“I have disagreed with the decisions of all authorities for a very long time and that is why I store all my money only in foreign currency, and I am skeptical of Sberbank, VTB, of national banks in general,” he said. he declares. “I can’t say that I was ready (for sanctions) but I was as ready as possible as a citizen of the Russian Federation.”
A sharp devaluation of the ruble would mean a drop in the standard of living for the average Russian, economists and analysts have said. Russians still depend on a slew of imported goods, and the prices of those items are likely to skyrocket, like iPhones and PlayStations. Foreign travel would become more expensive as their rubles would buy less foreign currency abroad. And deeper economic turmoil will arise in the coming weeks if price shocks and supply chain issues cause Russian factories to shut down due to lower demand.
“It’s going to trickle down to their economy very quickly,” said David Feldman, an economics professor at William & Mary in Virginia. “Anything imported is going to see the local cost of currency skyrocket. The only way to stop it will be heavy subsidies.
Russia has decided to produce many goods on its territory, including most of its food, to protect the economy from sanctions, said Tyler Kustra, assistant professor of politics and international relations at the University of Nottingham. He expected that certain fruits, for example, which cannot be grown in Russia “will suddenly be much more expensive”.
Electronics will be a sore spot, with computers and cellphones having to be imported and costs rising, said Kustra, who studies economic sanctions. Even foreign services like Netflix might cost more, although such a company might lower its prices.
The auto sector, a major employer, “is being hit very quickly by the ban on the import of microchips and other parts,” said Chris Weafer, managing director of Macro-Advisory, a Eurasia strategy consultancy.
As long as even a few Russian banks were spared the SWIFT cut, he said, Russia would still be able to continue exporting, post modest growth this year and earn enough to subsidize or bail out big companies. or employers.
“So it really depends critically on whether SWIFT stays open or whether that last channel is closed,” Weafer said.
After the West sanctioned Russia for seizing Ukraine’s Crimean Peninsula in 2014, Russia’s central bank cleaned up weak banks and braced for possible tougher sanctions.
“There is therefore no need to fear an immediate crisis or collapse” this year, he said. “It is clear that if these sanctions become tougher and extend over several years, the situation will clearly deteriorate during this period.”
The fall of the ruble evoked bad memories of previous crises. The currency lost much of its value in the early 1990s after the end of the Soviet Union, with inflation and loss of value leading to the government removing three zeros from ruble banknotes in 1997. Then came a further decline after a 1998 financial crisis in which many depositors lost their savings and yet another plunge in 2014 due to falling oil prices and Crimean sanctions.
On Monday, Russia’s central bank raised its key rate sharply from 9.5% to 20% in a desperate attempt to prop up the ruble and stave off a run on the banks. He also said the Moscow Stock Exchange would remain closed.
European officials have said that at least half of Russia’s US$640 billion ($883 billion) in hard currency, some of which is held outside Russia, would be crippled. This has significantly increased the pressure on the Russian currency by undermining the ability of financial authorities to support it by using reserves to buy rubles.
Kremlin spokesman Dmitry Peskov called the sanctions “heavy” but said “Russia has the potential to repair the damage.”
The measures taken to support the ruble are themselves painful because rising interest rates can dampen growth by making it more expensive for companies to obtain credit. Russians who have borrowed money, such as homeowners with mortgages or business owners who have taken out loans, could also be hit by doubled interest rates, experts said.
The ruble fell around 30% against the US dollar early on Monday, but stabilized after the central bank’s decision. Earlier, it was trading at a record high of 105.27 to the dollar, down from around 84 to the dollar on Friday night, before climbing back to 94.60.