Foreign Secretary Liz Truss has said today that the West must hit the Russian economy even harder with sanctions. The West has frozen more than $35
Foreign Secretary Liz Truss has said today that the West must hit the Russian economy even harder with sanctions. The West has frozen more than $350billion (£266billion) of Russia’s $604billion (£461billion) foreign currency reserves. Ms Truss said while on a visit to Poland: “The only way to end this war is for Vladimir Putin to lose in Ukraine. “Although Russian troops have been defeated in their initial assault on Kyiv, there has been no change in their intent and ambition.
“We are seeing Putin’s forces set their sights on the east and south of Ukraine, with the same reckless disregard for civilian lives and their nationhood.”
The UK and other Western countries are hoping that sanctions will force Russia into backing down in Ukraine.
Maximillian Hess, a Central Asia fellow in the Eurasia program at the nonprofit Foreign Policy Research Institute, told CNBC last month that the Russian ruble could collapse entirely due to the measures.
He said: “The problem you have now is we’re basically in a spiral where we don’t know how many unrealised losses there are left to realise.
“So we still can’t rule out that the ruble could collapse. Collapse.”
Christopher Smart, chief global strategist and head of the Barings Investment Institute, explained how the sanctions will impact ordinary Russians.
He said: “There was an emerging middle class [in Russia] that is now going to be knocked back.
“It’s going to be isolated. It’s going to have a currency that doesn’t really hold any value outside the country.”
Since the sanctions were implemented, everyday transactions have been severely impacted in Russia.
Buying a metro ticket in Moscow with Apple Pay, which is prohibited by US sanctions, is now not possible.
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Neither is exchanging rubles for dollars at a bank, which is prohibited by the Kremlin.
Since the start of the invasion of Ukraine, more than 300 of the world’s most iconic brands have voluntarily halted or dialled back their business.
Among them are global banks like Goldman Sachs, all Big Four accounting firms and consumer brands like Starbucks and Ford.
Mr Hess added: “A lot of these companies pulling out of Russia are not doing it for their reputational reasons.
“It’s because they know they’re not going to be able to process payments and move money in and out of the country for the foreseeable future,”
The European Bank for Reconstruction and Development (EBRD) estimated recently that Russia and Ukraine’s economies will shrink by 10 percent and 20 percent respectively in 2022.
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The London-based lender warned on Thursday that the war had triggered “the greatest supply shock since at least the early 1970s” and would have a severe effect on economies far beyond the immediate area of the conflict.
The EBRD added: “Sanctions on Russia are expected to remain for the foreseeable future, condemning the Russian economy to stagnation in 2023, with negative spillovers for a number of neighbouring countries in eastern Europe, the Caucasus and Central Asia.
“With so much uncertainty, the bank intends to produce a further forecast in the next couple of months, taking into account further developments.”