Russia is extremely likely to default on its external debts if the Ukraine crisis continues to worsen, the deputy chief economist of the Institute of International Finance (IFF) said on Monday. The Russian economy is to shrink by low double digits this year, IFF added, and inflation is to soar by double digits following Western sanctions. Russia's central bank will do everything it can to protect Sberbank and its savers, other smaller Russian banks might fail. There are significant trade, financial and pure contagion risks for Western economic given the scale of sanctions, the IFF warned. 

Market Reaction

The rouble continues to trade in choppy fashion with USD/RUB near 110 and just below record highs hit earlier in the session. Attention is currently on Russian/Ukrainian talks taking place between delegations at the Ukraine/Belarus border.