How Is Russia Trying To Protect Its Financial System After Sanctions? | Explained

Sanctions on Russia: President Vladimir Putin also signed an order to ban people from withdrawing more than $10,000 of foreign currency from the banks. MOEX has suspended trading in Russia.

New Delhi: The impact of western sanctions on Russia’s economy has already started to get visible. With the Russian Ruble hitting an all-time low value, the Bank of Russia has a big problem to solve. The war expenditure is coming as an additional burden for the country.

A latest report by the Wall Street Journal said that the sanctions imposed by countries on Russia have cut the banks’ access to reserves and the effects are likely to get more severe as the country is excluded from the SWIFT messaging system soon.

Numerous companies including oil giants like Shell and BP have decided to move away from Russia. The report also said that the sanctions will render most of the Russian reserves useless. However, diplomats still believe that the sanctions will ‘not force us [Russia] to change its position’.

MOEX Shut

To contain the heavy outflow of money from the economy, the Russian central bank has suspended Moscow Stock Exchange (MOEX). According to WSJ, the government is stopping foreign investors from fleeing the markets in Russia with this.

Also, Russian residents have been banned from giving loans to foreigners. Russian exporters have been asked to sell 80 per cent of their foreign currency gains. Long queues could be seen outside ATMs as people rushed to withdraw cash in a ‘frantic rush’, the report added.

Government To Buy Shares Of Companies

The report also quoted Russian Prime Minister Mikhail Mishustin as saying that the government will spend $9 billion in rubles to buy shares of the Russian companies. The residents have also been banned from sending money to bank accounts in other countries.

Further, the Bank of Russia has also announced a steep hike in the rate of interest on bank deposits from 9.5 per cent to 20 per cent in a bid to contain the damage.

President Vladimir Putin also signed an order to ban people from withdrawing more than $10,000 of foreign currency from the banks. Further, to get loans, the residents will have to take permission from the Russian government if any state which takes ‘hostile actions’ against Russia is included in the deal. The ruble has fallen to all-time lows due to the widespread withdrawal of funds from the financial systems of the country.

With a ban from the SWIFT mechanism, which seems very close, the financial troubles of the country are set to increase. There are chances that many traders will simply stop trading with the country.