Russian Business Sentiment Up in July but Sanctions Could Spoil Party

Russian business sentiment reached its highest level in three months in July, according to the MNI Russia Business Sentiment report.

The survey showed confidence had rebounded in the wake of economic sanctions imposed by the United States and the European Union after Moscow annexed the Crimea region from Ukraine. However, overall sentiment had not returned to the levels seen at the start of the year.

"Russian companies haven't quite shrugged off the sanctions already in place but their impact has certainly waned," said Philip Uglow, chief economist at MNI Indicators.

The report showed Russian companies were less optimistic about future business conditions than the current climate, while companies also found it tougher to access credit. However, confidence reached 54.6 in July, up from 50.5 in June, showing some resilience in the Russian private sector.

"This of course could change dramatically should the EU plump for more stringent action," said Uglow.

Fresh Sanctions

Business sentiment could well plunge in the coming weeks if Russia is subjected to tougher penalties.

The MNI survey was completed before the US and EU imposed tougher sanctions on Russia on July 16. Moreover, the allies are mulling even tougher sanctions after a Malaysia Airlines plane crashed in eastern Ukraine on July 17.

Washington has alleged the plane was shot down by Moscow-backed rebels and has urged the EU to tighten economic sanctions against the Kremlin in response.

Both the US and EU have accused Russia of assisting the Ukrainian rebels with arms and fighters, fuelling an insurgency that has spread throughout eastern Ukraine.