Russia's Sanctioned Economy!

Russia, the successor of the Soviet Union the largest country in the world by its landmass. Russia is often compared to big powers in the world like the US and China. But today the country's economy is in the worst condition, as a consequence of its actions.

In addition to the existing economic problems Russia has invited the economic sanctions. You see the period of economic sanctions on Russia started after the annexation of Crimea in 2014. the United States, the European Union, Canada, and Japan imposed sanctions on Russia. Even though these sanctions are not as severe as the sanctions that have been imposed on them now, still it has impacted the Russian economy.
The sanctions that were imposed on Russia today due to the Russian Ukraine conflict, are much more severe and specifically target the Russian economy.
First let's talk about a banning Russian banks from the swift system. Swift is an global financial messaging system which is used by thousands of banks worldwide to communicate information on financial transactions in a secure and standardized way. Due to this ban Russia is unable to access foreign funds. This also makes international transactions very difficult, especially for businesses. Due to this Russia isn't able to receive payments for its exports.
Talking of exports, as you know Russia is hugely dependent on oil and gas exports. And the US has banned all oil and gas imports from Russia, but the EU is not doing the same. Here we have to understand, for EU 40% of the gas and quarter of its oil comes from Russia. Still, Germany who is very much dependent on Russian energy has put hold on the Nord Stream 2 gas pipeline to open. The European Union has said it will find alternatives and make EU independent from Russian imports before end of this decade.
You see, Russia has foreign exchange reserves of about $640 Billion. Out of this nearly half have been seized by the western powers like the US, UK and EU. Many countries have also imposed different sanctions on wealthy Russians known as oligarchs. Few assets of these oligarchs have been seized. Doing this will eventually make them pressurize Putin to stop this conflict.
Now apart from this, many companies such as Shell, Starbucks, Apple, Samsung, Netflix and many more have stopped their services in Russia. Also Visa and MasterCard have already blocked their network with Russian banks. And the same is the case with payments platforms like Apple pay and Samsung pay. All this is forcing people to withdraw lots and lots of cash and this might end up in a bank run kind of situation.
Now speaking of cash the ruble has fallen drastically. In a month's time the ruble has fallen by more than 40%, plummeting to a record low of 139 against the US dollar on 7th march. Annual inflation in Russia accelerated to 9.15% in February from 8.73% in January, which is already highest in the past seven years. With this rate Russia might end up in dual digit inflation rate.
At present Russia is the most sanctioned in the world, but after the 2014 sanctions, Russia learned the lessons and started to prepare to build a sanction-proof economy. They started to reduce their dependency on western countries. The first thing that they have done is move away from the US dollar. They started to build foreign reserves, in which percentage of gold has increased drastically. Today only 16% of reserves are in US dollars which were at 40% just five years ago remaining, 35% and 13% are in the Euro and Chinese Renminbi. Russia is also reducing its dependence on foreign investment from a western country and looking into Asian countries like China and India. At the same time, the Russian government is cutting down its spending and promoting stability over the growth in the past few years to become more self-reliant. There have also been talks going on between India Russia china to find out alternatives to the swift payment system. Maybe in the coming year we may get to see it.
But even with all these adjustments, the Russian economy will suffer. And it's not just going to affect Ukraine and Russia but the entire global economy could face high inflation and low growth rate in the future, further affecting the global recovery from the pandemic. In the end we hope this conflict ends soon.

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Видео Russia's Sanctioned Economy! канала Global Economics