The Russian currency is at its lowest level in two years. The oligarchs’ financial dissatisfaction is growing as interest rates and inflation are also at high levels.
- For the Russian population, it does not look particularly bright if you look ahead with the Russian economy, says Torbjörn Becker at the Stockholm School of Economics.
When the Russian currency, the ruble, fell by seven per cent on Thursday, emergency measures were activated and the central bank halted all purchases of foreign currency for the rest of the year, hoping to stabilize the ruble and stem rising inflation.
The fall of the Russian ruble can mainly be linked to three factors: falling oil prices, new sanctions from the US and national dissatisfaction with the actions of the central bank.
Spending money on warfare
Several oligarchs are beginning to lose confidence in the actions of the Russian central bank. When the bank this week raised the interest rate to 21 percent to try to counter inflation of over eight percent, “a serious discussion” was required, according to the chairman of the steel company Severstal.
- Russia is on an economic downward slope as they spend all this money on a rather hopeless war against Ukraine. It does not create the conditions for investments or other development that creates long-term growth, says Torbjörn Becker, director of the Eastern Economic Institute (SITE) at the Stockholm School of Economics.
Ordinary people get worse
Russia spends a very large part of its state budget on the war in Ukraine. People who are part of the war industry have received higher wages, but for those who are outside, things have gotten worse financially.
- Their opportunities to travel or consume goods from the West disappear. It is also the case that when the ruble weakens, many may become worried about what their future savings will look like if they have saved through a ruble account in a Russian bank, says Becker.
However, he does not foresee an immediate economic crash, but the conditions are being created that could in the long run affect Russian warfare.
- If you get stronger financial anxiety and people start questioning the central bank’s independence or the financial system, then you can get a bigger financial crisis. That in turn could have affected the ability to wage war against Ukraine, says Torbjörn Becker.
Source: svt
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