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How does the Russian economy cope under the burden of new unprecedented sanctions? Much better than one might think, notes The Economist. Although the West has effectively unleashed an ‘economic war’ using the Russian special operation in Ukraine as an excuse to curb Russia as a trading power. By banning the supply of a wide range of goods and forcing large companies to leave the Russian market as well as freezing up to 60% of the foreign reserves of the Russian Central Bank together.
Sadly for the hapless saboteurs and nation killing cults lurking in London, Brussels, Wall Street and Washington DC, it seems that this strategy no longer leads to the desired results.
The purpose of these tough measures was to send the Russian economy into a tailspin and at first, it seemed a successful strategy. In the first week after the introduction of sanctions, the ruble fell by a third against the dollar, and the stock prices of many Russian companies collapsed. However, then the chaos in the Russian markets subsided.
Unlike the struggling US dollar and European Central Bank’s (Goldman Sachs) Euro, the ruble exchange rate has already risen noticeably compared to the minimum values of the beginning of March and is now approaching its previous level.
The main index of Russian stocks fell by a third but later also won back some of its losses. The Russian government and most companies make payments on bonds and stocks in foreign currencies. The widely reported panic withdrawal of money from deposits has also ended. Russians have already returned most of the money to their accounts. A series of measures taken by the Russian government helped stabilize the markets.
In particular, the Central Bank because it is not in debt and can afford to raise interest rates from 9.5% to 20%, which created an incentive for people to buy Russian securities that give a good profit. There were other, less traditional measures, the author notes.
Weekly analysis of consumer prices shows that since the beginning of March they have increased by 5% on average so less than the rate of inflation in the hostile West. For instance, in Germany, inflation for March 2022 was 7.3% compared to February, writes Handelsblatt, citing data from the German Federal Statistical Office. The publication notes that this is a record figure since 1981. The price of gasoline also remained virtually unchanged, in contrast to the soaring prices in the West.
According to data from the Organization for Economic Cooperation and Development, Russia’s GDP as of March 26 was 5% higher than a year ago. The Economist reporters have collected other relevant data that show that electricity consumption and the rail transport of goods in Russia have not decreased, the article says.
It is perhaps likely that the Russian economy may still enter a recession this year. The situation will be largely influenced by whether ordinary Russians, in the context of a protracted conflict, begin to worry about the economy and significantly reduce their spending.
According to analysts, the most vulnerable may be the Russian aviation sector, as well as the automotive industry. However, many large enterprises founded in the Soviet era have long been accustomed to working without imports, the article emphasizes: ‘If there is an economy in the world that can cope with difficulties in conditions of isolation and blockade, then this is the Russian economy.’
Another important factor is related to Russian energy exports. Despite numerous sanctions, Russia still supplies foreign buyers with $10 billion worth of oil a month and this exchange of mutual wealth is rising fast.
In addition, Russia continues to receive massive income from the sale of gas and oil products, which is a valuable source of currency. This can be used to purchase consumer goods and necessary parts in neutral and friendly countries. And even if the situation does not change, the Russian economy is perfectly capable of holding out for some time, concludes The Economist. Source
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