Putin started the war with the aim to cripple Ukraine’s NATO dream. Instead, the Russian economy is sinking in the quicksand of recession.
Russia and Ukraine war has taken a dramatic shape- the one that exhibits no signs of stopping. The world is consistently reacting to the Russian invasion by imposing heavy trade sanctions. A report revealed by Castellum.AI, a New York-based sanction watchlist, revealed that Russia is now the most sanctioned country across the world. Putin’s administration now stands ahead of the likes of Iraq, Syria and North Korea in terms of crippling sanctions.
Given the situation, it is valid to ask the question- how is the Russian economy doing? Here is the answer that sounds a lot like a disaster for the country.
How is the Russian really economy doing?
According to the reports, a total of 5,532 sanctions imposed against Russia are on the verge of spelling doom for the nation. The highest number of sanctions have been imposed by Switzerland (568), followed by the EU (518), Canada (454), Australia (413), the US (243), the UK (35) and Japan (35).
To quote Elvira Nabiullina, head of Russia’s Central Bank-
The conditions for the Russian economy have altered dramatically,” Nabiullina said in Russian. “The new sanctions imposed by foreign states have entailed a considerable increase in the ruble exchange rate and limited the opportunities for Russia to use its gold and foreign currency reserves.
She further told the people of the country that the Central Bank of Russia was raising its key interest rate to the highest ever 20% in order to combat inflation and collapse.
Russian aviation facing the Western wrath
The United States, Europe and Canada have declared a no-fly zone for the Russian flights as a response to the Ukraine war. According to Eurocontrol, the air traffic management company for the EU, a total of 300 Russian flights to Europe and 50 European flights to Russia in a day have been suspended.
This is not all, companies like Airbus and Boeing have frozen the supply of spare airplane parts to Russia. This has already mounted the danger of the Russian aviation industry running out of spare parts in the coming few weeks or months.
Catastrophic blow for Russian currency
Russian economy appears to be deadlocked from all corners. Since the onset of the invasion of Ukraine, the value of the ruble has declined by more than 40%.
The plummeting value of Russian currency is so worrisome that Bitcoin now has a larger market cap than the ruble. According to the latest data, Bitcoin stands at a market cap of $835 billion while ruble amounts to $626 billion.
As a consequence of the war that Putin started, Russians are frantically preparing themselves for an impending recession which is predicted to be one of the biggest in history.
$640 billion Russian forex reserve rendered worthless
Out of all the troubles for the Russian economy, this is perhaps the biggest. The country boasts of a whopping $640 billion in foreign exchange reserve, the fourth biggest in the world. However, with crippling sanctions on international trade for Russia, the treasure trunk now has turned to mere paper pieces.
Businesses and banks in the nations that have levied sanctions against Russia are by default restricted from trading with the country. However, for other nations too, the process becomes almost impossible to get through, therefore, self-sanctioning.
To trade with Russia, nations would have to execute transactions in USD which involves clearance from New York-based banks. This poses a threat for traders and banks being blacklisted in the U.S.
Worse, only one-fifth of Russia’s forex reserve is in the form of gold. Therefore, the maximum portion of the reserve is touted as worthless for the Putin administration.