Alexander had to fly to Istanbul to leave russia bypassing the closure of European airspace, one of the routes chosen by thousands of their compatriots to leave the country in the face of the storm that international sanctions have triggered on the russian economy. Some products are beginning to be scarce in stores; others have increased up to 30% in price; and in the ATMs queues follow one another to get the maximum authorized in foreign currency before the collapse of the ruble. “Many Russians are under enormous stress. It is horrible what is happening in Ukraine. We have understood that we are running out of future,” says the 30-something Muscovite. “There are rumors that they could close russian borders to men and force some to enlist. Everything is so unpredictable that I didn’t want to risk it”, he confesses from Istanbul.
Unlike its citizens, the regime of Vladimir Putin He had been preparing for this moment since 2014. That year the sanctions began to rain down on Moscow for its illegal annexationl of the Ukrainian peninsula of crimea and, since then, the Kremlin has tried to inoculate itself against a hypothetical ‘economic war’ scenario like the one you are facing now. He swung east to reduce their dependence on the West and loosened some of the knots that bind it to globalization. It reduced its reserves in dollarspenalized the imports with high tariffs minimized its external debt and created a alternative system to Swift for international bank transfers.
But above all he dedicated himself to fattening the foreign exchange reserves of its central bank with a bulletproof vest 630,000 million dollars, equivalent to a third of its economy, designed to protect the ruble from potential attacks. He gave that strategy a name, “russian fortress“, the same fortress that collapses these days with astonishing ease. “In less than two weeks, Putin’s war has catapulted Russia to the Soviet era levels of economic isolationformer US Treasury adviser and sanctions expert Bryan O’Tool wrote this week. will lead the Russian people to disaster“.
An unprecedented economic punishment
Everything has happened with enormous speed, as the Kremlin’s bombardments pummeled the Ukrainian cities. The sanctions have been closing almost all the channels of communication between the Russian financial system and the rest of the world. Both those adopted by the thirty governments that have so far followed the pattern set by Washington, Brussels and London, and by the private sector. The Russian freight transport has lost its insurers, Visa and master card they have stopped processing the purchases of their citizens abroad and the central bank has seen how at least half of its foreign exchange reserves were frozen outside its borders.
The consequences of such mismatches worsen in a cascade. The ruble has lost half its value against the dollar since the beginning of the invasion. The moscow stock exchange It has been closed for days to avoid the disbandment of investors. The thirty large Russian companies listed in London have lost more than 90% of their value. The interest rates have doubled up to 20% and the russian debt has been reduced to junk bond. “Many of the sanctions are part of the usual menu, what is different this time is the speed with which they have been imposedthe cohesion between the countries that have applied them and the economic dimensions of the sanctioned country,” Richard Nephew, one of the architects of the US sanctions against Iran, told this newspaper. “None of this is unprecedented since the package of sanctions imposed on Iraq in 1990 with the endorsement of the UN Security Council”.
Analysts predict that the Russian economy will lose about 10% this year of its GDP and, according to the World Bank, is dangerously approaching a scenario of suspension of payments like the one that already experienced during the 1998 crisis. The same one that took away the savings of millions of Russians. “My salary has been enormously devalued in just two weeks. And with the departure of the multinational companies from Russia, many people are going to lose their jobs. The situation is very worrying,” says Alexander from his temporary exile in Turkey, of which he does not know when you will be able to return to your country.
The most sanctioned country in the world
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quantitatively Russia is already the most sanctioned country in the worldabove North Korea and Iran, according to the consulting firm Castellum.Al. “The devastating sanctions against Iran were adopted within a period of 10 years. The same type of sanctions against Russia have been implemented in just 10 days,” said its director, Spencer Vuksic. There is no doubt that the cost to Russian society will be monumental. The point is that these sanctions will serve to achieve the purpose they have set themselves: to stop the war in Ukraine. Days after the invasion, the Putin’s popularity shot up to 70%, according to a survey by the state company VTsIOM. Nothing too surprising considering how official propaganda has whitewashed the offensive or the ironclad news censorship prevailing in the country.
“In the apartheid south africa or in the Libya 2003 sanctions served to change the behavior of their regimes,” says Nephew, author of the book ‘The Art of Sanctions’. “This time they may help stop the war, but they probably won’t stop it on their own.” recognizes that, in between, they could accentuate the aggressiveness of the Kremlin. Both on the battlefield and in the economic sphere. Cards in his sleeve, he still has. Since closing the gas tap to Europe to expropriate business in Russia from multinationals leaving the country, a possibility that Putin has already aired publicly.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.