Previous Quarterly Editions
Expropriation Risk: 57 57 58 78 ▲ Political Violence Risk: 59 59 59 59 ► Terrorism Risk: 52 50 48 58 ▲ Exchange Transfer and Trade Sanction Risk: 64 55 55 73 ▲ Sovereign Default Risk: 47 47 47 75 ▲
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Government's commitment on climate policy Weakest 1 2 3 4 5 Strongest
While Russia ranks fourth worldwide in terms of total greenhouse gas emissions (GHG), behind China, the United States and India, its emissions are still less than half the United States’ and several times less than China’s.
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Despite that, Russia has the most GHG-intensive economy in the world. The country also ranks second in terms of per capita GHG emissions, according to 2018 data, lagging slightly behind the United States but dwarfing China.
In 2019, Russia ratified the 2015 Paris Climate Accords. Crucially, since the global benchmark is the year 1990, when Russia was still a member of the Soviet Union, with far greater total emissions than subsequent to the Soviet Union’s collapse, Russia can effectively lower its emissions by 30% by 2030 even as its actual emissions continue to grow through 2029.
In 2021, Russia adopted a strategy for a low-carbon economy until 2050 and a legal framework on emissions reporting and regulation. Also in 2021, Sakhalin Region became the first region to experiment with carbon emissions trading.
These legal and regulatory changes notwithstanding, the authorities still treat climate change as a low-priority issue. The share of renewables in Russia’s energy mix is negligible, and both nuclear and hydropower have been performing below their true potential.
There are no significant projects for expanding renewables in Russia, which would require substantial government support. Conversely, more profitable liquefied natural gas and Arctic oil projects have been generously subsidised.
Russia has several pro-environment political parties, but none of them has nationwide representation. Three such parties with climate change in their programmes failed to coalesce in the run-up to the 2021 parliamentary elections and were left out of the Duma.
The long-term consequences of the Russian conflict in Ukraine in February 2022 will have a considerable impact on Russia’s climate profile. On the one hand, the reduced output of oil, gas, coal and other commodities, due to existing and future sanctions and embargoes, would translate into low GHG. On the other, the Russian government has already announced unprecedented economic support to the national fuel and energy complex, suggesting a partial or even total backtracking on its climate goals.
In the first months following the conflict in Ukraine, hundreds of well-known foreign brands have withdrawn from the Russian market, mostly voluntarily as well as under pressure from sanctions. The Russian government has since decided to entrust the temporary management of their local assets to Russian companies and has floated the possibility of nationalising foreign properties, although no decision has been taken yet. Foreign companies’ assets in Russia are at direct risk of expropriation, especially if they are headquartered in the so-called ‘unfriendly countries’, the list of which, containing 48 names, was last updated in early March.
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Following the September 2021 parliamentary elections which unexpectedly strengthened the ruling United Russia party’s hold on the Duma, the Russian authorities have been keeping a tight lid on protest moods across the country. They have been steadily pursuing their massive legal attack against opposition and independent media by labelling them as well as individual journalists “foreign agents”. This designation has resulted to date in the closure or suspension of several prominent publications. In the absence of opinion leaders and sufficient infrastructure to initiate a mass protest movement, President Vladimir Putin’s regime is facing no serious challenge.
The ongoing Russian/Ukraine crisis has led to a wave of protests, resulting in the arrests of more than 12,000 people between the launch of the military campaign and March 13, when the protest movement fizzled out amid a severe crackdown. On March 4, President Vladimir Putin signed into law a bill criminalising the spreading of so-called ‘fake news’ about the Russia/Ukraine crisis, with the maximum penalty being 15 years of imprisonment.
While the authorities have continued to expand their foreign agents list, they have also launched a head-on assault on domestic opposition and Western media including social media, for instance banning Facebook, which has been labelled an extremist organisation.
There have been no significant terrorist incidents in a major Russian city since 2017, when a suicide bomber attacked an underground train in St. Petersburg. Nonetheless, law enforcement regularly report on the arrests of presumed terrorist group members and terrorist attacks that have been prevented.
Since the onset of conflict in Ukraine, the Federal Security Service has arrested several groups of Ukrainian nationalists allegedly plotting attacks against Russia. On February 20, the US Embassy in Moscow warned US citizens of the heightened risk of terrorist attacks in Moscow, St Petersburg and cities close to Ukraine.
The conflict in Ukraine has led to the imposition of unprecedented economic sanctions on Russia, including multi-jurisdictional freezes of the Russian central bank’s overseas assets, restrictions on sovereign debt trading, and the U.S. and EU bans on the sale of their currencies to Russia. Faced with an impending liquidity crisis, the authorities have enacted drastic capital controls, for example by freezing until September withdrawals from foreign currency bank accounts above a USD10,000 limit, prohibiting the transfer of foreign currency exceeding USD10,000 in physical form and USD5,000 via bank wires, and allowing both sovereign and corporate debt to be paid in rubles. On March 23, Putin instructed the government to start collecting revenue from the sale of natural gas by Gazprom in Europe in rubles only.
Other Western restrictions include the disconnection of a dozen Russian banks, including the country’s second largest, VTB, from the SWIFT messaging system; restrictions on correspondent and payable-through accounts against Sberbank (the largest bank) and Alfa Bank (the largest private bank); and a wide range of export controls, such as the ban on the sale of Boeing and Airbus aircraft, spare parts, (re)insurance, leasing and other services.
Since late February, the UK, EU, U.S., Canadian and Japanese governments have frozen the Russian central bank’s foreign currency reserves held within their jurisdictions. Russia’s finance ministry estimates that some USD300 billion has been immobilised out of USD634 billion as of mid-February. These freezes, in addition to the U.S. and EU decisions to ban the transfer of U.S. dollars and euros to Russia, have prompted Putin to install stringent capital controls and to allow paying down both sovereign and corporate debts in rubles.
Prior to the crisis in Ukraine, Russia’s sovereign debt rating was last updated in August 2019. Post-February 24, when the conflict began, the country’s sovereign debt rating has been downgraded eight times by Moody’s, S&P and Fitch. As of March 17, S&P rates Russia as ‘CC’ with a negative outlook, compared with Fitch’s ‘C’ and Moody’s ‘Ca’ with a negative outlook (on March 25, Fitch withdrew all ratings for Russia because of sanctions).
In all cases, this means either ‘extremely speculative’ or ‘imminent default’. In May, the US Treasury did not renew the waiver which allowed Russia to conduct debt transactions, and specifically to pay U.S. bondholders, bringing default a step closer.
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