{"id":35924,"date":"2022-04-13T15:39:08","date_gmt":"2022-04-13T10:09:08","guid":{"rendered":"https:\/\/tradebrains.in\/features\/russia-sanctions-impact\/"},"modified":"2022-04-13T15:39:08","modified_gmt":"2022-04-13T10:09:08","slug":"russia-sanctions-impact","status":"publish","type":"post","link":"https:\/\/tradebrains.in\/features\/russia-sanctions-impact\/","title":{"rendered":"Russian ruble&#8217;s recovery masks disruptive impact of West&#8217;s sanctions \u2013 but it won&#8217;t make Putin seek peace"},"content":{"rendered":"<div class=\"trade-content_2\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-233964345\"><p><a href=\"https:\/\/tradebrains.in\/get\/telegram\/\"><img decoding=\"async\" class=\"alignnone wp-image-101992\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2023\/01\/telegram-channel-300x119.png\" alt=\"\" width=\"148\" height=\"59\" \/><\/a> <a href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMN3Epgswxc--Aw?hl=en-IN&amp;gl=IN&amp;ceid=IN%3Aen\"><img decoding=\"async\" class=\"alignnone wp-image-123430\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png\" alt=\"follow-on-google-news\" width=\"222\" height=\"61\" srcset=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png 300w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-150x41.png 150w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news.png 468w\" sizes=\"(max-width: 222px) 100vw, 222px\" \/><\/a><\/p>\n<\/div><p>Middletown (US), Apr 13 (The Conversation) Six weeks into the war with Ukraine, Russia\u2019s economy seems to be holding up better than initially expected.<\/p><div class=\"trade-content_7\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-2799122486\"><!-- Composite Start --> \r\n <div id=\"M923760ScriptRootC1549812\"> \r\n <\/div> \r\n <script src=\"https:\/\/jsc.mgid.com\/t\/r\/tradebrains.in.1549812.js\" async> \r\n <\/script> \r\n <!-- Composite End --><\/div>\n<p>Despite unprecedented sanctions and an exodus of Western companies, the Russian ruble \u2013 a widely followed indicator of the economy \u2013 has recovered all of its earlier losses. Meanwhile, billions of dollars continue to flow in from energy sales to Europe and elsewhere, which has allowed the Kremlin to keep paying its international debts.<\/p>\n<p>However, Russia\u2019s apparently robust financial situation is something of a chimera and masks the real pain being experienced by Russians and stress on the economy.<\/p>\n<p>I\u2019ve been a close observer of Russia for over 30 years. I have been struck by the tension between Russia\u2019s integration into the global economy on the one hand and its growing domestic authoritarianism on the other.<\/p><div class=\"trade-content_5\" id=\"trade-1645142610\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_2_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"7925020301\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div>\n<p>Russia\u2019s integration is what makes the sanctions sting. Its authoritarianism is what makes them irrelevant.<\/p>\n<p> \tSwift sanctions \t  \tBroad and deep sanctions were promptly imposed on Russia by over 50 countries after the Feb 24, 2022, invasion.<\/p>\n<p>Notably, those joining the sanctions included historically neutral Switzerland \u2013 a key location for many of Russia\u2019s overseas banking assets \u2013 and Taiwan, the source of 60% of the world\u2019s microchips.<\/p>\n<p>The sanctions had an immediate and dramatic impact. The ruble lost 50 per cent of its value within days as Russians lined up to draw out dollars and rubles from their bank accounts. Panic buying of sugar, buckwheat and other essentials meant empty shelves and scuffles in stores. The official sanctions were followed by a wave of foreign companies deciding to suspend their operations in Russia or pull out entirely.<\/p>\n<p> \tThe ruble recovers \t  \t But the more dire predictions of how this would affect Russia have not come to pass.<\/p>\n<p>For example, after plunging to a record low of 136 to the US dollar on March 10, 2022, the ruble has recovered to 83 to the dollar as of April 11, roughly what it was worth before the invasion.<\/p><div class=\"trade-content-10\" id=\"trade-2109954940\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_3_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"2969612066\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div>\n<p> This is due to the Russian Central Bank\u2019s imposition of strict rules, such as requiring exporters to convert 80 per cent of their dollar earnings into rubles, banning individuals from taking more than USD 10,000 out of the country and introducing a 12 per cent tax on dollar purchases.<\/p>\n<p>Likewise, Russia met its debt payments in March, and though the ratings agency S&#038;P declared it to be in \u201cselective default\u201d in April after it paid bondholders in rubles rather than dollars, it still hasn\u2019t fully defaulted on its debt.<\/p>\n<p>While some individual countries such as the US, UK and Lithuania have announced that they will no longer buy Russian oil and gas, the European Union cannot afford to take such a step until the infrastructure for handling alternative fuel supplies has been created. And China and India continue to be big buyers of Russian oil.<\/p>\n<p>Furthermore, any drop in the volume of sales due to sanctions has been more than compensated by a 60 per cent spike in the price of oil.<\/p>\n<p>As a result, Russia continues to rake in USD 35 billion a month from its oil and gas exports, more than enough to enable it to meet its international debt obligations \u2013 and to keep the war going.<\/p>\n<p> \tSoaring inflation \t  \tThe ruble, however, is no longer a convertible currency, so its exchange rate is an artificial indicator that tells us little about the economy. Its apparent stabilization is a deceptive measure and doesn\u2019t reflect the traumatic shock that the real economy is experiencing as a result of the sanctions.<\/p>\n<p>The rising cost of living, on the other hand, is a more revealing indicator. It\u2019s something the Kremlin is likely concerned about because it can potentially lead to social unrest.<\/p>\n<p>Russian consumer prices rose 7.6 per cent in March and were up 16.7 per cent from a year earlier. Part of this is due to rising global food prices even before the Ukraine war. The United Nations food price index was up 34 per cent in March from a year earlier.<\/p>\n<p>Russian Prime Minister Mikhail Mishustin offered a window into how bad things actually are when he told the State Duma on April 7, 2022, that the crisis is the worst that Russia has faced in 30 years. The economy will take six months to adapt, he added \u2013 which may turn out to be an overly optimistic assessment. The European Bank for Reconstruction and Development expects the Russian economy to contract by 10 per cent this year.<\/p>\n<p> \tSoftening the blow on workers \t  \tThe potential for rising unemployment is another concern.<\/p>\n<p>Analysts surveyed by Bloomberg forecast Russian joblessness to exceed 9 per cent in the coming months, the first time it\u2019s been that high in more than a decade.<\/p>\n<p>To soften the blow, the government is spending 40 billion rubles (about $470 million) subsidizing wages in industries affected by the sanctions. This affects about 400,000 workers in total.<\/p>\n<p>Meanwhile, the fate of the thousands of workers in foreign-owned businesses that are now shuttered remains uncertain. Russia has yet to follow through on threats to nationalize their assets, but some companies, such as the local franchisees of retail outlets like McDonald\u2019s, may try to reopen under Russian management and build new brands and supply chains. The Russian subsidiaries of the top Western accounting firms reportedly plan to continue operating under new names.<\/p>\n<p>One important safety valve for Russian workers is the presence of roughly 10 million migrant workers, 15 per cent of the total workforce, who are typically the first to be fired. The fall in the remittances they send back home will be a blow to the economies of Central Asia.<\/p>\n<p>  \t Tech troubles \t  \tRussian consumers and companies are also encountering shortages of a wide range of goods, including pharmaceutical supplies, such as asthma inhalers, and drugs for Parkinson\u2019s disease. Even copy paper, whose price has tripled over the past month, is hard to come by because of a halt to the import of key chemicals, leading to calls for university entrance exams to be suspended this year.<\/p>\n<p> The situation looks particularly grave in the information technology sector. Russian companies and state-owned enterprises remain heavily dependent on imported hardware and software \u2013 despite a 2017 order to wean themselves off of Western software. As part of the sanctions, companies like Microsoft and Google are no longer doing business in Russia, leaving local managers scrambling to find alternative software.<\/p>\n<p>Compounding the problem is the fact that tens of thousands of IT professionals are leaving Russia because they can easily work overseas, free from the economic and political restrictions of life in Russia. In a bid to stem the flow, on March 29, 2022, Prime Minister Mishustin signed a decree exempting IT professionals from the draft.<\/p>\n<p> \tA bleak future \t  \tThe goal of the Western powers in imposing sanctions was to increase pressure on the government in the hope that President Vladimir Putin would come to the realization that the costs of continuing the war in Ukraine exceed the benefits. Unfortunately, that strategy may exaggerate the extent to which Putin factors the living standards of ordinary Russians into his decision-making calculus.<\/p>\n<p>Moreover, the war and the resulting sanctions seem likely to be further empowering hard-line nationalist elements of the Russian government, with some critics calling for a reintroduction of Soviet-style central planning and a military mobilization of the economy.<\/p>\n<p>Put simply, the future looks bleak for Russian citizens, who will continue to bear the brunt of the sanctions. Putin apparently expects them to tighten their belts until he achieves his \u201cvictory\u201d \u2013 which is increasingly being seen in Russia as a war with the \u201ccollective West,\u201d not just Ukraine.  (The Conversation)  NSA<\/p>\n<div class=\"trade-after-content\" id=\"trade-2700863423\"><div id=\"taboola-below-article-thumbnails\"><\/div>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({\r\n    mode: 'alternating-thumbnails-a',\r\n    container: 'taboola-below-article-thumbnails',\r\n    placement: 'Below Article Thumbnails',\r\n    target_type: 'mix'\r\n  });\r\n<\/script>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({flush: true});\r\n<\/script><\/div>","protected":false},"excerpt":{"rendered":"<p>Middletown (US), Apr 13 (The Conversation) Six weeks into the war with Ukraine, Russia\u2019s economy seems to be holding up better than initially expected. Despite unprecedented sanctions and an exodus of Western companies, the Russian ruble \u2013 a widely followed indicator of the economy \u2013 has recovered all of its earlier losses. Meanwhile, billions of [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[1697,31],"tags":[],"class_list":["post-35924","post","type-post","status-publish","format-standard","hentry","category-economy","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.5 (Yoast SEO v25.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Russian ruble&#039;s recovery masks disruptive impact of West&#039;s sanctions \u2013 but it won&#039;t make Putin seek peace - Trade Brains Features<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tradebrains.in\/features\/russia-sanctions-impact\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Russian ruble&#039;s recovery masks disruptive impact of West&#039;s sanctions \u2013 but it won&#039;t make Putin seek peace\" \/>\n<meta property=\"og:description\" content=\"Middletown (US), Apr 13 (The Conversation) Six weeks into the war with Ukraine, Russia\u2019s economy seems to be holding up better than initially expected. 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