News & Views
Toothless: The Real Effect of the Economic Sanctions on Russia
Earlier this month, the Central Bank of Russia raised its benchmark rate from 9.5% to 20% – the highest in almost 20 years. The purpose: defending the ruble against international sanctions, which have knocked it down to its lowest point in more than 20 years.
The Biden administration is touting this as a win. The problem with that: Russia is also demanding that its customers (which include most of Europe) pay for its oil in rubles. That means the French and Germans that depend so heavily on Russian oil will have to exchange their euros at the new rate. It makes the cost to them the same as it was prior to the Ukraine invasion, and the profit to Russia roughly the same as well.
From Bloomberg: “What’s become clear is that despite an incredibly wide-ranging package of sanctions on the Russian government and its oligarchs, and an exodus of foreign businesses, the actions are largely toothless if foreigners keep guzzling Russian oil and natural gas – supporting the ruble by stocking Putin’s coffers.”