Russia ‘terrified’ sanctions will cause economic collapse: ‘Having an effect’

Putin has his 'back against the wall' says Lord Robathan

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The country is facing its gravest economic crisis in more than 20 years as western sanctions in response to Moscow’s invasion of Ukraine begin to take hold. Goldman Sachs has projected the Russian economy to shrink by 10 percent this year, and inflation was tipped to skyrocket to 20 percent. Restrictions on financial activities and the withdrawal of a slew of western companies, including Apple, McDonalds and Dell, will also hit Russia’s economic growth, according to the Wall Street bank.

Goldman Sachs economist Clemens Grafe also claimed last week that western sanctions on Russia’s trade will cause exports to drop 10 percent and imports to tumble 20 percent. 

The sanctions imposed on Russia have already taken a toll on the Russian economy.

The Russian ruble is down by a quarter since the start of the invasion while Central Bank governor Elvira Nabiullina said on Friday the bank would maintain its key interest rate at 20 percent and purchase government bonds to limit volatility.

According to the BBC’s former Moscow correspondent Mr Connolly, the sanctions are beginning to “have an effect” and the country is “terrified” of economic collapse.

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Mr Connolly told Express.co.uk: “[Sanctions] are starting to have an effect.

“You’re going to see rampant inflation in Russia and there will be some shortages in shops.

“There were already shortages of goods from the European Union because there was a mutual exchange of sanctions after the invasion of Crimea.

“One of the things that Putin was trying to do was develop Russia’s ability to make its own cheeses.

“That sounds fairly banal, but he was trying to develop a capacity to say to the Russian people ‘look we don’t need these foreign foods coming in because we can do much more ourselves.’

“So there has been an effort to ‘sanction-proof’ the Russian economy.

“But the closure of the Russian stock market for an entire week tells you that the Russian authorities are terrified that these sanctions will cause a massive drop in the value of the ruble ‒ that’s already begun to happen.”

On Monday, the Moscow Stock Exchange partially reopened after nearly a month-long suspension.

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The exchange, which closed just hours after Russian President Vladimir Putin launched his invasion of Ukraine on February 24, will only trade bonds issued by the Russian government as part of a phased re-opening of the market.

Mr Connolly continued: “Russia won’t be able to pay its debts on the world stage.

“It’s going to start trying to pay its foreign debt in rubles instead of dollars and euros. That is going to look like a default.

“All of this will eventually feed through into higher and higher prices [and] fewer and fewer choices for ordinary Russians.”

Moscow has been telling its citizens not to worry about a lack of food and to avoid panic-buying staples like sugar and buckwheat.

Yet some Russian supermarkets have begun rationing basic goods, such as salt and cooking oil.

Meanwhile, Reuters reported today that in the Russian town of Pokrov, sugar has sold out in a number of stores. 

Four grocery stores belonging to two major supermarket chains reportedly had no sugar on sale. 

According to the publication, one resident, Svetlana, purchased 10kg of sugar in the nearby city of Vladimir to make sure she could preserve the berries she planned to collect in the summer.

She said: “Maybe the price of sugar won’t go up, but people are afraid.

“That’s probably what everyone is buying some.”

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