Forget Sanctions; What Could Really Hurt Putin Is Investor Backlash

I’m not sure whether or not this is accurate. Nevertheless:

Western governments may not have to make good on their threat to punish Russia for invading Crimea. Investors are doing it for them.

Moscow’s Micex stock index plunged more than 11 percent today, the first day of trading after President Vladimir Putin got parliamentary approval to send troops into Ukraine. The ruble sank to a record low against the dollar, even after Russia’s central bank unexpectedly hiked its key lending rate from 5.5 percent to 7 percent.

Russia can’t afford to let this go on. Even before the Ukraine crisis, it was hemorrhaging investment capital. Outflows totaled $17 billion in January alone, undermining efforts to jump-start an economy that grew only 1.3 percent last year. The ruble is one of the world’s worst-performing currencies. “If investors begin to boycott Russia, that would be a far more damaging sanction” than any penalties meted out by the U.S. or the European Union, says Chris Weafer of Moscow investment group Macro-Advisory. He predicts that Putin, in an effort to limit economic damage at home, won’t make a grab for other Ukrainian regions after Crimea.

Read the rest here: http://www.businessweek.com/articles/2014-03-03/forget-sanctions-dot-what-could-really-hurt-putin-is-investor-backlash

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