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A bad week for global co-operation

Published Monday, April 28th, 2014

Last week was not a good one for global co-operation. Israel withdrew from the Middle East Peace process because Fatah and Hamas agreed to join forces and the deteriorating situation in the Ukraine drew increasingly aggressive and alarming rhetoric from all of the parties involved.

On Friday Russia found itself downgraded by S&P to just above junk status and increased interest rates in response by 0.5% to 7.5% in the hope of reducing capital outflows. The downgrade was of course “politically motivated” according to the Russian Economy minister. The G7 have agreed that there will be an escalation of sanctions, the details of which should be announced today.

Russia may feel that it is winning the war on the ground but it is coming at a significant financial cost. The Micex lost another 1.6% on Friday, the RTS lost 6.6% over the course of the week, $65bn of capital has fled the country, the rouble is under massive pressure and Russian banks are unable to roll over foreign currency denominated loans.

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Posted by David Hufton