Russia’s Putin Says Western Sanctions Have Failed | Russo-Ukrainian War

Russian President Vladimir Putin said the barrage of Western sanctions imposed on Russia for its invasion of neighboring Ukraine had failed.

Putin said on Monday that the West “expects a rapid upheaval in the economic and financial situation, causing panic in the markets, the collapse of the banking system and shortages in shops.”

He added that “the economic blitz strategy failed” and instead led to a “deterioration of the economy in the West”.

The Russian leader spoke in a televised address during a video call with top economic officials.

Western countries have imposed unprecedented sanctions on Russia’s trading and financial system since it sent troops to Ukraine on February 24 in what it calls a “special military operation”.

Putin noted that “Russia has withstood unprecedented pressure”, arguing that the ruble has strengthened and the country recorded a historically high trade surplus of $58 billion in the first quarter of the year.

Instead, he argued that the sanctions backfired on the United States and its European allies, accelerating inflation and driving down living standards.

Putin acknowledged a sharp rise in consumer prices in Russia, saying they rose 17.5% in April on an annual basis and ordering the government to index wages and other payments to mitigate the impact of the crisis. income inflation.

Putin said Russia should use its budget to support the economy and liquidity amid shrinking lending activity, even though central bank rate cuts will make lending cheaper.

He also said that Russia should speed up the process of using national currencies in foreign trade under the new conditions.

The World Bank said it expects the economy to contract by more than 11% this year.

Need to “adapt”

The Central Bank of the Russian Federation more than doubled its key interest rate to 20% on February 28 during the first wave of sanctions, before lowering it to 17% on April 8. He should lower it again at the next meeting of the board of directors. April 29.

“We must have the possibility to lower the key rate more quickly,” Central Bank Governor Elvira Nabiullina said on Monday. “We must create the conditions to increase the availability of credit for the economy.”

Although inflation in Russia has reached its highest level since the beginning of 2002, the Central Bank “will in no way try to bring it down – that would prevent companies from adapting”, Nabiullina said.

The current spike in inflation is caused by low supply, not high demand, and the Central Bank aims to bring it to its 4% target in 2024 as the economy adjusts to Western sanctions, a she said, speaking to the lower house of parliament.

“The period during which the economy can live on the reserves is over. And already in the second and third quarters, we will enter a period of structural transformation and the search for new business models,” said Nabiullina.

She also said that Moscow plans to take legal action against the blocking of gold, forex and assets belonging to Russian residents, while adding that such a step should be carefully considered.

Foreign sanctions froze about $300 billion of the roughly $640 billion Russia had in its gold and currency reserves.

UKRAINE_RUSSIA_INVASION_ECONOMY_PRICES OF GOLD

The sanctions had mainly affected the financial market, “but now they will start to affect the economy more and more,” Nabiullina said.

“The main issues will relate to restrictions on imports and foreign trade logistics, and in the future to restrictions on exports.”

She said Russian companies would have to adapt.

“Russian manufacturers will have to look for new partners, logistics or switch to the production of products from previous generations,” she said.

Exporters will have to look for new partners and logistical arrangements and “all of that will take time,” Nabiullina said.

She said the Central Bank is considering making the sale of foreign exchange products by exporters more flexible.

In February, Russia ordered exporting companies, including some of the world’s biggest energy producers, from Gazprom to Rosneft, to sell 80% of their foreign exchange earnings on the market, because the Central Bank’s ability to intervene in the foreign exchange markets was limited.

The bank could relax mandatory sales timing and volume conditions, Nabiullina said.

Nabiullina’s comments “are directly or indirectly aimed at preventing the ruble from strengthening,” Promsvyazbank analysts said.

But the Russian currency extended its gains on Monday, firming to 81.4025 per euro, a level last seen on April 8, helped by upcoming tax payments that will prompt export-focused companies to convert. exchange their income into rubles to meet their debts.

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