AFP

European stock markets rebounded Tuesday following days of losses on fears over rising US interest rates fuelled by surging inflation and the impact of China’s prolonged Covid lockdowns.

US stocks also bounced higher at the start of trading but gave up their gains as the day wore on.

Meanwhile, oil prices also resumed their slide lower with the benchmark US crude contract, WTI, falling under $100 per barrel.

World stock markets have been on a tempestuous ride this year, and have seen sharp losses after the US Federal Reserve last week hiked interest rates by half a percentage point to get a grip on surging inflation.

Between rising prices eating into the disposable income of consumers and higher borrowing costs, investors have been increasingly concerned about the possibility of recession.

“European markets have seen a modest rebound from yesterday’s two-month lows, after the carnage of the last three days, as investors look for signs of a possible base,” said market analyst Michael Hewson at CMC Markets UK.

London ended the day with a gain of 0.4 percent, Paris added 0.5 percent and Frankfurt rose 1.2 percent.

“We’re seeing a small recovery in stock markets on Tuesday, as investors dust themselves off following the rout at the start of the week,” said Craig Erlam, senior market analyst at online trading platform OANDA.

“There’s clearly a huge amount of worry about a recession in the markets at the minute as central banks continue to aggressively tighten against the backdrop of a slowing economy and a cost-of-living crisis,” he added.

Asian equities mostly sank following sharp losses on Wall Street on Monday.

Oil prices have also taken a drubbing in recent days on worries about demand.

“This week’s oil price weakness has been largely driven by reports that the EU is having difficulty in reaching a consensus on its Russian oil ban,” said CMC Markets’s Hewson.

“Yesterday’s weak China trade numbers have also weighed into the overall calculus, as concerns grow over Chinese demand, with the major cities of Beijing and Shanghai on the receiving end of new restrictions.”

– Bitcoin woes –

Bitcoin on Tuesday slumped briefly under $30,000, reaching a 10-month low.

The volatile cryptocurrency has lost more than half its value since a November surge saw it reach a record high of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

Data on Tuesday showed inflation in Greece jumping by 10.2 percent in April, its highest level since 1995, while it reached its highest rate since 1984 in Denmark at 6.7 percent.

Inflation began to rise after countries emerged from Covid pandemic restrictions last year, but it worsened following Russia’s invasion of Ukraine, which pushed energy and food prices even higher.

The Ukrainian economy is set to contract by almost one third this year in the wake of Russia’s invasion, the European development bank said.

Ukraine’s output is set to contract 30 percent compared with an EBRD forecast of minus 20 percent given in March shortly after Moscow’s military offensive.

– Key figures at around 1630 GMT –

New York – Dow: DOWN 1.0 percent at 31,937.12 points

EURO STOXX 50: UP 0.7 percent at 3,508.47

London – FTSE 100: UP 0.4 percent at 7,243.22 (close) 

Frankfurt – DAX: UP 1.2 percent at 13,534.74 (close)

Paris – CAC 40: UP 0.5 percent at 6,116.91 (close)

Hong Kong – Hang Seng Index: DOWN 1.8 percent at 19,633.69 (close)  

Shanghai – Composite: UP 1.1 percent at 3,035.84 (close)

Tokyo – Nikkei 225: DOWN 0.6 percent at 26,167.10 (close)

Brent North Sea crude: DOWN 3.1 percent at $102.64 per barrel

West Texas Intermediate: DOWN 3.2 percent at $99.82 per barrel

Euro/dollar: DOWN at $1.0539 from $1.0563 on Monday 

Pound/dollar: DOWN at $1.2320 from $1.2331

Euro/pound: DOWN at 85.55 pence from 85.64 pence

Dollar/yen: DOWN at 130.12 yen from 130.26 yen

burs-rl/imm

The UK and the EU appeared on a collision course Tuesday over post-Brexit trading arrangements in Northern Ireland, after London branded them unsustainable but European leaders insisted they would not be renegotiated. 

It comes as political tensions rise in the UK province after historic elections last week saw pro-Irish nationalists Sinn Fein become the biggest party for the first time and now bid to lead a power-sharing executive.

UK Prime Minister Boris Johnson said in a call with his Irish counterpart Micheal Martin that the so-called Northern Ireland Protocol governing trade there “was not sustainable in its current form”.

In the latest threat to take unilateral steps to address the “very serious” situation, he added his government “would take action to protect peace and political stability in Northern Ireland if solutions could not be found”.

But the warning prompted a swift response from German Chancellor Olaf Scholz and Belgian Prime Minister Alexander De Croo.

“No one should unilaterally scrap or break or in any way change the arrangement we agreed on together,” Scholz told a joint press conference in Berlin. 

Flanking the German leader, De Croo added: “Our message is quite clear. Don’t touch this, this is something we agreed on.”

European Commission vice-president Maros Sefcovic, who has been leading months of talks between the two sides, said the 27-member bloc was “united” in its stance.

“The Protocol, as a cornerstone of the Withdrawal Agreement, is an international agreement. Its renegotiation is not an option,” he added.

– ‘Disruption’ –

Signed as part of the UK’s EU divorce, the protocol keeps Northern Ireland largely in the EU’s single market and imposes sweeping checks on goods heading there from Great Britain (England, Scotland and Wales).

The compromise was introduced to avoid the return of hard border infrastructure between Northern Ireland and EU member Ireland to the south.

Keeping the border open was a key plank of the 1998 Good Friday Agreement that ended decades of sectarian violence over British rule in Northern Ireland.

But the protocol has infuriated pro-UK unionists who claim the checks on trade across the Irish Sea undermine the province’s place within the UK.

The DUP, the largest unionist party, has vowed not to nominate ministers to the Northern Ireland executive in Belfast until the protocol is overhauled, raising the prospect of post-election paralysis. 

“In the absence of agreement with the EU, then the UK Government must act to safeguard the political institutions in Northern Ireland, to safeguard the political process,” its leader Jeffrey Donaldson said.

Johnson and his ministers have said they share unionists’ concerns about how the protocol is being implemented and have repeatedly threatened to trigger a suspension clause in the terms.

They have accused the EU of inflexibility and overzealous interpretation of the rules, causing “economic and political disruption” in Northern Ireland.

In their call, Johnson told Martin the province’s 1998 peace agreement “was being undermined”, his office said.

– Unilateral actions –

The EU is insistent the UK must abide by the terms of the deal it signed up to and that it risks a possible trade war with the bloc if it unilaterally suspends any of the protocol.

Sefcovic has urged London to dial down the rhetoric and work on finding solutions within the existing framework.

Martin’s office said the Taoiseach “set out clearly his serious concerns at any unilateral action at this time, which would be destabilising in Northern Ireland and erode trust”.

However, The Times said Foreign Secretary Liz Truss could move to scrap large parts of the deal from British law by as early as next week.

The newspaper said officials had drawn up draft legislation to remove the need for checks on goods from Great Britain for use in the province.

If passed, Northern Irish companies could also ignore EU rules and regulations and strip the European Court of Justice of oversight powers on disputes, it added.

European stock markets rebounded Tuesday following days of losses on fears over rising US interest rates fuelled by surging inflation and the impact of China’s prolonged Covid lockdowns.

US stocks also bounced higher at the start of trading but gave up their gains as the morning wore on.

World stock markets have been on a tempestuous ride this year, but have seen sharp losses after the US Federal Reserve last week hiked interest rates by half a percentage point to get a grip on surging inflation.

Between rising prices eating into the disposable income of consumers and higher borrowing costs, investors have been increasingly concerned about the possibility of recession.

“European markets have seen a modest rebound from yesterday’s two-month lows, after the carnage of the last three days, as investors look for signs of a possible base,” said market analyst Michael Hewson at CMC Markets UK.

London ended the day with a gain of 0.4 percent, Paris added 0.5 percent and Frankfurt rose 1.2 percent.

“We’re seeing a small recovery in stock markets on Tuesday, as investors dust themselves off following the rout at the start of the week,” said Craig Erlam, senior market analyst at online trading platform OANDA.

“There’s clearly a huge amount of worry about a recession in the markets at the minute as central banks continue to aggressively tighten against the backdrop of a slowing economy and a cost-of-living crisis,” he added.

Asian equities mostly sank following sharp losses on Wall Street on Monday.

– Bitcoin woes –

Bitcoin on Tuesday slumped briefly under $30,000, reaching a 10-month low.

The volatile cryptocurrency has lost more than half its value since a November surge saw it reach a record high of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

Data on Tuesday showed inflation in Greece jumping by 10.2 percent in April, its highest level since 1995, while it reached its highest rate since 1984 in Denmark at 6.7 percent.

Inflation began to rise after countries emerged from Covid pandemic restrictions last year, but it worsened following Russia’s invasion of Ukraine, which pushed energy and food prices even higher.

The Ukrainian economy is set to contract by almost one third this year in the wake of Russia’s invasion, the European development bank said.

Ukraine’s output is set to contract 30 percent compared with an EBRD forecast of minus 20 percent given in March shortly after Moscow’s military offensive.

Elsewhere Tuesday, oil prices fell further but the losses were less severe than the drops of more than six percent Monday on weaker demand concerns.

– Key figures at around 1530 GMT –

New York – Dow: DOWN 0.3 percent at 32,144.47 points

EURO STOXX 50: UP 0.8 percent at 3,511.72

London – FTSE 100: UP 0.4 percent at 7,243.22 (close) 

Frankfurt – DAX: UP 1.2 percent at 13,534.74 (close)

Paris – CAC 40: UP 0.5 percent at 6,116.91 (close)

Hong Kong – Hang Seng Index: DOWN 1.8 percent at 19,633.69 (close)  

Shanghai – Composite: UP 1.1 percent at 3,035.84 (close)

Tokyo – Nikkei 225: DOWN 0.6 percent at 26,167.10 (close)

Brent North Sea crude: DOWN 1.9 percent at $103.95 per barrel

West Texas Intermediate: DOWN 1.8 percent at $101.20 per barrel

Euro/dollar: DOWN at $1.0539 from $1.0563 on Monday 

Pound/dollar: DOWN at $1.2300 from $1.2331

Euro/pound: UP at 85.67 pence from 85.64 pence

Dollar/yen: UP at 130.30 yen from 130.26 yen

burs-rl/lcm

Germany is seeking to ban Russian oil by the end of this year over the war in Ukraine, but workers at the PCK oil refinery outside Berlin are less than happy about the plans.

“We need Russian oil. We have our houses, our families. If (the government) wants to stop it, then the area here will be dead,” Thorsten Scheer, 60, told AFP at the refinery in the town of Schwedt, on the border with Poland.

The plant, which employs 1,200 people, exclusively processes Russian crude oil from a branch of the Druzhba pipeline, the world’s longest oil pipeline.

It supplies around 90 percent of the oil consumed in Berlin and the surrounding region, including Berlin-Brandenburg airport, and many local businesses depend on the cash it brings to the area.

Economy Minister Robert Habeck travelled to Schwedt on Monday to hold a question-and-answer session with the refinery’s employees, where he met a mixed reception.

Standing on a table outside the staff canteen, Habeck sought to reassure the crowd of workers in green and orange overalls that the government would seek alternative ways to keep the plant running.

– ‘Not Germany’s concern’ –

But employees accused him of serving US interests in seeking to drive a wedge between Germany and Russia.

“Yes, war is rubbish. That is perfectly clear to us,” one worker told the crowd.

“But on the other hand, why should we suddenly ban a business partner who has delivered reliably for decades? We get a raw material and we process it. If this raw material is interrupted out of political correctness, that is not right in my eyes.”

Another worker, 48, who did not want to give his name, told AFP the situation was “stressful for everyone” as their jobs were “hanging in the balance”.

“In my opinion, the war is not Germany’s concern,” he said. “If (the oil embargo) would end the war, fine. But it won’t. Putin will peddle his oil somewhere else.”

Habeck, a member of the Green party, was also met with protests from environmental campaigners, who said they had managed to turn off the oil supply to the PCK plant in advance of his visit.

Germany has ruled out an immediate embargo on all Russian energy in response to the war in Ukraine, especially gas. 

However, Europe’s biggest economy has already slashed its oil imports from Russia to 12 percent of the total from 35 percent before Russia’s invasion.

– Sticky problem –

But the PCK refinery presents it with a sticky problem — especially since the site is majority owned by Russian oil giant Rosneft, controlled by the Kremlin.

In late 2021, Rosneft announced plans to increase its stake in the refinery from 54 to 92 percent by buying shares from Shell.

Germany’s Federal Cartel Office approved the transaction a few days before the outbreak of the war but the Economy Ministry is examining whether it can still be stopped. 

Habeck laid out three elements that would have to come together to keep the plant alive: new oil deliveries from other countries via ships arriving in the port of Rostock; financial aid from the government; and a new ownership structure to wrest control from Rosneft.

The minister said he was “well aware” that there was “a lot of uncertainty” for the workers. 

“I would be happy if you would see me not just as your enemy, but as someone who is really trying to save this site and keep it alive and lead it into the future,” he said.

But after the meeting, as the workers stood in line to help themselves to barbecued burgers and sausages, many remained unconvinced by his plans.

“It’s an experiment. We all just have to hope it works out,” said Steffen Thierbach, 64.

From superyachts and mansions to private jets and works of art, mega-rich Russians are being deprived of their expensive playthings, under swingeing sanctions that implicate them in Vladimir Putin’s war in Ukraine.

The seizing and freezing of assets is proving the toughest trial yet for the Kremlin-favoured “oligarchs”, many of whom got rich on the back of the collapse of the Soviet Union.

In Britain, more than 100 oligarchs and their families have been slapped with restrictions. The United States has sanctioned 140 and the European Union more than 30.

UK Transport Secretary Grant Shapps has said the move was designed to hit them where it hurts — denying them “access to their luxury toys”.

The British capital has for years been dubbed “Londongrad” after becoming a haven for Russians to keep their money, educate their children and pursue litigation.

“The welcome mat is now being taken away from Russian oligarchs,” The Economist wrote.

Even the high-profile Roman Abramovich has been targeted, forcing him to put Chelsea Football Club, which he bought in 2003, up for sale.

But acting against so many in a highly globalised major economy is “totally uncharted territory”, said researcher Alex Nice, from the Institute for Government think-tank.

Whenever the war ends, a deep rift between the West and Russia will remain, even if the assets are just frozen, rather than expropriated, he added. 

“There doesn’t seem to be any prospect that these sanctions will be lifted any time soon,” said Nice.

In Moscow, the independent Russian political analyst Konstantin Kalachev said Putin’s “special operation” in Ukraine could last “for years” — and even be widened to fulfil his dream of recreating the Russian empire.

If the decision is down to Ukraine, “they will never lift them (sanctions)”, he told AFP.

– Avalanche –

There’s no question that the sanctions have hit home.

Forbes magazine last month removed 34 Russians from its annual billionaire list citing the “avalanche of sanctions”.

“The war is an absolute disaster for them,” said Elisabeth Schimpfoessl, a lecturer in sociology at Aston University in Birmingham, central England, and author of a book called “Rich Russians”.

Petr Aven, known for his extensive collection of Russian art, told The Financial Times newspaper he was unsure if he was “allowed to have a cleaner or a driver” and faced expulsion from the UK.

His long-term business partner, Mikhail Fridman, told Bloomberg news agency he was “in shock” and also struggling to pay a cleaner.

Many oligarchs have multiple citizenships and are not rushing back to Russia.

The West has been a “base that they can go to at any moment when they fear prosecution in Russia”, said Schimpfoessl.

“Oligarchs never bothered developing Russia’s rule of law.”

– Soap opera –

The scale of assets targeted is staggering.

The UK government estimates that Abramovich alone is worth over £9 billion ($11 billion, 10.5 billion euros).

It has also targeted two of his associates worth up to £10 billion.

Abramovich is rumoured to own half a dozen luxury superyachts, two of which docked in Turkey in March, thereby avoiding sanctions.

EU members have reported freezing nearly $30 billion in Russian assets, including almost $7 billion in yachts, helicopters, property and works of art.

Washington has said it has sanctioned or blocked boats and aircraft worth over $1 billion.

US President Joe Biden has proposed permanent sanctions, saying oligarchs should not be allowed to enjoy luxuries while Ukrainian children die.

In Fiji last week, police seized a 348-foot (106-metre) yacht called “Amadea” worth some $300 million and linked to Suleiman Kerimov, a reticent billionaire senator, on Washington’s request.

Images of impounded yachts and shuttered mansions of Putin cronies prompt Schadenfreude in Russia, too.

“Ordinary Russians like to see ‘the rich also cry’,” said Kalachev, citing a Mexican soap opera Russians watched in the early 1990s.

What is not clear is whether sanctions affect Moscow’s decisions.

They cannot influence Putin, because he meets such business figures “only to tell them things — it’s not a dialogue”, argued Kalachev.

“The record of using economic coercion to try to force change in foreign policy is not a good one,” said Nice.

But sanctions “are undoubtedly going to weaken Russia’s capacity to fight”, he added.

– Opposition –

Abramovich has been involved in talks aimed at ending the war, with consent of both sides. Other oligarchs have criticised the conflict.

On Instagram the UK-sanctioned entrepreneur and banker Oleg Tinkov slammed “this crazy war” and Russia’s “shitty army”.

Fridman urged an end to the bloodshed and Oleg Deripaska, sanctioned by the UK, the EU and the US, said continuing fighting was “madness”.

But experts questioned the likelihood of them allying against Putin.

“It’s hard to see that happening,” said Nice. 

“It would not be in their interests ever to speak out against Putin prematurely,” said Schimpfoessl.

Bitcoin slumped below $30,000 for the first time since July 2021 on Tuesday as cryptocurrencies track sinking markets with investors spooked by aggressive US monetary tightening and surging inflation.

The world’s largest cryptocurrency by market value fell as low as $29,764 in Tuesday trade, before recovering above $30,000, extending a recent collapse in price as investors desert assets viewed as risky.

Bitcoin’s value has more than halved since a November surge that sent the token to a record of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

“Bitcoin is breaking below some key technical levels as the never-ending selloff on Wall Street continues,” said Edward Moya, senior market analyst at OANDA, a foreign exchange platform.

“The institutional investor is paying close attention to bitcoin as many who got in last year are now losing money on their investment,” he added.

While the token’s “long-term fundamentals have not changed in months”, concerns about growth and a possible recession are creating “a very difficult environment for cryptos”, Moya said.

“No one is looking to buy the crypto dip just yet and that leaves bitcoin vulnerable here.”

– Tech gloom –

Other cryptocurrencies are not faring better: the total market is valued at just over $1.5 trillion, compared with $3 trillion at its peak, according to data from the CoinGecko website, which tracks over 13,000 crypto assets.

The sector’s woes are linked to investors’ heightened caution.

Worried about the war in Ukraine, Covid lockdowns in China, and tighter monetary policy in the US, they are abandoning the stock markets — especially shares in technology companies, whose performance was boosted by the easy money policies of central banks during the pandemic and bets on long-term growth.

The slump in crypto follows dives on US equities and other markets, with the tech-heavy Nasdaq sinking by more than four percent on Monday.

Nasdaq’s correlation with Bitcoin has reached “historic highs”, according to the Kaiko analytics firm.

But it is difficult to say which way bitcoin will move next, given the proven volatility of crypto assets.

In 2021, bitcoin temporarily fell below $30,000 twice, in June and July, before surging again to hit its all-time high a few months later, in November.

And despite a less impressive 2022 in terms of prices, some players in the sector are seeking to comply with increasingly demanding authorities.

One of the largest trading platforms, Binance, was granted approval to operate in France from the Financial Markets Authority (AMF) in early May.

Meanwhile in the US, the Securities and Exchange Commission (SEC) has announced it is strengthening its team responsible for regulating cryptocurrencies.

– El Salvador confident –

In a sign of the growing importance of cryptocurrencies, two countries, El Salvador and the Central African Republic, have even taken the gamble of adopting bitcoin as their official currency — despite strong criticism from international financial institutions.

While the Central African Republic’s project is still in its infancy, Salvadoran President Nayib Bukele proudly announced on Twitter on Monday that “El Salvador just bought the dip” by adding 500 bitcoins to its fund, using the vocabulary of stockbrokers who see falling prices as opportunities to invest.

On Tuesday, bitcoin rose 2.3 percent to $31,695 at around 0925 GMT.

But since its creation in 2009, the cryptocurrency has existed in a context of ultra-low rates.

The US Federal Reserve has instead signalled in recent months that its recent rate hikes would be renewed to stem inflation.

City Index analyst Fawad Razaqzada warned: “Granted, we will see bounces here and there, but for as long as yields on government bonds are on the rise and the dollar is in an uptrend, the risks remain skewed to the downside.” 

European stock markets rebounded Tuesday, Asian equities mostly sank and oil prices tumbled as traders reacted to fears over rising US interest rates fuelled by surging inflation and assessed the impact of China’s prolonged Covid lockdowns.

World stock markets have been on a tempestuous ride this year, with Wall Street suffering another hit on Monday as the tech-rich Nasdaq slumped more than four percent, while the S&P 500 ended below 4,000 points for the first time since March 2021.

That followed hefty declines Monday in Europe, although key indices in Frankfurt, London and Paris had recovered some of those losses by the half-way stage Tuesday.

“After yet another miserable session in the US yesterday, Europe and pockets of Asia managed to… push ahead,” noted Russ Mould, investment director at AJ Bell.

Investors were worried “about inflation, rising interest rates, a slowdown in the world economy, war in Ukraine, new Covid flare-ups in China, weakness in consumer spending and concerns that business investment might take a back seat”, he added.

– Bitcoin woes –

Bitcoin on Tuesday slumped briefly under $30,000, reaching a 10-month low.

The volatile cryptocurrency has lost more than half its value since a November surge saw it reach a record-high of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

Data on Tuesday showed inflation in Greece jumping by 10.2 percent in April, its highest level since 1995, while it reached its highest rate since 1984 in Denmark at 6.7 percent.

Inflation began to rise after countries emerged from Covid pandemic restrictions last year, but it worsened following Russia’s invasion of Ukraine, which pushed energy and food prices even higher.

The Ukrainian economy is set to contract by almost one third this year in the wake of Russia’s invasion, the European development bank said.

Ukraine output is set to contract 30 percent compared with an EBRD forecast of minus 20 percent given in March shortly after Moscow’s military offensive.

Elsewhere Tuesday, oil prices fell further but the losses were less severe than the drops of more than six percent Monday on weaker demand concerns.

– Key figures at around 1045 GMT –

London – FTSE 100: UP 0.7 percent at 7,264.86 points

Frankfurt – DAX: UP 1.5 percent at 13,574.20

Paris – CAC 40: UP 1.0 percent at 6,147.03

EURO STOXX 50: UP 1.3 percent at 3,573.61

Hong Kong – Hang Seng Index: DOWN 1.8 percent at 19,633.69 (close)  

Shanghai – Composite: UP 1.1 percent at 3,035.84 (close)

Tokyo – Nikkei 225: DOWN 0.6 percent at 26,167.10 (close)

New York – Dow: DOWN 2.0 percent at 32,245.70 (close)

Brent North Sea crude: DOWN 1.8 percent at $104.03 per barrel

West Texas Intermediate: DOWN 1.8 percent at $101.28 per barrel

Euro/dollar: DOWN at $1.0549 from $1.0563 on Monday 

Pound/dollar: UP at $1.2355 from $1.2331

Euro/pound: DOWN at 85.36 pence from 85.64 pence

Dollar/yen: DOWN at 130.08 yen from 130.26 yen

From superyachts and mansions to private jets and works of art, mega-rich Russians are being deprived of their expensive playthings, under swingeing sanctions that implicate them in Vladimir Putin’s war in Ukraine.

The seizing and freezing of assets is proving the toughest trial yet for the Kremlin-favoured “oligarchs”, many of whom got rich on the back of the collapse of the Soviet Union.

In Britain, more than 100 oligarchs and their families have been slapped with restrictions. The United States has sanctioned 140 and the European Union more than 30.

UK Transport Secretary Grant Shapps has said the move was designed to hit them where it hurts — denying them “access to their luxury toys”.

The British capital has for years been dubbed “Londongrad” after becoming a haven for Russians to keep their money, educate their children and pursue litigation.

“The welcome mat is now being taken away from Russian oligarchs,” The Economist wrote.

Even the high-profile Roman Abramovich has been targeted, forcing him to put Chelsea Football Club, which he bought in 2003, up for sale.

But acting against so many in a highly globalised major economy is “totally uncharted territory”, said researcher Alex Nice, from the Institute for Government think-tank.

Whenever the war ends, a deep rift between the West and Russia will remain, even if the assets are just frozen, rather than expropriated, he added. 

“There doesn’t seem to be any prospect that these sanctions will be lifted any time soon,” said Nice.

In Moscow, the independent Russian political analyst Konstantin Kalachev said Putin’s “special operation” in Ukraine could last “for years” — and even be widened to fulfil his dream of recreating the Russian empire.

If the decision is down to Ukraine, “they will never lift them (sanctions)”, he told AFP.

– Avalanche –

There’s no question that the sanctions have hit home.

Forbes magazine last month removed 34 Russians from its annual billionaire list citing the “avalanche of sanctions”.

“The war is an absolute disaster for them,” said Elisabeth Schimpfoessl, a lecturer in sociology at Aston University in Birmingham, central England, and author of a book called “Rich Russians”.

Petr Aven, known for his extensive collection of Russian art, told The Financial Times newspaper he was unsure if he was “allowed to have a cleaner or a driver” and faced expulsion from the UK.

His long-term business partner, Mikhail Fridman, told Bloomberg news agency he was “in shock” and also struggling to pay a cleaner.

Many oligarchs have multiple citizenships and are not rushing back to Russia.

The West has been a “base that they can go to at any moment when they fear prosecution in Russia”, said Schimpfoessl.

“Oligarchs never bothered developing Russia’s rule of law.”

– Soap opera –

The scale of assets targeted is staggering.

The UK government estimates that Abramovich alone is worth over £9 billion ($11 billion, 10.5 billion euros).

It has also targeted two of his associates worth up to £10 billion.

Abramovich is rumoured to own half a dozen luxury superyachts, two of which docked in Turkey in March, thereby avoiding sanctions.

EU members have reported freezing nearly $30 billion in Russian assets, including almost $7 billion in yachts, helicopters, property and works of art.

Washington has said it has sanctioned or blocked boats and aircraft worth over $1 billion.

US President Joe Biden has proposed permanent sanctions, saying oligarchs should not be allowed to enjoy luxuries while Ukrainian children die.

In Fiji last week, police seized a 348-foot (106-metre) yacht called “Amadea” worth some $300 million and linked to Suleiman Kerimov, a reticent billionaire senator, on Washington’s request.

Images of impounded yachts and shuttered mansions of Putin cronies prompt Schadenfreude in Russia, too.

“Ordinary Russians like to see ‘the rich also cry’,” said Kalachev, citing a Mexican soap opera Russians watched in the early 1990s.

What is not clear is whether sanctions affect Moscow’s decisions.

They cannot influence Putin, because he meets such business figures “only to tell them things — it’s not a dialogue”, argued Kalachev.

“The record of using economic coercion to try to force change in foreign policy is not a good one,” said Nice.

But sanctions “are undoubtedly going to weaken Russia’s capacity to fight”, he added.

– Opposition –

Abramovich has been involved in talks aimed at ending the war, with consent of both sides. Other oligarchs have criticised the conflict.

On Instagram the UK-sanctioned entrepreneur and banker Oleg Tinkov slammed “this crazy war” and Russia’s “shitty army”.

Fridman urged an end to the bloodshed and Oleg Deripaska, sanctioned by the UK, the EU and the US, said continuing fighting was “madness”.

But experts questioned the likelihood of them allying against Putin.

“It’s hard to see that happening,” said Nice. 

“It would not be in their interests ever to speak out against Putin prematurely,” said Schimpfoessl.

The Ukrainian economy is set to contract by almost one third this year in the wake of Russia’s invasion, the European development bank said Tuesday.

Ukraine output is set to contract 30 percent compared with an EBRD forecast of minus 20 percent given in March shortly after Moscow’s military offensive.

“The 30 percent decline forecast is due to the fact that the war has been taking place on the territory that is responsible for 60 percent of (Ukraine) GDP,” the bank’s chief economist Beata Javorcik explained to AFP in an interview.

The European Bank for Reconstruction and Development added that Ukraine’s economy would rebound 25 percent in 2023, up from its March forecast of 23 percent.

A Russian blockade has severely hurt Ukraine’s key agricultural sector as the country is a major exporter of wheat and sunflower oil, raising concerns that it could spark hunger in other parts of the world. 

“I don’t think there are food shortages — that is very important to stress,” Javorcik said.

“Typically when you observe famine they are not due to shortages of food but… to distribution.”

She pointed out that wheat could be sourced also from major producer the United States.

The war has put a brake also on Ukraine’s deliveries of cables imported by European carmakers.

– Russia contraction –

The EBRD added that the economy of sanctions-hit Russia would contract 10 percent this year and post zero growth next year — in unchanged estimates from March.

Tuesday’s forecasts were announced as the bank opened its annual conference in the Moroccan city Marrakesh.

Founded in 1991 to help former Soviet bloc countries switch to free-market economies, the EBRD has since extended its reach, including to countries in the Middle East and North Africa.

The London-based bank on Tuesday also forecast lower-than-expected growth in its regions of operations combined.

“The revision since March is driven mostly by a larger-than-previously-expected contraction in Ukraine as the war drags on,” it said.

Output in the EBRD regions was set for growth of 1.1 percent this year, down on expansion of 1.7 percent seen shortly after the February invasion.

“Projections are subject to major downside risks should hostilities escalate or should exports of gas or other commodities from Russia become more restricted,” the bank cautioned.

It noted that “in addition to the impact of high food, energy and metals prices, some economies in the EBRD regions are further affected through trade, tourism and migration-remittance links to Russia”.

Russian ally Belarus, which has been hit also by Western sanctions, would see its economy contract four percent this year, the EBRD said.

In March, it had forecast a three-percent contraction for Belarus, which borders Ukraine and Russia.

Following the invasion, the EBRD in April suspended access to financing and expertise for Russia and Belarus.

The organisation, which has repeatedly condemned Russia’s invasion of Ukraine, also announced that it was closing its Moscow and Minsk offices.

The EBRD — which invests alongside the private sector — has not undertaken any new investment projects in Russia since 2014, when Moscow invaded and then annexed Crimea.

– Refugee impact –

The lender in March unveiled a two-billion-euro “resilience” package to help citizens, companies and countries affected by the war in Ukraine, including those hosting refugees.

While host countries are pressured by additional costs to their public services, in the long term migrants who settle permanently “increase trade and investment” between their country of origin and new residence, according to Javorcik. 

“People who leave their countries, it’s not the very poor” as they need money to travel, she pointed out.

“They tend to me more entrepreneurial-educated” and offer an “influx of skills that increases the labour force”.