International Sanctions Threaten Russian Economy
Headline Roundup March 1st, 2022
While Russia’s central bank had a plan to prop up the value of its currency, international sanctions blocked it from accessing much of its foreign-held reserve funds. Several key Russian banks were cut out of SWIFT, the worldwide messaging system which banks rely on for international transactions. As a result of these sanctions, major financial services like Visa, MasterCard, Apple Pay and Google Pay were unavailable to many Russians. Sanctions didn’t just come from the West — countries sanctioning Russia included Japan, Taiwan, Australia, and more. Even China, often seen as Russia’s best hope for an economic lifeline, implemented some restrictions; two state-run Chinese banks blocked funding for Russian commodity purchases on Friday.
Coverage of Russia’s financial struggle was widespread on Tuesday, particularly in business-focused outlets. The story prompted some moderately sensationalist language, including “Russia's economy gets nailed” from Fox Business (Lean Right) and “sanctions slam its economy” from CNN Business (Lean Left).
A run on Russian banks is underway.
Russia’s ruble dropped dramatically in Monday’s trading on the news of unprecedented sanctions levied on Moscow by the EU and U.S. for its invasion of Ukraine.
Lines at ATMs snaked down sidewalks and around buildings in Moscow and at Russian banks in Europe as depositors rushed to withdraw cash. Sberbank Europe, which is owned by Russia’s state-run Sberbank, says it has experienced “significant outflows of deposits in a very short time.”
As markets opened in a panic on Monday, many Russians rushed to local cashpoints in Moscow to retrieve their savings before the damage got any worse.
“It said they had dollars so I came here immediately,” said Alexei Presnyakov, 32, pointing to an app for Russia’s Tinkoff Bank, indicating he could withdraw hard currency. About 20 people were queued in line. “Yesterday [the rate] was 80 [to the dollar]. Today it’s 100. Or 150.”
“I just made a spontaneous decision today that I would ask [out of work] and go around...
Russia’s unprovoked invasion of Ukraine is taking a worsening toll on the wealth of the country’s richest oligarchs as international sanctions crush the Russian economy.
Russian billionaires have lost a combined $83 billion in on-paper wealth this year – with most of the losses occurring in the days since the Kremlin ordered military against Ukraine. Their losses have more than doubled since the invasion began last week.