Russian economy during sanctions

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The risk of a black market, blocking of payment cards and rising prices: the authorities and specialists are trying to counteract the first consequences in the real economy of the tough sanctions imposed on Russia due to its invasion from the territory of Ukraine.

There are no signs of panic on the streets of Moscow. Restaurants are open and busy this long weekend until March 8, International Women’s Day.

However, from a professional point of view, this is the beginning of unrest associated with the consequences of numerous Western sanctions, as well as the withdrawal of international giants from the Russian market. In a country that experienced acute shortages at the end of the USSR, hyperinflation and numerous economic crises, food is the main concern.

Large retail groups are already seeing an increase in purchases of staples, according to the Department of Commerce, which is concerned about the possible emergence of a black market.

>> View: “Sanctions against Russia: how will they affect the Russian economy?”

Bulk purchases and price increases

“The largest federal and regional supermarket chains have decided to minimize the risk of ‘dealers’ buying basic products,” the ministry said in a statement on Saturday. “In a number of regions (…) these products were suddenly bought up in bulk, up to several tons, more than necessary for personal use, and with the aim of reselling them,” he said, he continued.

Therefore, several supermarket chains have decided to impose limits on the volumes sold to each person.

To curb inflation, Russia may decide to cap prices on about twenty basic food items: meat, fish, milk, flour, sugar, butter, cereals, butter, rice, bread, cabbage, carrots, onions and potatoes. So far, the government has not taken any steps in this direction.

According to professionals, price growth is already a reality, although general statistics have not yet been published. Thus, in the Kommersant newspaper, the leaders of catering groups reported a significant increase in prices from their suppliers, even for local products. A meeting with the Moscow mayor’s office is scheduled for Wednesday, according to the website of the Russian newspaper.

In another sign of trouble looming, Russia’s central bank has ordered the country’s banks not to release their financial statements as of February. We are talking about “limiting the risks of credit institutions due to sanctions.”

Because any question about the solvency of banks claiming to have all the liquidity they need to meet the needs of their clients could create a buzz on the shelves that the authorities and banks are trying to avoid, especially since the ruble has collapsed against the dollar and the euro.

A buyer gives ruble banknotes and coins to a seller at a market in Omsk, Russia, February 18, 2022.
A buyer gives ruble banknotes and coins to a seller at a market in Omsk, Russia, February 18, 2022. © Alexey Malgavko, Reuters

Russians abroad urged to withdraw cash

These same banks were also quick to reassure their users about the announced termination of Visa and Mastercard bank cards. The two American giants said on Saturday that cards issued in Russia will no longer work abroad, and vice versa.

As of Sunday morning, major Russian banking groups announced that they were working on issuing UnionPay cards, the system’s Chinese counterpart, as Russia’s Mir only operates in a few countries. “With this card, you can make payments in 180 countries around the world,” they wanted to reassure the Alfa-Bank group, according to which Russian Visa and Mastercard will stop working outside of Russia at midnight Thursday (21:00 Moscow time Wednesday).

Thus, Russians outside the country have a real problem. “If you are abroad, we recommend withdrawing cash,” notes Alfa-Bank. “And if you’re in Russia, you still have a few days to decide which movie site subscriptions and other foreign online services you want to renew,” the group continues.

The issue is all the more relevant as many entertainment giants have said they no longer want to release their films in Russia. In his address on Saturday, Russian President Vladimir Putin said Western sanctions were “akin to a declaration of war.” But he added that “thank God, it hasn’t come to that yet.”

With AFP

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