Western economic sanctions seem to have achieved their goal: Monday, February 28, Russia was in a serious financial crisis. The ruble, which was already down 60% since 2014, is unscrewing: in the morning, it had lost more than 20% against the dollar. Forced to react, the Russian central bank doubled its interest rate, from 9.5% to 20%, dealing a severe blow to the Russian economy.
Across the country, locals line up in front of ATMs, looking for currency. Soaring inflation and a sudden impoverishment of Russia seem inevitable. The beginning of a bank panic is looming: the European subsidiary of Sberbank, the first Russian bank, owned by the State, is bankrupt, after the massive withdrawal of deposits by its customers.
- How the West coerced the Russian central bank?
Westerners announced, Saturday, February 26, unprecedented economic sanctions against Russia, in retaliation for the invasion of Ukraine. The United States, the European Commission, France, Germany, Italy, the United Kingdom and Canada have, in particular, decided to freeze the reserves of the Russian central bank, affecting its “war chest”, in the words of Ursula von der Leyen, the President of the European Commission. The Russian central bank has 630 billion dollars (562.3 billion euros), according to its own figures, published in January. Enough to “cover twenty-one months of imports” of Russia, she said in January.
Of this sum, a part (167 billion dollars) is in rubles, and is worth much less today. Some of it is in gold ($132 billion), in vaults in Russia, and is unaffected by sanctions. But part (95 billion dollars) is deposited with the major Western central banks, in particular the American Federal Reserve (Fed), or the Banque de France, which has approximately 3 billion to 4 billion euros in deposits. This money is now frozen.
Concretely, the Russian monetary institution no longer has the same firepower to defend the ruble on the financial markets. In the event of a currency crisis, it can normally buy rubles to stem the devaluation. It is now limited in its action.
- How are the Russian authorities reacting?
The central bank of Russia had announced, as early as Thursday, February 24, when the first Western sanctions had been taken, that it was intervening in the markets to ensure the financial stability of the country.
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