No Russian Economy, No Movement

Russia now bears the brunt of a crumbling economy as the over 141 countries in the United Nations impose crippling sanctions not only on its banking system but on various other systems and wealthy citizens.

By positioning itself as an aggressor whose tyrannical expansionism and fervent, unjustified imperialism that impinges on the sanctity of a neighboring, democratic country, Russia has now fallen prey to the following harsh economic measures:

  • A 25-40% reduction in the value of the ruble, from ca. 60 rubles/USD to 104.54/USD
  • Doubled interest rates for Russia’s central bank
  • Abrupt closures in the Russian Stock Exchange
  • Citizens’ desperate needs for access to money
  • The barring of several Russian banks from SWIFT, a global exchange system for international transactions
  • Paralysis of assets of oligarchs both unaffiliated – and recently, affiliated – with Vladimir Putin and his agenda
  • Paralysis of 1/2 of Russian reserve money, nullifying part of Putin’s safety net of $630 billion

All of these measures affect millions of ordinary Russian citizens, many of who staunchly oppose the war. Home purchases are falling through; there is a drastic reduction in the basic ability for people to eat, spend, and earn decently; and many other measures are directly reducing people’s basic needs. This may indeed prompt a revolt against Putin and his madness. The problem is that in his autocratic seat, he would stifle such dissent immediately. Every day, benevolent Russian citizens are in a huge catch-22.

These stringent sanctions that so many nations across the globe are imposing on Russia’s economy also address another key factor: natural resources. Russia’s position as the top exporter of oil in the world has fallen as more countries are refusing to purchase its oil and gas, even before these resources have been the direct target of sanctions.

Russia’s banks are now failing. The Russian Central Bank now has no choice but to turn to other currencies as theirs has dropped so much in value. This creates a possibility for increased value in such currencies’ countries, further leveraging them as more prominent economic powers with more control of Russia’s economy. Another company that UN countries have targeted is Sberbank, Russia’s biggest lender. The European Central Bank has now predicted that Sberbank is likely to completely go under as it had less and less ability for liquidation. Two other major players in Russia’s economy, Gazprom (large gas company) and internet provider Yandex can no longer trade.

This is war of the most egregious kind. Because Ukraine is not a NATO ally, no country can violate the terms of the treaty to only send troops to those within its ranks. Nevertheless, the world is coming together in solidarity to provide A) as much resources, economic, humanitarian, and militaristic as it can to Ukraine, and B) for the purposes of this article, defeat Putin’s authoritarian agenda by preventing Russia’s economic ability to function as a country. These countries recognize – rightly so – that an economy is one of the central factors that gives a nation its power. Once that factor is taken away, Russia may not be able to move. That is precisely what the world is seeing now.

Oil Companies Moving Out of Russia

As public pressure mounts, businesses in all industries have started to sever ties with Russia following their invasion of Ukraine. Major oil companies seem to have begun following suit. With more and more companies pulling out of the nation, it’s likely to cause a cascading effect on the nation’s economy.

BP, First of Many?

Following Russia’s attacks in Ukraine, BP, the UK-based oil company, became one of the first in its industry to pull out of the oil-rich nation. Initially, when Russian troops first began amassing at the border between the two nations, BP CEO Bernard Looney stated that there were no plans to reduce or eliminate their holdings in the state-owned oil company Rosneft. However, as Russian troops began to march into Ukraine, BP soon set into motion its plan to exit its investments in the nation. Both the CEO, Bernard Looney, and the company’s former CEO, Bob Dudley, stepped down from their positions on Rosneft’s board of directors. In its announcement, it attributes its move both to the Russian attacks on Ukraine and to their continued involvement in the nation no longer being in alignment with the long-term interests of the company. This move also seems to be an incredibly costly one for BP, as its partnership with the nation was estimated to produce a potential $25 billion for the company.

Shell Oil Joining BP

Shell, another UK-based oil company, followed suit shortly after BP’s announcement. In a public statement, it announced plans to exit from its investment in the Sakhalin-II project an oil and natural gas development located on the Sakhalin Islands. In his statement, CEO Ben van Beurden expressed shock at Russia’s attack on Ukraine, denouncing their military aggression. Shell will also be exiting several development projects located in Siberia. Included in the announcement, Shell also said it would likely incur financial losses from its exit of more than $3 billion in assets in the region. This comes at a time when the world seems united in an effort to isolate the Russian economy from the rest of the world’s trade and banking systems.

Russia’s Economy Suffers as Sanctions Pour In

While Russia’s oil industry may be suffering, it’s certainly not the only part of Russia’s economy under heavy scrutiny. During the first wave of sanctions levied against the nation, Russia’s stock market was paused, likely in an attempt to stymy the bleeding as the markets began to crash. While the market’s pause is still ongoing, it’s already surpassed all others as the longest pause in the market’s history. Russian oligarchs are feeling the pain as well, as the sanctions have begun hitting them exceptionally hard. Governments around the world have also begun shutting out the oligarchs from their personal bank accounts and seizing their property, most notably with western nations impounding their superyachts. Western nations also seem to be moving forward with isolating Russian banks from the SWIFT system, or The Society for Worldwide Interbank Financial Telecommunication, the main platform banks use to trade back and forth over international lines. A full-scale block-out would be unprecedented, with sanctions only having ever been applied against individual banks, generally for ties to terrorist groups in the middle-east.