Upper house

Russia struggles to shore up sanctions-hit economy

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Moscow (AFP) – Russian authorities are scrambling to stem the panic as massive sanctions over Moscow’s invasion of Ukraine have caused the worst economic shocks since the fall of the Soviet Union.

Asked by journalists on Wednesday about the survival of the economy, Kremlin spokesman Dmitry Peskov acknowledged that the current situation was “hostile”.

The Russian economy “is experiencing serious blows” aimed at undermining its integrity, he said, while promising: “We will continue to stand tall”.

Russians faced a grim new economic reality after Western powers agreed to impose far-reaching sanctions.

The ruble has fallen by more than a third against the dollar and the euro, Russian planes are banned from a handful of countries and ordinary citizens face serious doubts about the future of their career, their salaries and the repayment of their loans.

“Do not panic”

Valentina Matviyenko, the speaker of the upper house of parliament, called on everyone “to turn on their brains and analyze everything that prevents businesses from operating”, warning against “any panic”.

President Vladimir Putin signed a decree on the development of the IT sector, allowing male programmers to avoid the project.

Prime Minister Mikhail Mishustin reiterated long-standing policy goals of replacing imports with local products and diversifying the economy.

But these statements appeared to offer little protection against the impending economic collapse.

The Moscow Stock Exchange remained closed for a third day on Wednesday after the Bank of Russia said it had decided trading would not resume except for buying rubles.

The ruble tumbled following the West’s decision to impose massive economic sanctions on Russia following the invasion of its pro-Western neighbor Ukraine last week.

It changed hands at around 103 rubles to the dollar on Wednesday at 2:30 p.m. GMT and 112 rubles to the euro.

Russia has announced a ban on foreign investors selling Russian stocks or withdrawing funds from its financial markets.

Putin also banned travelers from taking more than $10,000 in cash out of the country.

The Russian Ministry of Finance has expressed support for the abolition of sales or value added tax on gold bullion purchases by individuals.

Mishustin said buying gold “could be a good alternative to buying foreign currency.”

Faced with Western sanctions, Russia’s biggest lender, Sberbank, announced it was leaving the European market.

It came after European banking regulators decided that the European branch of Austria-based Sberbank and its subsidiaries “failed or were likely to fail” and would be liquidated.

The bank’s shares then plunged 94% to just 1 US cent on the London Stock Exchange, as earlier on Wednesday it announced 2021 profits of 1,246 billion rubles (about $12 billion at the exchange rate). changes very low current).

Russian companies and oligarchs targeted by the sanctions said they were cutting operations and foreign companies were rushing out, including oil and gas majors such as Shell and BP, which have invested billions in the country.

– ‘The time has come’ –

Hundreds of thousands of jobs – possibly more – could be lost as foreign companies ask how they will pay their employees given new restrictions on Russian banks’ dealings with the outside world.

“One of the immediate effects of the war in Ukraine will be to knock Russia down several places in the ranking of the world’s largest economies,” said Neil Sharing, group chief economist at Capital Economics.

“However, the long-term impact on the global economy will depend to a large extent on its political and geopolitical legacy,” he added in an analyst note.

While Russians pride themselves on their ability to overcome crises, the past two decades have brought them the benefits of closer integration into the global economy.

Middle-class Russians were able to vacation abroad, eat out and shop in malls. Putin’s popularity rests at least in part on the greater economic stability since he became president in 2000.

Since 2014, when Russia faced sanctions for its annexation of Crimea from Ukraine, the state has built up substantial reserves to resist such tactics.

But ordinary Russians have since seen their purchasing power eroded as many have taken out loans and, according to a Levada survey last year, two-thirds have no savings.

Financial adviser Sergei Leonidov advised Russians: “If you have loans or other obligations to banks, now is the time to pay them back quickly.”

“Due to the crisis, the risk of losing sources of income is increasing,” he told state news agency RIA Novosti.