Goldman Sachs: Sanctions could make Russian assets ‘uninvestable’

Goldman Sachs says tougher sanctions on Russia are beginning to bite, and could soon see the country’s assets become “uninvestable.”

This is the view of Kamakshya Trivedi, the investment bank’s head of FX and emerging market strategy.

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In an interview with CNBC on Monday, Trivedi said that the above scenario will likely play if one major factor fell into place- sanctions succeeding in freezing about $630 billion of Russia’s foreign reserves.

If the stockpile is effectively inaccessible, then Russia’s currency and assets are likely to be hit hard amid high inflation and depreciation.

The 2014 Crimea annexation

Trivedi pointed to the 2014 Crimea annexation as a period when Russia also experienced increased “decumulation” of reserves. He said the conflict saw oil prices plunge, the ruble plummet, and markets sell-off. 

The analyst noted that the period saw over $100 billion in reserves used to buffer the currency and the broader economy.

Looking at the current geopolitical environment, the Goldman Sachs strategist said a similar, if not worse outlook, is possible. According to him, making the foreign exchange reserves “completely inaccessible or not very accessible” is a recipe for significantly more pain and volatility.

“I think those assets, apart from the technical stance of how people transact in them, are increasingly going to become uninvestable for a lot of global investors,” he added.

For investors looking for alternative markets, the Goldman Sachs strategist says emerging markets such as Latin America and the Gulf region might be the answer.

These markets, he notes, are not close to the conflict zone and thus offer a medium-term proposition that could be attractive.