Russia faces economic ruin as interest rates doubled overnight following global sanctions
RUSSIA is facing economic ruin as severe sanctions started to bite yesterday.
Interest rates doubled overnight, the rouble tanked and huge cashpoint queues built up as desperate Russians tried to salvage their savings.
The stringent global bans on banking and trade clearly rattled President Vladimir Putin, who hit out at the West’s “empire of lies” as the economy crumbled.
Britain yesterday unveiled a "full asset freeze" on three more Russian banks.
And No10 warned UK lawyers, accountants and bankers they should “think very carefully” before acting for Russian oligarchs Even normally neutral Switzerland confirmed it would back EU sanctions and ban five oligarchs.
Last night the EU clobbered 26 of Putin’s inner circle with fresh sanctions, freezing assets and banning them from entering the bloc.
The move hit oligarchs including former Arsenal part-owner Alisher Usmanov, as well as energy and banking bosses, politicians, propagandists and military leaders.
Overnight, Russia’s central bank doubled interest rates from 9.5 per cent to 20 per cent in a bid to stave off recession. The new rate is the highest for almost two decades.
Most read in The Sun
'Strategic failure'
Trading on Moscow’s stock exchange was halted temporarily as the rouble plunged 30 per cent against the dollar.
Central bankers ordered firms to sell off 80 per cent of their foreign cash revenues to prop up the ailing currency. Russians were also barred from sending money abroad from midnight.
Russia has a war chest of around $630billion (£470billion) in international reserves.
🔵 Read our Russia - Ukraine live blog for the very latest updates
Putin earlier summoned central bank governor Elvira Nabiullina and other top officials to the Kremlin. Smirking, he told them: “I’ve invited you here to talk about issues to do with the economy.
“I mean of course the sanctions which the so-called Western community, the empire of lies, is trying to implement against our country.” Ms
Nabiullina later insisted: "The Bank of Russia will be very flexible in using all necessary instruments.” Yet despite the official response, experts said economic panic had already set in.
Elina Ribakova, deputy chief economist at the Institute of International Finance, said: “Bank runs have started from the very first day of sanctions and have accelerated over the weekend.”
And analyst Jeffrey Halley told Reuters: “A bank run has already started in Russia over the weekend. Inflation will immediately spike massively, and the Russian banking system is likely to be in trouble.”
Our strategy to put it simply is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine.
US government official
Experts said Russia was now likely to sink into recession this year compared to earlier hopes for three per cent growth. That was despite huge oil reserves worth a potential $73billion (£54billion).
Meanwhile, ministers are urging British firms with billions invested in Russia to follow the lead of BP and Shell and quit the country.
On Sunday, BP said it was selling its shareholding in the Russian oil giant Rosneft. Yesterday rival Shell followed suit after speaking to Business Secretary Kwasi Kwarteng.
He said Shell made the “right call” and added: “There is now a strong moral imperative on British companies to isolate Russia. This invasion must be a strategic failure for Putin.”
The UK has £11billion invested in Russia according to government figures. Yesterday it also emerged Western sanctions could cause Russia to default on its debt for the first time since 1998.
American were also banned from doing business with the Central Bank of Russia, while its US assets were frozen.
READ MORE SUN STORIES
White House officials sped up plans to clamp down after learning the bank had been “attempting to move assets”.
A US government official said: “Our strategy to put it simply is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine.”
