Desperate Russians Race to Withdraw Cash as Sanctions Send Currency Into Freefall

Russian President Putin has the right to think that threat of sanctions if he invades Ukraine will fall. After all, when his army stormed to annex Crimea in 2014, the European Union restricted some of Russia’s financial transactions – which cost Europe as much as the Russian economy. , and over time has actually increased the continent’s dependence on Russian gas and other exports.

Putin certainly thinks that Russia’s advances in the European economy are too deep to cut.

But all of that is rapidly changing after the European Union began putting pressure on conventional holders, including Germany, which wants to exempt gas from the sanctions list; Italy, which wants to exempt luxury goods; and Hungary, disagreeing with the sanctions. With the EU now completely united on the most painful sanctions – removing Russia from the international monetary network SWIFT – Putin is feeling the pain.

On Monday, the first trading day since the new sanctions took effect, the Russian economy was in free fall.

The Russian ruble fell 30% against the US dollar to an all-time low and Moscow raised interest rates to an emergency 20%.

Russia’s central bank opted not to open for trading on the Moscow exchange on Monday morning to try to stem the sell-off. “Due to the current situation, we have decided not to open part of the stock market, part of the derivatives market or part of a special derivatives market on the Moscow Exchange today,” the bank said. , according to the media.

As Russians lined up at ATMs across the country fearing that cash could run short, Russia’s Central Bank appealed for calm. That fell on deaf ears, although the Kremlin promised that it had “the resources and tools necessary to maintain financial stability and ensure the operational continuity of the financial sector.”

A race for Russian banks may already be underway. “Events taking place this weekend mean that no G7 banks will be able to buy the Russian ruble, sending the currency into free fall, and the end result we could see a massive inflationary shock is happening inside Russia,” Michael Hewson, CMC Markets UK, told CNN. “A race for domestic Russian banks seems to have begun, as ordinary Russians fear that their credit cards may no longer work.”

Considering Russia’s war has only been going on for 5 days, things are likely only to get worse. Will Walker-Arnott, senior investment director at Charles Stanley, “It appears that Russia is increasingly becoming a major economic powerhouse, increasingly isolated from the global financial system. told BBC.

Collateral damage goes beyond the oligarchs, who have European real estate is currently isolated. Entities as far apart as the above Russian models OnlyFans and of Russia World Cup soccer team feeling oppressed. Russian airlines are now banned from flying over much of European airspace. Flights to Russia from Europe have been canceled due to concerns that sanctions banning the sale of aircraft parts to Russia means Putin could detain some jets for spare parts. KLM even filmed two passenger jets mid-air for fear they wouldn’t turn around.

The economic fallout will have devastating effects on ordinary Russian citizens, who have little hope of forcing Putin out of office.

And it will only get worse. Norway announced it would remove Russian investments from its lucrative $1.3 trillion sovereign wealth fund, and Moody’s said it would likely downgrade Russian bonds to ” trash” following a similar move by the S&P. European Commission President Ursula von der Leyen said in a statement on Sunday that the worst may yet to come. “We will also ban transactions of the Russian central bank and freeze all of its assets, to prevent it from financing Putin’s war,” she said.

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