Sanctions on Russia
in War in Ukraine ·
ironpuma29 said:Let's just step back to where we were about a year ago.
At first, the ruble didn't move much against the dollar after the offensive started, but lately, it's dropped quite a bit.
There’s a specific phenomenon here, a reason why Russia managed to stay financially afloat...
back in 2022...
To start, look at those massive reserves—half kept in Russia and half in various banks globally.
First, half got frozen, but there were still trillions upon trillions of rubles sitting right there in Russia. Plus, until the end of last year, they were getting steady payments from their biggest consumer in the European Union for gas and oil deliveries... that money funded the state's needs throughout 2022.
Between those huge reserves, the steady cash flow, limited domestic withdrawals due to banking restrictions, and a pivot toward domestic production instead of imports, they avoided bankruptcy.
And they didn't need the International Monetary Fund to act as a tutor...
which would have forced austerity measures across all government sectors.
The sabotage of the pipelines, specifically I and II, actually helped Russia... (who really did it?
we can guess about the pipeline mining, but we'll probably never know the truth)
- Maybe the Russians squeezed the EU harder...
- Maybe the Americans pressured Germany...
- Maybe Ukrainians (that would force the EU to step up, and eventually, charging for transit through their territory could become quite lucrative)
The first real blow to Russia was the 5th, 6th, or 7th sanction point, which limits gas and oil purchases to lower prices and smaller volumes (ignoring the black market, which doesn't help them much).
So, 2022 wasn't a huge hit to their financial status...
But nothing lasts forever. Reserves are melting away... export revenue is shrinking...
and pivoting to a war economy is expensive.
Consumer goods aren't being produced like they were at the start, and there are fewer products available that don't rely on "Western" components.
On top of that, about 3 million Russians are leaving for various reasons. These are usually highly educated citizens, meaning more lost jobs and less tax revenue for the state treasury.
Then there's the influx of disabled veterans returning from the front... a direct cost to the state that keeps coming as long as they are alive and not producing.
Death benefits add to the burden, too.
Projections for 2023 aren't great...
The piggy bank is emptying, leading to cuts in social spending, pensions, and salaries across this massive economy.
People in Eastern Russia will feel the drop in living standards first... after a few months...
as will the European part of Russia. That area might see a slight dip initially, though they've lived well so far and will just have to tighten their belts.
Even now, the influencers aren't as loud as they were at the beginning... Russians seem to be living better than before the war.
Restaurants are full, malls are full... sure, they're full, but the shopping baskets are lighter.
We're talking about the lower class here, since the middle class barely exists, much like in the US.
Right now, a day of warfare costs Russia about a billion dollars. Even if it were half that...
it's too much for any nation.
What if they actually take all of Ukraine? They won't have the "strength" to rebuild everything they destroyed... maybe they never will, because the import and export sanctions remain in place...
How long? Nobody actually knows...
We need to watch how fast they can build that pipeline to China using their own components. It would bring a massive influx of cash back to Russia, though still less than what they were seeing two years ago.
Russian economists are estimating stability might hold until mid-summer, but then a tsunami hits everything...
And don't expect any protests from the Russian people. They won't happen. The repressive apparatus will be paid even more than before just to keep everyone submissive.
Money does that. The intelligence agencies know the politics are wrong, but loyalty is bought. Plus, the structure of those agencies is such that "every spy is being spied on"...
and if you get caught, you might even get a reward.
The prediction is... Russia will survive regardless of how little they have left, becoming a nation of "happy" people, much like South Korea.
How many years will it take to "wake up" under a totalitarian system like this?
Maybe never.
And what about the mobsters and the ultra-rich?
They won't feel the people's struggles much. They have enough accounts scattered across global banks... you don't put all your eggs in one basket.
Some are in Dubai right now... spending money like there's no tomorrow.
There are others on the coast of Florida... yacht racing by young Russians who fled a year ago—the oligarchs' kids, obviously.
It looks like this whole war was planned for years. No one doubted that Russia was hoarding massive reserves in gold.
But they miscalculated with the democratic West. Half their funds are frozen... otherwise, they wouldn't be struggling this hard to stay afloat.
From one perspective, we'll see a major market crash in Russia toward the end of the year. One possible outcome could be a withdrawal from Ukraine... paying out war damages and returning whatever is left in the treasury to the Russians, since it belongs to them after all.
But the sanctions remain. Isolation continues... until things change.
At the same time, this is a harsh lesson regarding potential terrorism of this kind. It doesn't matter if it's Russians, Americans, the Chinese... or any nuclear power.
If this isn't the rule moving forward, we're just destined to keep repeating the same mistakes.
The Ruble isn't really a market currency anymore—not since the government stepped in and killed off any actual competition. They've put limits on citizens trying to get their hands on foreign cash (like USD or EUR), and exporters are forced to hand over 80% of their foreign currency earnings straight to the state.
At the end of the day, we can only guess what the exchange rate would actually look like if the government hadn't meddled. My bet? The Ruble would be crashing way past 200 per dollar.