On 21 February 2022, Russian President Vladimir Putin announced that Russia recognizes the independence of two pro-Russian breakaway regions in eastern Ukraine. In response, NATO countries imposed the first round of sanctions on Russia the following day.
On 24 February 2022, Putin announced that he had made the decision to launch a “special military operation” in eastern Ukraine. He stated that he sought the “demilitarization and denazification” of Ukraine.
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Within minutes of Putin’s announcement, explosions were reported in Kyiv, Kharkiv, Odessa, and the Donbas. Ukrainian officials said that Russian troops had landed in Mariupol and Odessa, and had launched cruise and ballistic missiles at airfields, military headquarters, and military depots in Kyiv, Kharkiv, and Dnipro.
The Russian invasion of Ukraine was well on its way, by the net day being 25th February, cruise and ballistic missiles were hitting the Ukrainian capital.
Since the invasion started, the United States, the European Union, NATO members and their allies has imposed a wide series of sanctions on the Russian Federation, its leaders and Billionaires (Oligarchs) that are said to be close to Putin.
The sanctions are designed to cripple the Russian Economy and punish President Putin.
The sanctions has been wide and far reaching, below are the takes the Russian authorities have and are taking to stabilize the domestic economy.
Payment System: Amongst the sanctions imposed on Russian was the cut off of her banks from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) global financial system. This effectively denied these banks from accessing international markets.
In response, the country reverted to the use of Mir, the Russian alternative payment system. Russia now accept electronic transfers via Mir, which work with foreign banks and businesses bypassing Western restrictions.
Mir also provides an alternative to Visa and MasterCard, which have stopped providing international transaction services to Russian clients.
The development and implementation of Mir was spurred by the imposition of international sanctions against Russia in 2014.
Currency & Trade: To deny Russia an ability to trade international, EU and US sanctions targeted her holdings in euros and US dollars.
Sanction lade Russia has resorted to setting up trades mechanisms to enable national currency payments with foreign trade partners.
- Between Russia and China, the ruble-yuan payment mechanism which has been around was handy.
- With India, a ruble-rupee trading scheme had been announced for Russian oil exports to India. India, which until now bought only 3% of its oil imports from Russia, has been eager to boost purchases, as has Serbia.
- Turkey, a NATO member has expressed its willingness to trade in rubles as well.
To support the Russian currency; ruble, Russian businesses that trade abroad were ordered to sell 80% of their foreign currency earnings and convert them to ruble.
The expectation is that it will stabilize the national currency and encourage more investments in Russia instead of moving them abroad.
President Putin urged Russian exporters not to reduce production in response to sanctions, but to supply the domestic market. This will keep prices within the country from surging, including for gasoline, diesel, metals, and other export goods, he said, adding that import substitution projects have never been more important.
To compensate for the increased devaluation of the ruble and inflation risks, help maintain price stability and protect citizens’ savings from depreciation, the Russian Central Ban raised key interest rate n late February from 9.5 to a record 20% per annum.
Nearly half of the country’s forex reserves were frozen and unavailable to support the depreciating ruble as a result of sanctions.
Earlier today, Investogist reported that the Russian rubble has strengthened for the sixth consecutive day against the US dollar.
Food Security: To secure domestic food supplies and stop prices from soaring, Russia temporarily banned grain exports to the countries of the Eurasian Economic Union (EAEU) earlier in the week.
Restrictions cover shipments to post-Soviet states that share a free customs zone with Russia. They include, Armenia, Belarus, Kazakhstan, and Kyrgyzstan.
The Eurasian Economic Union (EAEU) is an economic union of post-Soviet states located in Eastern Europe, Western Asia and Central Asia. The Treaty on the Eurasian Economic Union was signed on 29 May 2014 by the leaders of Belarus, Kazakhstan, and Russia, and came into force on 1 January 2015.
Debt Payment: Two Russian bonds’ US$117 million interest payment were due on Wednesday and these payments has been authorized.
The money is to come from the country’s accounts frozen abroad. It is now up to the US and its allies to approve the transfer.
The Russian government argues that if the US and her allies do not approve the transfer, they will be left with no option but to pay the debt in rubles at the official central bank exchange rate at the time of transfer
Western-based institutions insist that unless the debt is paid in the currency of issue, Russia faces its first default in a century. Moscow insists that the West is trying to engineer “an artificial default” since the country has the money to pay its debts, to which it is being denied access.
Support for Citizens: On Wednesday, President Vladimir Putin ordered new measures to support Russian citizens amid rising prices, unemployment, and supply issues tied to sanctions. The steps will focus on protecting families with children and elderly citizens. He said a decision to increase the minimum wage, salaries in the public sector, and social benefits, including pensions, will be made in a matter of days.
Support for entrepreneurs and businesses: The Russian government has approved a draft plan to support small and medium-sized businesses. Local authorities have been instructed to provide organizations, individual entrepreneurs, and self-employed citizens with support measures, including subsidies and credits.
For foreign businesses, President Putin said on Wednesday that Russia will respect private ownership of foreign firms. He earlier voiced support of another idea – to introduce external management, so foreign firms could be run by partners in Russia. The Ministry of Economy is developing a bill to regulate the procedure.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur