WASHINGTON, July 29 (RIA Novosti) – The ongoing crisis in Ukraine and tougher Western sanctions against Russia would bring negative economic consequences for the EU and the CIS countries and may have adverse effects on the global scale, according to report released by the International Monetary Fund Tuesday.
“Spillover effects from geopolitical tensions between Russia and Ukraine thus far have been mostly felt in the countries directly involved … An escalation of tensions through intensification of sanctions and retaliations may lead to larger spillovers across Europe, central Asia, and beyond,” the report stated.
Austrian banks are the most exposed to potential losses from tougher sanctions on Russia, and any problems affecting them could spread through credit channels in the rest of emerging Europe, the report said.
Swedish, French and Italian lenders are also vulnerable having “relatively larger exposures compared to other advanced economies,” according to the IMF.
“As Russian and Ukrainian credit quality deteriorates, banks with credit exposures will be faced with increased risks of default,” the report said.
The IMF also highlighted the "significant risk" of sharp disruptions in the supply of Russian natural gas to Europe, with Gazprom providing about one-third of Europe's gas needs and half of that transiting through Ukraine.
Earlier in the day, US Secretary of State John Kerry said that the United States and European nations are close to imposing new economic sanctions on Russia. Speaking at a joint press conference with his Ukrainian counterpart, Pavlo Klimkin, Kerry said the new package of sanctions could be announced “today or tomorrow.” According a source cited by Reuters, the EU governments reached a preliminary deal to impose economic sanctions on Russia. The restrictions will affect oil and defense sectors, dual-purpose goods and sensitive technologies.
Western nations have imposed targeted sanctions on Russian individuals and companies over its alleged backing of independence supporters in eastern Ukraine, but have yet failed to adopt tougher measures. Moscow denies materially supporting militia and says Western sanctions are counter-productive.