The Russian invasion of Ukraine has triggered international criticism that later became “punishments” that will severely affect its economy, although President Vladimir Putin’s regime has indicated that they will resist them and that they will be an opportunity for them.
From deactivating some banks of the Swift system (system that supports global payment transactions) to the ban on the import of its oil by the United States, they are among the strongest sanctions, which have caused the Moscow stock market to remain closed for two weeks in fear of an unprecedented crash. The primary, extractive sectors are what support the Russian economy.
For Francisco Cortés, PhD in Economics and professor at the International University of La Rioja (Spain)in this conflict we must separate the strictly economic sanctions, which can affect imports, such as gas or oil supplied by the United States, but which are unfeasible for Europe at this time due to its dependence.
60% of its exports are oil and gas, and these also represent a third of its industries. Therefore, it is closely linked to price movements in the international market.
“Regarding financial sanctions, the most delicate point is to isolate Russia from the Swift system, which would be to isolate it banking from the rest of the world (…). [Actualmente solo] it has been done for some banks, but not for the whole system. This was already done at the time for Iran and meant a drop in exports of almost 30% for that country. That would be a very harsh measure for Russia, but it is very difficult to take it, because there is a very large dependency on gas,” says Cortés, who also explains that the Ukrainian economy —also affected— has a weight in agriculture, especially in cereal theme.
He recalls that in 2014 Putin launched an alternative similar to Swift and China supported him, but not many banks are part of it.
“It is most likely that a corralito will be generated, and effectively they have already started with the restrictions for the withdrawal of cash, not yet to large amounts and more in foreign currencies, but it will probably be adjusted much more, because obviously there has been an attack against the ruble, which has depreciated almost 50% of its value, and that makes exports more expensive. That means that the Russians are going to see how inflation is going to affect them a lot, especially in the withdrawal of deposits from the banking system,” says Cortés.
In the last decades it was opened and in theory there is free market, but with a dual structure, because it is not a liberal democracy. With a very unequal distribution of wealth, economic power is in the hands of a very defined oligarchy that revolves around Putin, of power. Something similar to what is happening in China, a country that could be a financial lifeline, although the increase in the price of oil is offsetting the losses for Russia, which is one of the main producers worldwide.
In addition, Russia keeps a good percentage of its foreign currency in China, which, together with its own gold reserves and low public debt, can give it a break for a while.
According to the ambassador of the Russian Federation in Ecuador, Vladimir Sprinchanthere is an economic war that not only affects your country, but the whole world, and the best example is the rise in fuel prices even in the United States.
“Russia has the largest territory in the world and not only has borders with Europe, but also with Asia, and many of its Asian partners remain consumers of our hydrocarbons. We have, as well as the Nord Stream to Europe, gas pipelines with China, which can consume all the gas that Russia sells. Other countries in the region, such as India, remain trade partners of my country,” says Sprinchan, who admits that even with the sanctions they lose a lot and people suffer, because prices rise, but that their economy has several possibilities to redirect its economic operations.
Regarding the exit or closures (total or temporary) that international companies have applied in their country, causing a decrease in employment, Sprinchan states that other companies, especially Asian ones, can replace them.
In addition, they are analyzing the mechanisms to comply with payments and trade to other countries, such as Ecuador, that have been affected by financial sanctions.
“My government has been prepared, because the sanctions of the United States and Europe began from the situation in Crimea. These measures accommodated the Russian economy to the situation of imported products from those countries that sanction us (…): the national production in agriculture and other spheres of production grew. Now with [las nuevas] sanctions is also prepared (…) a program to resist and adapt. Of course, it is impossible to level all the sanctions, but in time Russia will establish itself. Also, I’m sure that over time [también] Economic ties are going to be restored, because the impact is not only for Russia, but also for the world market of hydrocarbons, oil, gas, due to the large increase [de precio]”, says Sprinchan.
Santiago Pérez, international affairs analyst at the Universidad Técnica Particular de Loja, He lived for several years in Moscow, and in the conversations he has had with contacts there, they mentioned their concern about the payment situation, since the problem of the banks is serious, although the main one, Sberbank, and Gazprombank, the third, they did not enter the sanctions; but for the common citizen, Visa and Mastercard does mean that the population cannot use credit cards when moving within their own territory.
“In times of war, the restrictions fall more on the poorest,” says Pérez, for whom there is currently a hybrid war that mixes the conflict in Ukraine, cyber attacks, increased propaganda and an economic-financial war that is very effective.
“I think that these sanctions will hit the Russian economy so much in a couple of months or during this year and will affect the war actions in a certain way, although Putin has assured that the supply of the war is guaranteed; but it is not known, it is unknown,” says Pérez, who believes that the Russians expected the Swift, but the oil and gas issue did not, or at least not so quickly.
He adds that the current measures are a serious blow to the Russian economy, which is 1.7 trillion dollars, about 7% of the US economy. It ranks twelfth in the list of countries by GDP, below Italy or Canada.
Pérez recalls that earlier this week the Russian government issued a decree of special measures in which it authorizes the prohibition of exports of various products and raw materials to guarantee the functioning of key sectors of the economy. That gives a signal. (I)
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
