Analysis

How Russia’s sanction-proofing failed

Published

4 years ago

March 18, 2022

“How could our government have been so stupid?” one Russian acquaintance of mine wondered, after the West imposed sweeping sanctions that froze around $300 billion of the Russian government’s foreign exchange reserves held in Western banks.

Over the past few weeks, the US, EU, UK, Japan, and other allies have hit Russia with a package of restrictions targeting its access to foreign financing and technology. Russia’s currency has plummeted, inflation is rising, living standards are slumping, and many factories across the country have stopped work due to shortages in components. Russia now faces the deepest economic crisis since post-Soviet collapse in the Nineties — a downturn so severe that it may eventually threaten Vladimir Putin’s hold on power.

Only one month ago, analysts were focused not on Russia’s vulnerability to sanctions but its supposed “sanctions-proofing” strength. The Russian government has dealt with Western sanctions for decades, from the technological restrictions the West imposed on the USSR to the most recent restrictions on oil drilling technology and access to capital markets imposed after Russia’s first attack on Ukraine in 2014. However, the strength of the latest came as a surprise to Russia’s leaders. They thought they had taken adequate steps to defend their economy and that Western leaders would be too worried about domestic prosperity to risk tough measures. Neither assumption proved correct — and now Russia is paying the price.

Like many adversaries of the United States, from North Korea to Iran to Venezuela, Russia sees American sanctions as a fact of life. Almost every year over the past decade, the US has slapped on a new set of sanctions, sometimes unilaterally, sometimes in conjunction with allies in Europe. Some have been linked to domestic human rights violations, such as those implemented under the Magnitsky Act, named after a Russian lawyer who died under suspicious conditions in jail after uncovering a government-linked fraud. Some have been sparked by Russian meddling in American elections. Others were motivated by Russia’s use of a nerve agent in an attempted assassination in the UK. As Putin said just before announcing his decision to attack Ukraine: “They will never think twice before coming up with or just fabricating a pretext for yet another sanction attack … their one and only goal is to hold back the development of Russia.”

From the moment Putin announced that Russia was beginning a “special military operation” to “denazify” Ukraine, more sanctions were inevitable. The Biden administration had threatened “devastating” sanctions, though after endured many rounds of not-very-tough Western sanctions, most Russian leaders thought America was bluffing. The fact that European leaders were divided about sanctions — and that Germany, Europe’s most important player, was putting the finishing touches on a new Russian gas pipeline — led the Russians to believe that the West wasn’t ready for full-scale economic warfare. The Kremlin, therefore, began the war expecting measures that were costly but survivable. In a public meeting right before the invasion, Prime Minister Mikhail Mishustin briefed Putin that “we have thoroughly reviewed these risks” and that “we have been preparing for months”.

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In fact, Russia had been preparing for years, knowing that sanctions were always a risk. America’s sanctions campaign against Iran, which cut off its ability to export oil, was a worrisome precedent — though Russia was a far more important oil producer than the Islamic Republic. The 2014 sanctions against Russia, meanwhile, showed that when the US, UK, and EU joined forces, they could sever Russian firms from financial markets in ways that no other country — not even China — could equal.

In response, Russia developed a five-pronged strategy to steel its economy. The first step was to build up a substantial war chest of foreign exchange reserves, including major currencies (Euro, sterling, dollar, yen, and renminbi) and over $100 billion worth of gold. These reserves, equivalent to over twice the value of goods Russia imports in a typical year, were supposed to give Russia financial flexibility in case the West tried imposing restrictions on its ability to export goods and earn foreign currency abroad.

The second prong in Russia’s “sanctions-proofing” strategy was to reduce its use of the US dollar, the currency in which most commodities — and thus most of Russia’s exports — are priced. Russia managed to substantially reduce the scope of dollars in its foreign trade, largely by shifting its trade with China to Euros. The Kremlin also cut dollar holdings in its foreign currency reserves, choosing to hold more of other currencies, including renminbi, instead.

Third, Russia tried developing internal payments systems in case it was severed from Western-dominated platforms. Many purchases in Russia are made using Visa or Mastercard, which are subject to US sanctions legislation. Most international banking transactions are mediated by SWIFT, a Belgium-based organisation subject to EU sanctions. Russia has rolled out a domestic card payment system, called Mir, and an interbank payment system modeled on SWIFT, trying to prepare itself for a potential future without access to these Western platforms.

The fourth strategy was to intensify economic cooperation with China. The more China’s economy grew, and the more ties that Russia had with it, the more Russian leaders felt secure. The Kremlin knew it could rely on China to vociferously object to any Western sanctions that were applied extraterritorially to Chinese firms.

Finally, Russia counted on the West’s energy dependence to limit any willingness to apply economic pressure. The fact that the Germans were afraid of even mentioning the Nord Stream II pipeline demonstrated timidity that emboldened the Kremlin. However, though Germans were uniquely supine in their energy relations with Russia, they weren’t alone in their dependence. America liked to condemn Germany over Nord Stream II, but American politicians were and are highly sensitive to gasoline prices. Restrictions on Russian oil exports were, therefore, guaranteed to be a matter of acute domestic political concern, because such a move would drive up gasoline prices worldwide. The Kremlin assumed this was a price Western leaders would be unwilling to pay.

When Russian forces rolled into Ukraine, however, the West was jolted out of complacency. Though US and UK intelligence had been warning for several months that Russia was ready to invade, most people — and most Western European leaders — simply didn’t believe it. Images of Ukrainian cities aflame left them shocked. So it was Europe that led the drive during the first week of war for tougher economic sanctions, culminating in an almost unprecedented freeze on Russia’s central bank reserves.

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This was a level of sanctions escalation that Russian policymakers had never seriously contemplated. On its own, the move — grabbing control of around $300 billion worth of Russian foreign exchange reserves stashed in Western financial institutions — constituted the biggest bank heist in world history. The fact that these moves were multilateral meant that “de-dollarising” didn’t matter. The Euro, pound, and yen were no more accessible to the Kremlin. And it didn’t matter what payments system was used, Russian or otherwise, if a substantial chunk of the world economy simply refused to transact with you.

The Chinese — supposed allies in “sanctions-proofing” — were no less shocked than the Russians by this display of financial firepower. China has already announced that it is cutting off certain Russian industries under special sanctions, such as aviation. China’s banks, meanwhile, continue to undertake some non-sanctioned transactions with Russia, but according to reports they are broadly following the West’s lead. The Moscow–Beijing entente is more a marriage of convenience than a sanctions-busting partnership.

The only part of Russia’s sanctions-proofing plan that is proving somewhat effective is the bet that Western leaders can’t stomach a full energy cut off. The US and UK have announced bans on importing Russian energy, but this only has a minor impact. The EU has announced plans to cut Russian energy imports to zero — but only after several years. The move that would really hit Russia would be to block all its energy exports, via an Iran-style regime that severed its ability to sell to third parties such as India and China. This would dramatically escalate pressure on Russia. It would also push oil prices far higher.

For now, therefore, energy remains the one major loophole in the sanctions regime. Nevertheless, the Russian state faces a deep economic crisis. The ruble has slumped and prices are rising. Unemployment is set to spike as factory closures cause industrial bankruptcies. Living standards will fall far behind inflation, which will accelerate over the coming months. Foreign companies of all types, from BP to McDonald’s, are fleeing.

“I understand that rising prices are seriously hitting people’s incomes,” Putin admitted in a speech on Wednesday. What he didn’t say is that he has neither a plan nor any resources, to deal with this. On the battlefields of Ukraine, Russian forces have demonstrated incompetent organization and a horrible command of logistics. Despite much talk of “sanctions-proofing”, the Kremlin’s efforts to protect itself from economic warfare have been just as inept — and, for Russia, disastrous.

Via UH

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Analysis

Folsom High School Football: More Than a Game, It’s an Economic Engine

Published

1 week ago

December 6, 2025

Abdul Rahman

High school football is often dismissed as a pastime, a Friday night ritual confined to bleachers and scoreboards. Yet in towns like Folsom, California, the sport has become a socioeconomic engine. Folsom High School football is not just about touchdowns—it’s about recruitment pipelines, local business growth, and the cultural identity of a community.

Table of Contents

Macro Context: The Business of High School Sports

Across the United States, high school athletics are evolving into a billion‑dollar ecosystem. Sponsorships, streaming rights, and recruitment networks are reshaping what was once purely extracurricular. For policymakers and business leaders, this shift demands attention: sports are no longer just about play, they are about economics.

Folsom High School football exemplifies this transformation. With a legacy of championships and a reputation as a California high school football powerhouse, the Bulldogs have become a case study in how athletics ripple into broader economic and cultural spheres.

Regional Insights: Folsom’s Legacy

The Bulldogs’ record speaks for itself: multiple state titles, nationally ranked players, and a program that consistently feeds talent into college football. But the legacy extends beyond the field.

Recruitment Pipeline: Folsom’s roster has produced athletes who go on to Division I programs, drawing scouts and media attention.
Community Identity: Friday night games are cultural events, uniting families, alumni, and local businesses.
Media Reach: Coverage of the Bulldogs amplifies Folsom’s profile, positioning the town as a hub of athletic excellence.

Keywords like Folsom Bulldogs football schedule and Folsom football state championship history are not just search terms—they are markers of a program that commands attention.

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Business & Community Impact

The economic footprint of Folsom football is undeniable. Local restaurants see surges in sales on game nights. Merchandising—from jerseys to branded gear—creates revenue streams. Sponsorships tie local businesses to the prestige of the Bulldogs, reinforcing community bonds.

Beyond dollars, the program fosters youth development. Student‑athletes learn discipline, teamwork, and resilience—skills that translate into workforce readiness. For parents and educators, the balance between academics and athletics is a constant negotiation, but one that underscores the broader value of sports.

Opinion: The Columnist’s Perspective

As a senior columnist, I argue that high school football is undervalued as an economic driver. Folsom proves that sports can shape workforce pipelines, community identity, and local business ecosystems.

The contrarian view is clear: policymakers and business leaders should treat high school athletics as strategic investments. Ignoring programs like Folsom’s risks overlooking a vital engine of socioeconomic growth.

While Wall Street debates interest rates and GDP, the real story of resilience and identity is unfolding under Friday night lights.

Conclusion

Folsom High School football is not just about wins—it’s about shaping California’s economy and culture. From recruitment pipelines to local business surges, the Bulldogs embody the intersection of sport and society.

The lesson is simple: sports are a mirror of our priorities and potential. And in Folsom, that reflection is bright, bold, and instructive for the nation.

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Analysis

Pennsylvania’s Economy at a Crossroads: Why Local Signals from WNEP Matter Nationally

Published

1 week ago

December 6, 2025

Abdul Rahman

Our Editorial Chief and senior columnist’s opinion on how regional shifts in PA reflect the broader U.S. economy.

Table of Contents

Introduction

The U.S. economy is often measured in sweeping national statistics—GDP growth, inflation rates, and interest‑rate decisions. Yet the real pulse of America’s financial health beats in its local communities. Pennsylvania, with its diverse industries and working‑class backbone, offers a telling microcosm of national trends. And through outlets like WNEP, local anxieties and aspirations are broadcast daily, shaping how residents—and by extension, the nation—interpret the state of the economy.

Macro Context: The National Economy Meets Local Reality

At the national level, policymakers are grappling with inflationary pressures, uneven job growth, and questions about consumer confidence. Wall Street analysts debate whether the U.S. economy is heading for a soft landing or a prolonged slowdown. But in Pennsylvania (PA), these abstract debates translate into tangible realities: factory shifts, small business closures, and household budgets stretched thin.

Pennsylvania’s economy has long been a bellwether. Its manufacturing hubs, energy corridors, and healthcare networks mirror the broader U.S. industrial mix. When the state’s job market tightens or consumer spending dips, it often foreshadows national patterns.

“Local economies are the real pulse of national health. Ignoring signals from places like Pennsylvania risks misreading the bigger picture.”

Regional Insights: WNEP and the Pennsylvania Lens

Local news outlets like WNEP play a critical role in contextualising these shifts. Coverage of rising grocery prices, layoffs in regional plants, or new infrastructure projects provides a ground‑level view of the economy that national headlines often miss.

Manufacturing: Once the backbone of PA’s economy, it now faces global competition and automation challenges.
Healthcare: A growing sector, yet burdened by staffing shortages and rising costs.
Logistics & Energy: Pennsylvania’s geographic position makes it a hub for distribution and energy production, sectors that are sensitive to national policy shifts.

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By reporting on these industries, WNEP not only informs residents but also contributes to the national narrative.

Business & Consumer Implications

For small businesses in PA, the economy is not an abstract concept—it’s survival. Rising interest rates make borrowing harder, while inflation erodes margins. Consumers, meanwhile, adjust by cutting discretionary spending, delaying home purchases, or seeking additional income streams.

This dynamic reflects a broader truth: the health of the U.S. economy is inextricably linked to the resilience of its local communities. Pennsylvania’s struggles and successes are America’s struggles and successes.

Opinion: The Columnist’s Perspective

As a senior columnist, I argue that local economies are the real pulse of national health. Wall Street optimism often overlooks Main Street realities. Ignoring signals from places like Pennsylvania risks misreading the bigger picture.

Consider this: while national GDP may show growth, if households in Scranton or Harrisburg are tightening belts, the sustainability of that growth is questionable. WNEP’s coverage of local hardships—job losses, rising costs, community resilience—offers insights that policymakers and investors cannot afford to ignore.

The contrarian view here is simple: the economy’s future may be written in Pennsylvania.

Conclusion

Pennsylvania’s economy is not just regional—it is predictive. From manufacturing floors to local newsrooms, the signals emanating from PA offer a window into America’s trajectory. Policymakers, investors, and readers alike must pay attention to these local cues.

As WNEP continues to spotlight the lived realities of Pennsylvanians, the rest of the nation would do well to listen.

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AI

US Stock Market Forecast 2026: Wall Street Eyes Double-Digit Gains Amid ‘AI Bubble’ Anxiety

Published

2 weeks ago

December 5, 2025

Abdul Rahman

Table of Contents

Executive Summary: Key Takeaways

Bullish Consensus: Major banks including Morgan Stanley, Deutsche Bank, and JPMorgan project the S&P 500 could breach 8,000 by 2026, implying double-digit upside.
The “Capex” Conundrum: Big Tech is on track to spend over $400 billion on AI infrastructure, sparking fears of a 2000-style dot-com crash if ROI lags.
Sector Rotation: Smart money is looking beyond the “Magnificent Seven” to utilities, industrials, and defense stocks that power the physical AI build-out.
Fed Pivot: Falling interest rates in 2026 are expected to provide a critical tailwind for valuations, potentially offsetting slowing AI growth rates.

The Lead: A Market Divided

Wall Street has drawn a line in the sand for 2026, and the numbers are aggressively bullish. Despite a creeping sense of vertigo among retail investors and murmurs of an “AI bubble” in institutional circles, the heavyweights of global finance are betting on a roaring continuation of the bull market.

The central conflict defining the 2026 US Stock Market Forecast is a high-stakes tug-of-war: On one side, massive liquidity injections and corporate tax tailwinds are driving S&P 500 projections to record highs. On the other, the sheer scale of Tech sector CapEx—spending money that hasn’t yet returned a profit—is creating a fragility not seen since the late 1990s.

The Bull Case: Why Banks Are Betting on 8,000

The bullish thesis isn’t just about blind optimism; it is grounded in liquidity and earnings broadening.

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Morgan Stanley has set a towering target of 7,800, citing a “market-friendly policy mix” and the potential for corporate tax reductions to hit the bottom line. Their analysts argue that we are entering a phase of “positive operating leverage,” where companies trim fat and boost margins even if top-line revenue slows.

Deutsche Bank is even more aggressive, eyeing 8,000 by year-end 2026. Their rationale hinges on a successful “soft landing” orchestrated by the Federal Reserve. As rates stabilize and eventually fall, the cost of capital decreases, fueling P/E expansion not just in tech, but across the S&P 493 (the rest of the index).

JPMorgan offers a nuanced “Base Case” of 7,500, but their “Bull Case” aligns with the 8,000 predictions. Their strategists highlight that earnings growth is projected to hit 13-15% over the next two years. Crucially, they believe this growth is broadening. It is no longer just about Nvidia selling chips; it is about banks, healthcare firms, and retailers deploying those chips to cut costs.

The Bear Counter-Argument: The $400 Billion Question

While the targets are high, the floor is shaky. The “Elephant in the Room” is the unprecedented rate of spending on Artificial Intelligence without commensurate revenue.

Collectively, hyperscalers (Microsoft, Google, Amazon, Meta) are pacing toward $400 billion in annual capital expenditures. This “Capex Supercycle” has investors jittery. Recent reports of slowing growth in Microsoft’s Azure AI division—missing analyst estimates—have acted as a tremor, hinting that the seemingly infinite demand for AI might have a ceiling.

The fear mirrors the Dot-com Bubble. In 2000, companies overbuilt fiber-optic networks anticipating traffic that didn’t arrive for years. Today, the risk is that companies are overbuilding data centers for AI models that businesses aren’t yet ready to monetize. If Big Tech margins compress due to this spending, the S&P 500—weighted heavily in these names—could face a correction of 10-20%, a risk explicitly acknowledged by executives at Goldman Sachs.

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Sector Watch: Where the Real Value Hides

If the tech trade is crowded, where is the “smart money” moving for 2026?

Utilities & Energy: AI models are thirsty. They require massive amounts of electricity. Utilities are no longer just defensive dividend plays; they are growth engines essential for the AI grid.
Industrials: The physical build-out of data centers requires HVAC systems, steel, and logistics. This “pick and shovel” approach offers exposure to the AI theme without the valuation premium of a software stock.
Defense & Aerospace: With geopolitical fragmentation continuing, defense spending is becoming a structural growth story, detached from the vagaries of the consumer economy.

Wall Street Consensus: 2025 vs. 2026 Targets

The table below illustrates the widening gap between current trading levels and the street’s 2026 optimism.

Bank / Firm	2025 Year-End Outlook	2026 Price Target	Primary Catalyst
Deutsche Bank	~7,000	8,000	Robust earnings growth & AI adoption
Morgan Stanley	~6,800	7,800	Tax cuts & Fed easing
Wells Fargo	~6,900	7,800	Inflation stabilization
JPMorgan	~6,700	7,500 – 8,000	Broadening earnings (Base vs Bull case)
HSBC	~6,700	7,500	Two-speed economic growth

Conclusion: Navigating the “Wall of Worry”

The consensus for 2026 is clear: the path of least resistance is up, but the ride will be volatile. The projected double-digit gains are contingent on two factors: the Federal Reserve cutting rates without reigniting inflation, and Big Tech proving that their billions in AI spending can generate real cash flow.

For the savvy investor, 2026 is not the year to chase an index fund blindly. It is the year to look for cyclical rotation—investing in the companies that build the grid, finance the expansion, and secure the borders, while keeping a watchful eye on the valuations of the Magnificent Seven.

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