Putin’s Financial Fortress Blunts Impact of Threatened Sanctions

First American News LLC: Raleigh, NC: U.S. President Joe Biden says planned sanctions if Russia invades Ukraine would have “a devastating impact” on its economy. But after the Kremlin spent the last eight years preparing for more penalties, economists say the pain may not be as bad as some fear.

The measures under consideration, which include limits on big banks’ ability to use dollars and euros, as well as restrictions on government debt and access to U.S. technology, would be the most severe since the first wave of limits slapped on Russia in 2014 following the annexation of Crimea, according to U.S. and European officials.

Back then, Russia spiraled into a financial crisis. The ruble lost half its value as the central bank saw its reserves plunge by $130 billion and the economy swung into a recession.

This time around, economists say, the moves under discussion by the U.S. and its allies would hit the currency, fuel inflation and send investors fleeing, but might not be enough to trigger the same kind of turmoil. In addition to Kremlin preparations, a big difference is that prices for oil, Russia’s main export, are rising now, not plunging as they did in 2014.

“Russia is much better prepared for sanctions than it was in 2014 at least on its macro-indicators,” said Natalia Lavrova, chief economist at BCS Financial Group in Moscow. “The state sector is ready and the financial cushion is big,” she said. In all but the most extreme of scenarios, the economy would continue growing, though at a slower rate and with higher inflation, she said.

Click Here To Continue Reading

Top Digital News Subscriptions

Sales Support