Russia-Ukraine Conflict | JPMorgan's Jahangir Aziz on potential sanctions by Russia, US dollar and oil

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Jahangir Aziz, Head of Emerging Markets Economics Research & Commodities, JPMorgan spoke to CNBC-TV18 about the potential sanctions which Russia could place, the dollar movement and oil.

When asked about the potential sanctions, he explained that in case of a move by Russia that the United States considers as an act of invasion of Ukraine, extreme sanctions may be imposed.

"The way we are looking at it is that there are two sorts of approaches by the US. One approach in the event there is something that US or the NATO or European allies considered it to be an actual invasion of Ukraine and the second is other forms of things that Russia might take. Sanction which use to be proportionate so you do something and then the sanctions are imposed and then depending upon the health assumptions, how the country reacts to sanctions, if the sanctions are raised or lowered, that approach is not going to be this time."

"In an event of an act which the US considers to be an invasion of Ukraine, all the sanctions that being talked about in the US congress at this point in time will be imposed at its extreme level and that's a very sharp difference between previous use of sanctions as a proportionate reaction or response versus now that all of these sanctions across the board will be used at its extreme levels."

On market action - would USD be expected to rally a bit more?

I think the dollar hasn't reflected the kind of forces one is used to in the past interesting differentials, growth differentials and I think a lot of that has to do with concerns in the bond market particularly about you know how far the fed can go without that having an impact on the US economy and therefore the fed being struck.

So the question's is 2021's rate hike cycle going to be different from the 2015-18 rate life cycle. If you talk to economist like me they will say that no this time it is different because households and corporates balance sheets are far stronger today than they were in 2015. The equity markets are more or less also following that sort of argument but if you look at the bond market, it is saying that this time may not be different but same.

If you look at the action in the 10-year carrier or the long end of the curve, it hasn't really reflected the fact that on the short hands of the curve people are talking about rate hike March in every move and meeting right up to the middle of 2023.

So I think there is a perception of the bond market being different from that of the equity and clearly different from most economies that they still continue to believe that this may not end up like the 2015-18 cycle where the fed is stopped out and I think that is playing a big role in keeping the dollar from actually appreciating much under these circumstances.

What about India's oil import bill has doubled compared to last year where we are heading towards 85 billion dollars in the nine months of the fiscal. What are you factoring for the full year and what would the impact be on the risk?

Our baseline, in the absence of any untoward geopolitical events, is that the demand and supply dynamics suggests that oil should average on $90 a barrel.

"However, in the event, if we do get a geopolitical shock, then oil will easily go above $100 and we are looking at it even if there isn't a full-fledged invasion-like situation; but if the tensions continue, or the tensions escalate, and let us say it continues for the next three or four months, you could easily see oil breach $110, $115 a barrel, at least still summer."

Watch the full interview here