Russia is facing severe economic repercussions due to its invasion of Ukraine, with sanctions and financial restrictions imposed by major global players including the EU and the United States. These measures, along with being cut off from the EU’s SWIFT banking system and US financial institutions, have caused a dramatic collapse in the value of the Russian ruble.
Recently, the ruble has experienced a 30% decrease in value against the US dollar, resulting in it being worth less than one cent. To mitigate short-term costs, Russia has raised its interest rates significantly, but this action is expected to lead to substantial inflation in the near future.
David Feldman, an economics professor at William & Mary in Virginia, commented to CBS, “It’s going to ripple through their economy really fast. Anything that is imported will see a surge in local prices due to currency devaluation. Heavy subsidization may be the only solution to stop it.”
Analysts from TD Securities observed, “The ruble has entered a downward spiral, and most Russian bonds, regardless of direct sanctions, have seen prices plummet, indicating a high risk of default.”
Russian ruble is now worth less than 1 U.S. cent after SWIFT bank sanctionshttps://t.co/y8JqCvL3Kf
— TIME (@TIME) March 1, 2022
Peter Boockvar, chief investment officer at Bleakley Advisory Group, raised concerns about the uncertainty surrounding Russia’s ability to access its foreign exchange reserves and honor sovereign bond repayments. He mentioned, “With the ruble plummeting by 19% today to a historic low against the dollar, holders of dollar-denominated Russian bonds may face challenges recovering their investments.”
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