Ukraine-Russia War and Two Scenarios of TBC Capital - Timely or Delayed Solution

TBC Capital has published a report by the chief economist on two scenarios of the Ukraine-Russia war, expected actions, and international assumptions.

According to the publication, in case of a relatively short conflict, the scenario is as follows:

• Part of Ukraine is occupied, although hostilities no longer continue.
• Sanctions are imposed on Russia, but Russia continues to export energy resources. Disconnection of major banks from SWIFT is temporary.
• Only gradual easing of other sanctions takes place.
• In contrast to the shock of 2014-2015, prices for oil and other commodities are high, which is important for both economies. The price of Brent crude oil reaches $ 105 and will drop to $ 85 by the end of the year.

This scenario is similar to previous estimates by TBC Capital, but with a more negative impact on economic growth and currencies.

At the same time, it is expected that in 2022 the economy of Ukraine - by 10-15%, while that of Russia - by about 4%. The ruble and the hryvnia are depreciating by 30 and 20%, respectively, with possible further depreciation in the initial period, especially in the case of the ruble.

The second scenario - a delayed solution

• The conflict has been going on for more than a quarter of a period.
• The sanctions are quite severe, including disconnection from SWIFT and export of energy resources.
• Russia's internal payment system, cryptocurrencies, and other technologies do not serve as an alternative to SWIFT, although payments within the country continue unabated.
• To mitigate the impact of sanctions, Chinese support is out of place and Russia is losing more than half of its energy exports.
• More than half of the country's international assets have been seized, and Russia uses only part of them to shock.
• The US and OPEC are increasing energy supplies.
• However, prices are still rising. The price of Brent oil reaches $ 150 and is set at $ 120 by the end of the year.

In this scenario, the Ukrainian economy is decreasing by about 20%, while Russia's is decreasing by 7-10%. The ruble and the hryvnia are depreciating by 50 and 30%, especially in the case of the ruble, with a high probability of further temporary depreciation, - says the chief economist of TBC Capital.