Russia faces financial meltdown: Russia was rushing to avoid a financial meltdown as its economy was slammed by a broadside of crushing Western sanctions imposed over the weekend in reply to the invasion of Ukraine.
President Vladimir Putin was due to carry problem talks with his top advisers after the ruble slammed to a record low against the US dollar, the Russian central bank more than creased interest rates to 20%, and the Moscow stock trade was shuttered for the day.
The European deputy of Russia’s biggest bank was on the edge of collapse as savers hurried to withdraw their deposits. Economists instructed that the Russian economy could shrink by 5%.
The ruble lost about 20% of its cost to trade at 100 to the dollar at 6 a.m. ET after initial plummeting as much as 40%. The beginning of trading on the Russian stock market was postponed and then canceled totally, according to an announcement from the country’s central bank.
The latest storm of penalties came Saturday, when the United States, the United Kingdom, the European Union, and Canada said that they would dismiss some Russian banks from SWIFT, a global financial messaging assistance, and “paralyze” the investments of Russia’s central bank.
The ratcheting up of Western penalties over the weekend has abandoned Russian banks on the edge of crisis,” wrote Liam Peach, an arising market economist at Capital Economics, in a note on Monday.
Russia faces financial meltdown, Freezing reserves:
President Vladimir Putin’s government has used the past eight years in organizing Russia for difficult sanctions by building up a war chest of $630 billion in international reserves which includes gold and currencies but at least some of that monetary firepower is now frozen and his “fortress” economy is under remarkable assault.
We will ban the trades of Russia’s central bank and will freeze all its assets, to prevent them from financing President Vladimir Putin’s war,” European Commission President Ursula von der Leyen said in a statement Sunday.
Russia faces financial meltdown. The United States also restricted US dollar trades with the Russian central bank in a trick designed to prevent it from accessing its “rainy day fund,” senior US government officials said.
Our strategy is to put it solely, is to make sure that the Russian economy goes back as long as President Vladimir Putin decides to go forward with his assault of Ukraine,” a senior government official said.
Peach at Capital Economics calculates that about 40% of Russia’s reserves are now off barriers to Moscow.
Outer conditions for the Russian economy have drastically transformed,” the Russian central bank said. “This is required to support financial and protect the savings of citizens from devaluation and price vitality,” the bank added.
The central bank said it would give an update on share trading at 9 a.m. regional time (1 a.m. ET) on Tuesday.
“Due to the existing situation, the Bank of Russia has determined not to begin a stock market section or a derivatives market section on the Moscow or a derivatives market section, Exchange today,” the statement read.
Russia is a governing exporter of gas and oil but many other sectors of its economy rely on imports. As the price of the ruble falls, they will become much more costly to buy, pushing up inflation. Russia faces financial meltdown.
The crackdown on its prominent banks and the exclusion of some of them from the SWIFT protect the messaging system that attaches financial institutions around the world will also make it difficult for it to sell exports.
President Vladimir Putin was due to meet his prime minister, the head of the Russian central bank, the head of Russia’s top lender, and finance minister Sberbank to discuss “economic matters,” Kremlin spokesman Dmitry Pskov told media.
For a long time, Russia has been methodically readying for the event of reasonable sanctions, including the most serious sanctions we are currently facing,” Pskov said. “So there are comeback plans, and they are being executed now as difficulties arise.”