Western 'economic blitzkrieg' has failed - Putin

RT
Mon, 18 Apr 2022 15:51 UTC

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Russian President Vladimir Putin

Western nations have failed in their attempts to destabilize the Russian economy with sanctions, Russian President Vladimir Putin said at a government meeting on economic issues on Monday.

"The situation is stabilizing, the ruble exchange rate has returned to the levels of the first half of February and is supported by a strong balance of payments... Foreign cash is returning to the country's banking system, and the volume of deposits by citizens is growing. As for the consumer market, after a short rush to buy a number of goods... retail demand has returned to normal. Commodity stocks in retail chains are recovering."

Overall, he noted that sanctions have failed to break the country's economy:

"The goal [of sanctions] was to quickly undermine the financial and economic situation in our country, provoke a panic in the markets, trigger a collapse of the banking system and a large-scale shortage of goods in stores. But this policy has failed - the economic blitzkrieg has run aground."

Meanwhile, according to Putin, the sanctions have backfired on the countries that introduced them, namely the US and the EU, leading to a spike in inflation and unemployment in these countries, a worsening of the standard of living of its citizens, and devaluation of their savings.

Putin acknowledged that Russians have also felt the impact of the sanctions on their family budgets, as prices in the country over the past month and a half have jumped by 9.4%, and annual inflation surged to 17.5% as of April 8. The president noted, however, that prices are now showing signs of stabilizing, and he vowed to introduce further measures to help the population.

"We need to support our citizens, help them cope with the inflationary wave. In this regard, let me remind you that we made a decision to raise all social payments, pensions and salaries of residents employed in the public sector."

According to Putin, restrictions placed on the country have negatively affected businesses, complicating the logistics of export and import deliveries and creating obstacles for making payments. The president noted that in order to improve the situation, Russia needs to speed up the transition to national currencies in foreign trade settlements.

"It is necessary to provide maximum assistance to entrepreneurs in solving these problems, including speeding up the transition of foreign trade to settlements in rubles and in the national currencies of countries that are reliable business partners."

According to the president, the key task for the government at the moment is the long-term stability of the financial system at both the federal and regional levels.

Russia has faced unprecedented sanctions from the US and its allies in retaliation to Moscow's military operation in Ukraine. In less than two months, Russia has become the most sanctioned country in the world. Moscow says it is now subject to more than 6,000 different targeted restrictions. That is more than Iran, Venezuela, Myanmar, and Cuba combined.

Comment: While the economic situation in Russia could have been much worse, there are positive changes in the works:

The Russian economy is entering a period of major adjustments to cope with the impact of the sanctions placed on Moscow by the US and its allies, Elvira Nabiullina, the head of the country's central bank, said speaking to the State Duma on Monday.

"Our economy is entering a difficult period of structural changes associated with sanctions. As I said, sanctions primarily affected the financial market, but now they will begin to increasingly affect the economy."

Russia still has reserves to support the economy, but they won't be able to sustain it much longer, especially after roughly half of them were frozen abroad by sanctions. She said:

"The period when the economy can live on reserves is over. And already in the second - beginning of the third quarter, we will enter a period of structural transformation and the search for new business models."

While Russia still has the opportunity to use about half of its reserves (around $300 billion), these consist largely of gold, yuan, and IMF drawing rights, which is of no help in managing the situation with the currency on the domestic market.

The official praised the measures that Russia has already introduced to support the economy amid sanctions, including switching to its own financial messaging system, SPFS, after the country was cut off from SWIFT in March.

"When the threat of disconnection from SWIFT first appeared in 2014, we developed the SPFS, which operates according to the SWIFT standards. Foreign participants interested in working with Russian partners can join and are already joining it. At the moment, 52 foreign organizations from 12 countries have joined the SPFS."

Nabiullina stressed that sanctions cut off most of the Russian economy from settlements in reserve currencies, the US dollar and the euro, which made it crucial for Russia and partners to develop payments in national currencies.

"We are not starting from scratch here either. We have already launched and developed such bilateral projects with a number of countries. Now we are negotiating with partners in different countries in order to normalize the situation with payments as soon as possible."

The 20% rate introduced last month resulted in a rapid deceleration of the inflation jump that occurred in March, which enabled the regulator to reduce the rate to 17%.

"We will not try to lower [inflation] by drastic measures. This would prevent businesses from adapting... and we definitely need to cope with a period of adaptation."