On March 18, Russian Foreign Minister Sergey Lavrov said his country is already accustomed to living with Western economic sanctions and will withstand the latest round over Ukraine.
Governments and companies across the globe have imposed taken steps to punish all sectors of Russia’s economy since the Kremlin launched its full-scale invasion of Ukraine on February 24.
The United States, European Union, Canada, Japan, Australia, South Korea, Singapore and New Zealand collectively had imposed 2,754 sanctions on Russia before February 22, and 4,362 sanctions since February 22, according to Castellum.AI, a tracking site.
The sanctions targeted 437 entities and 3,915 individuals. The total count exceeds the sanctions against Iran, Myanmar, Cuba and Venezuela combined, making Russia the most-sanctioned nation.
Still, Lavrov claimed that Russia gained experience with living under sanctions after its annexation of Crimea in 2014. He said self-reliance and help from allies would defeat them.
“We are now champions in the number of sanctions introduced against the Russian Federation, more than 5,000 individual acts, almost twice as many as was introduced against Iran and North Korea. But sanctions always made us stronger,” Lavrov said.
That is misleading. In fact, Russia’s actual economy has taken a huge hit, and ordinary Russians are paying the price.
The ruble took a more than 30 percent nosedive after the invasion and is now worth less than one U.S. penny. Inflation, already high thanks to COVID-19, has taken root across the board.
Panicked Russians lined up at ATMs to drain foreign currency as their currency pancaked.
Sugar and cereal prices have increased by 20%, prompting authorities to reach agreements with retailers to limit the increases on some food products to 5%.
Prices for smartphones and electronics have increased by 10%, while the cost of travel has increased by nearly 30%.
On March 18, the Central Bank of Russia (CBR) took steps to prevent a further devaluation of the ruble by banning foreign exports, halting purchases using dollars and other foreign currencies and limiting how much foreign currency Russians can withdraw.
The CBR increased its key interest rate from 9.5% to 20%.
“The Russian economy is entering the phase of a large-scale structural transformation, which will be accompanied by a temporary but inevitable period of increased inflation, mainly related to adjustments of relative prices across a wide range of goods and services,” the CBR said.
On March 20, the SWIFT international interbank system barred seven major Russian banks from its financial network. Russians working for foreign companies in Russia and those working abroad fear they may not be able to receive their paychecks.
Moreover, about 150,000 Russian tourists found themselves stranded around the world after most European countries and Canada banned Russian flights from their air space.
The push against President Vladimir Putin’s war on Ukraine led international companies and banks to scale down their Russian presence and reconsider whether to stay.
Companies like Netflix, Levi’s, Burberry, IKEA and Unilever said announced a halt on their activities in Russia. Food and drink giants McDonald’s, Starbucks, Coca-Cola and PepsiCo said they would shut down. Global consultants KPMG, PwC, EY and Deloitte announced a pullout.
Raiffeisen Bank International AG (RBI) said it is considering departing Russia. The Austrian-based bank is the 10th-largest in Russia by assets and employs about 9,000 staff. JPMorgan, Goldman Sachs and Citibank promised to help clients curtail their operations in Russia and relocate staff.
In response, Russia threatened to seize the assets of the foreign companies that leave. On March 10, Putin said there are legal ways to seize and nationalize international firms.
Russia has also threatened to repay its “nonfriendly” creditors in now-devalued rubles. With half of Russia’s foreign reserves in Western countries frozen, some speculate that Russia could resort to defaulting on its debt.
Russia is looking for help from China, which has refused to condemn the attack on Ukraine. "The sanctions against Russia are getting more and more outrageous," Chinese Vice Foreign Minister Le Yucheng said on March 19.
On March 14, CNN, citing unnamed Western officials, said China “has expressed some openness” to providing Russia with financial and military assistance. Russia reportedly has asked China to send non-perishable food kits to Russian troops in Ukraine. CNN noted that some Russian troops in Ukraine have reportedly looted grocery stores for food.
On February 26, China announced it would allow wheat imports from Russia for the first time, The Associated Press reported.
As economic pressure rises, buyers of Russian products will likely look for deals. On March 18, an Indian official said his country would boost Russian oil imports – for a discount.