Reduce the Ruble to “Rubble”

The U.S. and its allies are conducting an unprecedented economic war on Russia with no end in sight. It’s uncertain if the broad sanctions will change the Kremlin’s thinking in Ukraine or help precipitate a worldwide economic recession.

Despite President Joe Biden’s pledge to bring the ruble to “rubble,” Russia has weathered an initial shock from a surge of U.S. and other financial penalties and managed to shore up its currency with dramatic measures.

Moscow avoids an economic crisis in the short term; however, the long-term consequences could be irreparable harm to its position among the world’s leading economies.

Meanwhile, Russia sells fossil fuels and other raw goods to keep hard cash flowing into the country; moreover, it eases the pain of a virtual financial blockade and an exodus of foreign firms. Sanctions can take years if at all, to gain traction and frequently fail to achieve the claimed political goal. However, horrific scenes of destruction and serious claims of alleged atrocities prompt political leaders on both sides of the Atlantic to seek methods to tighten the screws on Russi; moreover, it should raise the cost of the Kremlin’s campaign on Ukraine.

From Brussels to Tokyo to Washington, governments have unveiled more punitive measures in recent days; these include restrictions on more Russian banks and naval shipbuilding firms, a U.S. ban on exports to three Russian airlines; these include Aeroflot and sanctions on Russian President Vladimir Putin’s children.

Officials further claim that the Russian central bank’s severe measures to protect the ruble demonstrate that Russia’s financial system is in crisis.

Russia’s Oil Exports

Before the invasion, U.S. and European authorities had ruled out measures to impact Russia’s oil exports, fearing a worldwide economic disruption. But today, Western officials are debating how to rein in Russia’s oil and gas sales, which are the lifeblood of the country’s economy.

The European Union has banned Russian coal imports. European leaders have stated that they intend to reduce Europe’s natural gas imports by two-thirds by the end of the year. However, there is mounting pressure to go much further; Ukraine’s Eastern European neighbors spearhead the charge to cut off the Russian energy supply to Europe.

Europe depends on Russia for approximately 40% of its natural gas and 25% of its oil. A debate is raging across Europe about how quickly countries can find alternatives to Russian energy. Some European government officials argue that quitting Russian natural gas overnight is impossible, given Europe’s reliance on Russian natural gas. Robert Habeck, Germany’s economy and climate minister, has stated that his country will not be able to wean itself from Russian gas until at least 2024. Suppose, a gas embargo on Russia went into place right now. In that case, Germany’s GDP could fall by as much as 5%, wreaking havoc on the country’s people.

The post Reduce the Ruble to “Rubble” appeared first on FinanceBrokerage.