Inflation and the black market, among the possible effects of sanctions in Russia

authorities and businessmen russians prepare for the possible effects on the microeconomy of the sanctions imposed by the invasion of Ukraine, such as the price increaseblocking of cards or the appearance of a black market.

Restaurants in Moscow are open and full of people this four-day weekend, as March 8 (Women’s Day) is a public holiday in Russia.

Despite this apparent normality, the private sector is beginning to worry about the effects of the sanctions in a country that takes the risk of famine seriously after having known multiple economic crises and periods of hyperinflation in the past.

The large distribution chains noted an increase in purchases of basic products, according to the Ministry of Commerce, which is concerned about the emergence of a black market.

bulk purchases

“The main supermarket chains decided to minimize the risk of purchase by resellers of basic products,” the Ministry of Commerce said in a statement.

“In several regions (…), these products were bought in large quantities, up to several tons, higher than what is needed for personal use, with the aim of reselling them,” he added.

To prevent this practice from increasing, the large chains established restrictions on the quantities sold to each individual.

Russia can also limit the prices of some twenty basic foods, such as meat, fish, milk, flour or sugar, to avoid inflation. But, for the time being, the government has not ruled in favor of this measure.

According to businessmen, the rise in prices is already a reality, although no statistical data has been published to reflect it.

Catering industry leaders deplored sizable price increases by their suppliers, telling the Russian daily Kommersant, and are scheduled to meet Moscow’s mayor on Wednesday.

The Russian Central Bank also ordered financial entities not to publish their balance sheets from the month of February.

A measure taken to “limit the risk of credit institutions in the face of sanctions”.

No Visa or Mastercard

The solvency of Russian banks, which claim to have the necessary liquidity to guarantee the needs of their clients, is in the spotlight, especially due to the risk of a massive withdrawal of funds at ATMs, in the midst of the collapse of the value of the ruble against the dollar and the euro.

These entities also want to reassure their customers before the announcement of the end of the operation of Visa and Mastercard cards.

These credit giants announced on Saturday that their cards would stop working in Russia and also abroad in the case of those issued by Russian banks.

Russian financial entities announced Sunday morning that they were working on issuing UnionPay cards, the Chinese equivalent of Visa or Mastercard, since the Russian Mir cards do not work in some countries.

Despite this, they recognized that those Russians who travel or live abroad will not have it easy.

“If you are abroad, we recommend that you take out money in cash,” Alfa Bank said.