“Everything is frozen, hanging by a thread, as regards the application of sanctions…” This French entrepreneur, who has supplied equipment for the food and pharmaceutical industries to Moscow for many years, is devastated by his “dive into the unknown” since the Kremlin, in official terminology, began “special military operation” in Ukraine.
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Its sectors are a priori not subject to the sanctions imposed by the US and the EU against Moscow. But even away from the aviation or energy industries, whose activities are indirectly affected. “All logistics in Russia are upset”, he testifies. An example of, among other things, a partially paralyzed economy.
The partial blocking of the Swift international payment system affects those who, as the Russian economy modernized and internationalized, lived integrated into the global financial system. Russian countermeasures restricting foreign exchange outflows and transfers have also disrupted flows between suppliers and buyers.
In Moscow, some have returned to remote money exchange: Russians are asking contacts in Europe to pay their bills in euros and, for the equivalent amount, transfer rubles to another account in Russia. Others had to stop making payments, effectively interrupting the supply chain and therefore production.
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Still others are considering opening a bank account in yuan, a Chinese currency that is not subject to these sanctions and therefore provides a semblance of normalcy. Not forgetting that, in the face of the threat of the Internet shutdown in Russia, information technology specialists, mostly self-employed, preferred to go abroad. To Dubai for the richest, to the Baltic countries or to the Caucasus for the rest.
Inflation is accelerating
“Sanctions eventually catch up with us” laments the businessman, one of those new upper-class Russians who, liberal and open to foreigners, have long opposed Vladimir Putin’s Kremlin. Working in sectors that are not formally sanctioned, they learned from their Western suppliers about the sudden cut in supplies.
More for political than economic reasons. “From simple A4 paper to sophisticated equipment, there is a shortage. Did the Europeans do it of their own free will or under media and political pressure? “, asks another entrepreneur, frustrated with the West, who “Punishes us, criticizing the Kremlin, the middle class”. Inflation is accelerating, affecting primarily this part of the population.
Turkish and Chinese products as replacement
These logistical problems have become a headache for many stores and factories. “Once again, Turkey and China will be the big winners in this crisis! “, jokes Russian businessman. Like others, he began to replace his European supplies with products from these two countries. “This will help keep production and sales going. But in terms of quality, we will go down to the level, ” he is worried.
“Russians have integrated into international models. Now they risk withdrawing into themselves, not caring about our standards. This will send them back to the USSR! “, the Frenchman in Moscow, in the aviation industry, regrets in the same way.
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Civil aviation is indeed one of the most affected sectors. European and American sanctions prevent Russian companies from importing spare parts and benefiting from the slightest contribution from the West. Iranian scenario: no more new Boeings and Airbuses, no more aircraft parts in circulation.
However, in Russia, the world’s largest country where aircraft is the only means of rapid travel, a shortage of spare parts makes it difficult to maintain and insure the fleet of both state-owned Aeroflot and private companies. The latter have multiplied in fifteen years, growing almost exclusively through the purchase or lease of Boeing and Airbus. Barring a security risk, Western sanctions are tantamount to preventing air travel.