Russian economy is collapsing after western sanctions

The Russian Economy is currently experiencing, a full meltdown, since pretty much every western brand or company is pulling out, the banks are cut of from the financial system, the Ruble is on a crash collision, International airspace is almost fully closed off, imports and exports have been cancelled and a massive brain drain is underway, where young Russian professionals, with a bright future, are leaving the country in masses. This is not even the full story of what’s happening, in Russia right now and already it sounds like a terrible nightmare.

In fact, many experts agree, that Russia is looking at a massive recession, one that could be even worse than the 1990s, which his is based on the fact, that serious recession effects, that normally take months to develop, are developing in a matter of days and the worst is still to come. This whole disaster started with the induced bank run, explained in this short article.

Where major banks were cut off from the international banking system, which led to Visa, MasterCard, and PayPal, completely cutting ties with Russia. This step, combined with the closing of international airspace, made it pretty much impossible, to do business in the country, since when you cut Russia off, from international airspace, they can no longer get supplies in and out of the country, which prevents all hardware business from operating in Russia and when you also cut off, the entire financial system, this prevents all service sector businesses from operating, basically shutting down the entire country.

some brands leaving russia

Now the truly extreme effects, are still underway, think of it as a massive bomb going off, of which the shock wave still has to hit. Because, when major companies like IKEA, H&M and Zara close their stores and leave, it leads to mass unemployment and millions lose their job, since it’s not just tens of thousands of people, that work in those stores, you also have to consider all the people that work in the overall supply chain. On top of that, all these people, that are now unemployed, will simply stop buying products, other than the bare essentials and this means means that local companies, that were still able to operate under sanctions, will see their customers base shrink as well.

In addition to this, over 65% of Russian households, have no savings at all and this was already the case, before the pandemic hit, so you can imagine that this situation has not gotten any better. Low income household in Russia, have around, half a months income in savings, while medium-income families have about 2 to 3 months savings. This means that in about 1 to 2 months, you will have an absolute breakdown of the Russian economy, and the only way for the government to stop the bleeding, is to print more money.

The value of the Russian ruble against the US dollar. There has been no price change due to the fact that the ruble forex markets have been closed for the last few days. XE

However that is currently impossible. the currency of Russia has been falling like crazy and printing more money, is absolutely the last thing, the central bank wants to do. Just a week ago the Ruble was down 30% and at the time of writing this article it’s already down 44%. So just imagine the people, that have only half a months savings, in their bank account seeing almost half of it evaporating, this is the current state of the Russian economy and Putin is showing no signs of backing down in Ukraine, which means, that these financial sanctions are not going to get lifted any time soon.

russian gas dependency by countries from statistia

As a matter of fact, the US is already preparing energy sanctions, together with the UK, something is was hesitant to implement, since this also raises fuel prices state side and even the Europeans are considering banning the import of Russian Oil and Gas, however this is quite difficult for Europe. However some European countries are 30% to 100% dependent on Russian gas for their needs, so this would hurt Europe considerably, if they were to go this route.

Products exported by Russia with their percentage

The overall pain, will be felt much more, in Russia, since around 50% of Russia’s income is Oil and Gas, which shows that this sanction would really be the final nail in the coffin of the Russian economy. So basically, Europe would have to cut off it’s own foot, to kill Putin, but it will survive. This was, “Why the Russian Economy is Collapsing”.