Putin’s invasion of Ukraine will knock the Russian economy back by 30

WASHINGTON — Vladimir Putin’s unprovoked war on Ukraine and the resulting global response will set Russia’s economy back by at least 30 years — close to old Soviet Union times — and lower its standard of living for at least the next five years, according to economists, investors and diplomats.

The sweeping Western sanctions are designed to inflict maximum pain on Russia’s economy by expelling it from global markets and freezing assets around the world. From the moment they took effect three weeks ago, the sanctions have opened a new chapter in the country’s economic history.

Russia’s financial system and currency are collapsing on multiple fronts, forcing the Kremlin to close the stock market and artificially prop up the ruble inside its borders.

Practically overnight, the country’s 40-year effort to build a prosperous market-based economy that began under former leader Mikhail Gorbachev has failed, one more casualty in President Putin’s brutal invasion of Ukraine.

Landmark economic and social reforms originating in the 1980s gave the Soviet Union its first taste of American products. But decades of work to integrate Russia’s economy into Europe ended in the past few weeks, as blue chip companies quit the Russian market and the United States and European Union moved to wind down trade and tourism with Russia.

Two sanctions in particular have wreaked havoc on the country’s economy. The first one expelled Russia’s largest banks from the global payments network known as SWIFT, making it very difficult for them to process overseas transactions.

The second measure froze hundreds of billions of Euros held in reserve by Russia’s Central Bank. Without reserve funds to shore up the Russian ruble, there is very little the Kremlin can do to prevent its value from collapsing.

Meanwhile, the United States and Britain are also halting imports of Russian oil and gas, the U.S. has imposed export controls on high tech equipment and luxury goods, and a growing list of countries have barred Russian ships from their ports.

“The problem you have now is we’re basically in a spiral where we don’t know how many unrealized losses there are left to realize,” said Maximillian Hess, a Central Asia fellow in the Eurasia program at the nonprofit Foreign Policy Research Institute.

“So we still can’t rule out that the ruble could collapse, collapse.” he added.

Already, the snowballing economic crisis in Russia threatens to wipe out decades of economic gains made by ordinary Russians. 

In the past month, the ruble has lost 40% of its value against the dollar, rendering the currency effectively…