Russia has banned its citizens from buying US dollars, completing it isolation of an economy which once had ambitions to join the global club of economic forces, says the CNN.
It was only during the global financial crisis of 2008 that Russian President Vladimir Putin and his lieutenants promoted the ruble as a possible alternative to the US dollar, arguing that it should be an integral part of the global financial system. Russia would become one of the five largest economies in the world, they claimed.
Putin’s attempt to dominate his neighbors, beginning with the invasion of Georgia in 2008 and continuing with the annexation of Crimea in 2014 and last month’s invasion of Ukraine, shattered what was left of the authoritarian leader’s economic dreams. .
In early 2008, one US dollar would buy about 25 rubles. The Russian currency has depreciated significantly since then, and Western sanctions imposed in response to the invasion of Ukraine have led to a free fall. On Wednesday, one US dollar could buy 117 rubles in Moscow after the currency fell 10% and reached a new low.
The latest drop came after Russia’s central bank banned Russians from buying “hard” currency and ordered banks to limit foreign currency withdrawals to $ 10,000 for the next six months, moves that could help keep some stocks in country dollars and in support of the ruble.
Sergei Alexashenko, a former finance minister and central bank official, described the strategy as “unbelievable nonsense” that could lead to bank run-ins.
“Obviously, the outflow of foreign currency deposits from Russian banks has exceeded the Bank of Russia forecasts and calls into question the ability of banks to meet their obligations,” he wrote in a newsletter.
“The biggest mistake the monetary authority can make in Russia is to touch on private savings – if there has been no banking management so far, it will happen,” Alexashenko added.
Russia has been trying to stave off economic collapse since the United States, the European Union and other Western allies imposed sanctions on much of the country’s banking system, including freezing hundreds of billions of dollars that Moscow has been accumulating for years. shield the economy. Analysts estimate that more than half of Russia’s foreign exchange and gold reserves are now out of bounds.
The central bank more than doubled interest rates to 20% and temporarily banned Russian stockbrokers from selling foreign-held securities. The government ordered exporters to exchange 80% of their foreign exchange earnings for rubles and banned Russian residents from making bank transfers outside Russia.
The ruble has come under intense pressure and Moscow’s failure to defend the currency will translate into financial pain. Russia is a leading exporter of oil and gas, but many other sectors of its economy rely on imports. As the value of the ruble falls, it will become much more expensive in the market, pushing up inflation.
Fitch Ratings downgraded Russia’s credit rating on Tuesday and warned that a bankruptcy was “imminent”.
“Further strengthening of sanctions and proposals that could restrict trade in energy increase the likelihood of a political response from Russia that includes at least selective non-payment of its government obligations,” the rating agency said in a statement.
Even with Russia on the brink of bankruptcy, Western countries continue to impose restrictions aimed at further isolating Moscow. The United States and the United Kingdom have banned Russian energy imports, and the European Union has said it will try to reduce gas imports by 66% this year.
For Moscow, the costs add up. The central bank’s decision to block the Russians from buying US dollars marks the end of the ruble, according to Anders lslund, an economist and former adviser to the Russian government.
“Putin ruined the ruble,” lslund wrote on Twitter.
CNN
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