Economic sanctions cripple Russian economy as ruble plunges, interest

Penalties levied by the U.S. and foreign governments have crippled Russia’s economy in the last 24 hours by freezing about half of the nation’s central bank assets, U.S. officials say.

The economic sanctions imposed by the U.S. and its allies have sent Russians scrambling to spend their rubles while withdrawing dollars, euros and other currencies from banks as the value of their local cash plunged.

The U.S. penalties come in addition a growing effort to bar Russian banks from the SWIFT global payments system, the financial-messaging platform that links the globe’s biggest banks. Preventing Russian banks from using the system quashes cross-border financing critical to a modern economy, including trade, foreign investments and central banking supports, according U.S. Treasury Department spokeswoman Lily Adams.

“The range of outcomes is wide and the ripple effects from the severe sanctions on Russia will have further consequences for the global economy, markets, and inflation,” wrote Keith Lerner, chief markets strategist at Truist Advisory Services. “The repercussions will be long lasting as the world rethinks the relationship they have with Russia.”

But while markets sort out the high-level impact of sanctions, everyday Russians are already seeing the impact of the penalties. Many have clamored to ATMs to wait in lines dozens deep in the hopes of withdrawing cash before they’re unable to exchange currency for groceries and other necessities.

“Since Thursday, everyone has been running from ATM to ATM to get cash. Some are lucky, others not so much,” St Petersburg resident, Pyotr, who declined to give his last name, told Reuters.

Moscow’s department of public transport warned city residents over the weekend that they could run into problems paying for fare using Apple Pay, Google Pay and Samsung Pay because VTB Bank, one of the Russian lenders targeted by global sanctions, handles payments in the metropolis.

By blocking the Russian government’s access to its overseas bank accounts, the U.S. and its partners effectively close off Moscow’s access to dollars, euros and yen. That ultimately restricts any Russian citizen’s ability to purchase any goods not sold in rubles.

“The Russian ruble has depreciated massively,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “Expect much higher inflation rates: The ruble depreciating meaning that people’s savings are going to be wiped out.”

Part of the problem is Russia’s historic reliance on currencies beyond the ruble.

Even in calmer times, the ruble was known for volatility. Average Russians and oligarchs alike needed a way to preserve the value of their wealth that wouldn’t whipsaw on a day-to-day basis in an economy linked closely to the fate of the health of the energy sector.

To help satisfy…