ImpactAlpha, Feb. 28 – Western allies will bar some Russian banks from the SWIFT international system for cross-border payments. Western nations will also sanction the Bank of Russia to prevent Russia’s central bank from deploying its $630 billion in international reserves. The announcements have already caused a devaluation of the ruble and runs on Russian banks.
Among the second-order effects:
Risk off
Norway’s $1.3 trillion sovereign wealth fund is divesting its Russian assets. U.S. public pensions from New Jersey, Illinois and Colorado are moving to do the same. BP will exit its nearly 20% stake in Russia state-owned oil firm oil giant Rosneft.
“I am convinced that the decisions we have taken as a board are not only the right thing to do, but are also in the long-term interests of BP,” said CEO Bernard Looney. Teams and competitions are canceling games in Russia and dropping Russian sponsors.
Practical assistance
Chef Jose Andres’ World Central Kitchen deployed to feed thousands of refugees in Poland, Romania and inside Ukraine. The Ukraine government and Ukrainian organizations raised over $16 million in cryptocurrency donations, which can bypass financial institutions, according to Tom Robinson of blockchain analytics firm Elliptic (others have noted Russia can use the same tools).
TalentPools and Techfugees quickly stood up RemoteUkraine to help Ukrainians leaving the country offer employers their services remotely.
“I don’t think new investment (impact or otherwise) is really the first tool we turn to in times of crisis or war,” Sean Hinton of Soros Economic Development Fund told ImpactAlpha. “What we look out for first: is there a need to provide extra financial support/investment to existing investees. Second, can we enable business enterprises (social or pure for-profit) that can utilize their existing platforms to provide critical services that can be valuable?”
Brain drain
Russian startups and social enterprises, even those outside the country, have been caught up in the sanctions. Bank accounts have been closed, contracts paused or canceled, the SWIFT crackdown is blocking payments. “Some people are saying all of my last year’s work has just been wiped clean by this one thing,” Daniel Kozlov of the Global Venture Alliance, told ImpactAlpha from Moscow.
The alliance, based in Moscow and San Francisco, creates accelerator programs for corporations, governments and investors. “The ecosystem will keep shrinking,” Kozlov said. “Even Russian investors – why the hell would you invest in venture in Russia right now, where things like this just completely annihilate any value that has been created?”
Expect an exodus: “Anyone who has an opportunity to move outside is beginning to pack the bags.”
Social mobilization
Protests erupted over the weekend in Russia, former Soviet republics such as Georgia, elsewhere in Europe and in the U.S. Twitter and Facebook have been restricted in Russia and Russians are being told that authorities will regard ‘negative comments’ about the invasion as ‘treason.’
Economics writer Matthew Klein tweeted, “If this ends with regime change in Russia, the West should be prepared to be magnanimous and assist *as much as necessary* in economic reconstruction.”
