leisure and hospitality led job gains, followed by professional and business services and health care.

Job growth accelerated in February, posting the biggest monthly gain since July as the employment picture got closer to its pre-pandemic self.
Nonfarm payrolls for the month grew by 678,000 and the unemployment rate was 3.8%, the Labor Department’s Bureau of Labor Statistics reported Friday.

That compared with estimates of 440,000 for payrolls and 3.9% for the jobless rate.
In a sign that inflation could be cooling, wages barely rose for the month, up just 1 cent an hour, or 0.03%, compared with estimates for a 0.5% gain. The year-over-year increase was 5.13%, well below the 5.8% Dow Jones estimate as more lower-wage workers were hired and 12-month comparisons helped mute more recent gains.
For the labor market broadly, the report brought the level of employed Americans closer to levels before the Covid crisis, though still short by 1.14 million. Labor shortages remain a major obstacle to fill the 10.9 million jobs that were open at the end of 2021, a historically high gap that had left about 1.7 vacancies per available worker.
At least from an employment perspective, the February report confirms that the rampant omicron spread during the winter had little impact.
“This report indicates that the job market is healthy and resilient to the ebbs and flows of the pandemic,” said Daniel Zhao, senior economist for job placement site Glassdoor. “We’ve seen that job gains have been over 400,000 for 10 months in a row.”

“The labor market recovery remains very robust across the board as more Americans are returning to work,” added Eric Merlis, managing director of global markets at Citizens Financial Group. “Geopolitical issues and inflation pose ongoing threats to the U.S. economic recovery, but pandemic restrictions are being lifted and we continue to see strong job growth.”
Markets, however, reacted little to the news as investors remain focused on the Russia-Ukraine war. Stocks fell through the day Friday and government bond yields were sharply lower.
As has been the case for much of the pandemic era, leisure and hospitality led job gains, adding 179,000 for the month. The job gap for that sector, which was hit most by government-imposed restrictions, is 1.5 million from pre-Covid levels.
The unemployment rate for the industry tumbled to 6.6%, a slide of 1.6 percentage points from January and closer to the 5.7% of February 2020. Wages actually declined slightly, falling 2 cents an hour to $19.35. The increase in hiring for bars, restaurants, hotels and other similar businesses likely is contributing to the slower pace of pay increases.
“We’re getting back to pre-pandemic levels in terms of labor force participation. Job growth is still quite healthy and strong. So things are really good,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “As more people come back to work and participation picks up, the level of wage gains should start to subside a little bit. In terms of the Fed worrying about inflation driven by people making more money, I guess that’s good news.”
Other sectors showing strong gains included professional and business services (95,000), Health care (64,000), construction (60,000), transportation and warehousing (48,000) and retail (37,000). Manufacturing contributed 36,000 and financial activities rose 35,000.

‘Real’ unemployment edges up

Previous months saw upward revisions. December moved up to 588,000, an increase of 78,000 from the previous estimate, while January’s rose to 481,000. Together, the revisions added 92,000 more than previously recorded and brought the three-month average to 582,000.
The labor force participation rate, a closely watched metric indicating worker engagement, rose to 62.3%, still 1.1 percentage points from the February 2020 pre-pandemic level. An alternative measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons, and is sometimes referred to as the “real” unemployment rate, also edged higher, to 7.2%.
The trend for jobs is clearly upward after a wintertime surge of Covid omicron cases, while exacting a large human toll, left little imprint on employment.
“If we see more numbers like this moving forward, we can be optimistic about this year,” wrote Nick Bunker, economic research director at job search site Indeed. “Employment is growing at a strong rate and joblessness is getting closer and closer to pre-pandemic levels. Still, in these uncertain times, we cannot take anything for granted. But if the recovery can keep up its current tempo, several key indicators of labor market health will hit pre-pandemic levels this summer.”
The economy also has been wrestling with pernicious inflation pressures running at their highest levels since the early 1980s stagflation days. The Labor Department’s main inflation gauge showed consumer prices rising at a 7.5% clip in January, a number that is expected to climb to close to 8% when February’s report is released next week.
Amid it all, companies continue to hire, filling broad gaps still left in the leisure and hospitality sector as well as multiple other pandemic-struck industries.
The Federal Reserve is watching the jobs numbers closely. Monetary policymakers widely view the economy as near full employment, adding pressure to prices that have soared amid supply shortages and demand surges related to the pandemic.
Inflation has come as Congress has pumped more than $5 trillion in stimulus into the economy while the Fed has kept benchmark borrowing rates anchored near zero and injected nearly $5 trillion into the economy through asset purchases.
Now, Fed officials expect this month to start raising interest rates, with market expectations that those hikes likely will continue through the year.
The February jobs report “will give the Fed greater confidence to push ahead with its planned policy tightening but, with wage growth now levelling off, there is arguably less pressure for officials to front-load an aggressive series of rate hikes over the coming months,” wrote Michael Pearce, senior U.S. economist at Capital Economics.
Traders continued to fully price in a 25 basis point rate hike at the March Fed meeting, and see a strong possibility of five more such increases through the end of the year, according to CME Group data.

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Russia’s invasion of Ukraine is likely to go almost unmentioned at an annual gathering of China’s legislature, as leaders focus on stabilizing economic growth.BEIJING — When China’s legislature opens its weeklong annual session on Saturday, Chinese leaders will be eager to use the event to bolster confidence in the country’s economy.Beijing will use the National People’s Congress to pledge that China’s economy, the engine of global growth, will regain momentum despite a punishing slump in housing, rising commodity prices, scattered lockdowns to control coronavirus outbreaks and widespread uncertainty over the war in Ukraine.Beijing’s ability to maintain political and economic stability is paramount as the ruling Communist Party prepares the ground for Xi Jinping, China’s leader, to secure another term in power at a party congress late this year. Mr. Xi has used a nationalistic vision of rejuvenation to justify his strongman rule and the party’s expanding grip into everyday life, but the challenges his country faces are grave.The Chinese economy is slowing. Continued lockdowns and other stringent pandemic-control measures have hurt consumption. The average age of the population is rising fast, threatening to result in labor shortages. Officials are grappling with an unusually sustained wave of public anger about human trafficking and the shoddy protection of women.Stabilizing China’s weak economy will be the central focusOn Saturday, Premier Li Keqiang will announce the government’s target for economic growth this year. Economists expect the target to be at least 5 percent and possibly higher. That would signify continued gradual deceleration of the Chinese economy, although still faster growth than in most other countries.Economies have rebounded strongly over the past year in the West, helped by heavy consumer spending as the pandemic ebbs at least temporarily. But China is on the opposite track. China’s economy expanded 8.1 percent last year, but slowed markedly in the final months of last year, to 4 percent, as government measures to limit real estate speculation hurt other sectors as well.Residential housing construction last year in Guangdong, China.Gilles Sabrié for The New York TimesConsumers, sometimes kept home by lockdowns and domestic travel restrictions, are pulling back. A high level of household indebtedness, mainly for mortgages, has also dampened spending. Even exports appear to be growing a little less rapidly after spectacular growth through most of the pandemic.To offset weak consumption, Premier Li is expected to announce another round of heavy, debt-fueled spending on infrastructure and on assistance to very poor households, particularly in rural areas.Zhu Guangyao, a former vice minister of finance who is now a cabinet adviser, said at a news conference in late January that he expected the target to be about 5.5 percent. But Jude Blanchette, a China specialist at the Center for Strategic and International Studies in Washington, said that global supply chain difficulties and the economic and financial fallout from the war in Ukraine might prompt China to set a lower target.At the congress, Mr. Blanchette predicted, “the biggest concern and the central focus is going to be the economy.”How long will China seek to keep Covid out?China has kept the coronavirus almost completely under control within its borders after the initial outbreak in Wuhan two years ago, but at considerable cost: intermittent lockdowns, particularly in border cities, as well as lengthy quarantines for international travelers and sometimes domestic ones as well. Hints could emerge of how China intends to follow the rest of the world in opening up, although possibly not until next year.Experts say China is unlikely to throw open its borders before the Communist Party congress late this year. When China does start opening up, it will want to avoid the kind of uncontrolled outbreak that has overwhelmed nursing homes and hospitals in Hong Kong, largely taking a toll on the city’s oldest residents, many of whom are unvaccinated.But in interviews with state media, posts on social media and in public remarks in the past week, China’s top medical experts have begun dropping clues that the country is looking for a less stringent approach that protects lives without being overly disruptive to the economy.Coronavirus testing outside a shopping mall in Beijing last month.Andy Wong/Associated PressThe challenge for Beijing is increasing the rate of vaccination among the country’s older population. In December, a senior health official said that the country’s overall vaccination rate was high, but only half of citizens over 70 were vaccinated.China’s Covid strategy relies heavily on mass surveillance of the population’s movements, with mobile phone location tracking as well as swift containment of buildings and neighborhoods when cases emerge, to impose mass testing and quarantines. But in a sign of Beijing’s concern about the economic toll of such measures, the National Development and Reform Commission ordered local governments last month not to impose unauthorized lockdowns. The top economic planner said that governments “must not go beyond the corresponding regulations of epidemic prevention and control to lock down cities and districts, and must not interrupt public transportation if it’s unnecessary or without approval.”The Latest on China: Key Things to KnowCard 1 of 3National People’s Congress. More

Thomas Laryea is an international law and policy expert at Orrick, Herrington & Sutcliffe. He specialises in advising governments and creditors on international finance matters. In this post, he explores the legal ramifications for international economic law following Russia’s invasion of Ukraine.The armed conflict between Russia and Ukraine has already had profound geopolitical repercussions, as well as tragic human costs. It is also highly complex for international economic law and the institutions that govern it. In particular, the IMF.Before we dive into the central issues, however, some context.After the collapse of the Soviet Union in 1991, the former republics of the bloc were broken up into their own states. law. A dissolution under international law would have been messy, not least because it would have meant that the Soviet Union’s assets and liabilities would have to be allocated among the new successor states. However, Russia insisted that it be treated as the continuing state. That meant Russia retained all its international assets (such as foreign exchange reserves) and liabilities (such as obligations on international debt contracts).This approach also meant Russia continued the Soviet Union’s membership and status in international organisations such as the UN Security Council. And the former Soviet Union republics became new states under international law.Now to today. What are the international economic law implications of Russia’s invasion of the Ukraine?The IMF, in a joint statement with the World Bank, signalled on Tuesday that it’s responding to Ukraine’s request for emergency financing, and is continuing to work on making an additional $2.2bn available for the nation before June’s end.But what would happen if Russia were to apply for IMF financing to cushion the blow from the sanctions? Russia’s invasion of Ukraine does not breach its obligations under the IMF’s Articles of Agreement: Russia remains a full member of the IMF member and remains eligible for financing from the Fund. Russia could therefore immediately draw on its circa $5bn “reserve tranche” in the IMF without any conditions. Beyond that, however, the geopolitical reality suggests that securing the IMF Executive Board votes to approve additional financing would be impossible.Economic sanctions and other restrictionsThe scale of the economic sanctions against Russia has been unprecedented, with Russia’s central bank, financial and banking system all targeted.The nature of the sanctions imposed on Russia could mean that those measures fall foul of the IMF treaty. For instance, as the measures restrict the availability, or use, of foreign exchange by private parties in international payments, this could constitute “exchange restrictions”, breaching the IMF treaty, unless approved by the IMF Executive Board. However, since 1952, the IMF has approved exchange restrictions that are imposed “solely for the preservation of national or international security”. I would expect that the exchange restrictions imposed against Russia would be approved on this basis. In order to cushion the rouble’s fall and conserve the country’s now-limited store of foreign exchange reserves, the Russian authorities have also imposed a series of measures, such a restricting Russian residents from using foreign exchange to service foreign debt. Those measures would also be in breach of Russia’s IMF obligations, unless the IMF Board approves it. A basis for IMF Board approval is that such measures are imposed temporarily, for balance of payments reasons and their effect is non-discriminatory across residents of other IMF member countries. Based on past precedents, Russia has a fair argument for IMF approval of at least some of the restrictions that it has imposed.The international legal effect of the restrictive measures that Moscow is imposing may be much broader than many international investors realise. The IMF treaty gives extraterritorial effect to some of the payment aspects of the economic sanctions against Russia and its central bank’s attempts to conserve its reserves. Article VIII, Section 2(b) of the IMF’s treaty renders a contract for payment in foreign exchange unenforceable, where such payment is “contrary to an exchange control regulation imposed consistently with the IMF’s [treaty].” Any exchange restrictions approved by the IMF, or any restrictions on capital movements (which the IMF treaty generally authorises IMF member countries to impose), are consistent with the IMF treaty for these purposes. What this means in practice is that, if a US-based holder of a Russian corporate bond does not receive payment because Russia has imposed an IMF-approved exchange restriction, that bondholder might not be able to enforce its claim for non-payment in any of the IMF’s 190 member countries. A quick word on sovereign bondsIn the run-up to Russia’s invasion of Ukraine, the prices of Ukraine’s sovereign bonds traded lower, and they might fall further in a prolonged conflict. A debt restructuring looms. Ironically, Russia is reported to remain a holder of its bonds even though it fought Ukraine in court during its bond restructuring in 2016. Some bond market participants have also begun to wonder whether a default event would be triggered if it ceased to become a member of the IMF if Russia took control of the country. This question conflates two distinct international law issues: (i) the recognition of a state and (ii) recognition of a government. If Russia were to take over the government in Ukraine, it’s likely that the international community would refuse to recognise that government and, in any case, Ukraine would still retain its statehood and, therefore, would continue as a member country of the IMF.Another issue is whether Russia will make its upcoming payments on its sovereign bonds, with the first hard currency payments due on March 16. With the payment system restrictions and the obvious incentives on Russia to conserve financial resources, a default seems likely.The quest for peace and security is the international priority at this juncture. Unfortunately, the economic fallout may be prolonged and the international economic law consequences may be felt for years to come. More