The invasion of Ukraine has prompted a severe political backlash and international condemnation, combined with an exclusion from markets that will, if it persists, have a hugely harmful effect on the Russian economy.
Whether President Putin sees the economic hardship as a price worth paying for the annexation of Ukraine remains to be seen.
And, at some point, the money to fund an invasion will become harder to find.
However, speculation aside, the financial effect on Russia can be seen in the following charts.
Note: prices change quickly, and these are at time of writing (February 28, approx 6am ET)
The Ruble
Russia’s currency, the ruble, has crumbled in recent days, losing up to 30 percent of its value against the dollar.
The currency is currently trading at around R100 to $1, a record level.
This presents a huge problem for Russia in terms of the price of imported goods, and hence inflation.
As prices feed through into the shops, Russians will effectively have to pay far higher prices for any product that is either imported or relies on imports for its manufacture.
Interest Rates
One thing central banks have been traditionally able to do about a falling currency is raise interest rates.
This helps curb inflation and makes foreign investment more attractive. However, it’s unlikely to help either of those things as trading rubles is effectively out of the question for many currency brokers.
In any case, as an extreme measure, the Russian Central Bank just put interest rates up from 9.5 percent to 20 percent.
Whether this will have any effect internationally is unclear. It may stop Russians taking their savings out of the banking system: there have been reports of a run of withdrawals in Russia, and any bank run would cause huge problems domestically for Putin.
Russian Sovereign Debt
Government debt is a good barometer of a country’s financial health.
The yield on the 10-year Russia bond has risen to nearly 13 percent, and a rise in yields shows the value of the bond, and the faith in investors of the country paying back the debt, has fallen.
This is the highest level since 2015, and is a sharp increase from the start of 2022 when the yield was less than six percent.
Sberbank
Russia’s state-owned Sberbank is a key part of the financial system in Russia, with international and domestic customers. According to Statista, it is the largest Russian bank by assets, nearly twice the size of the next, VTB.
And its shares (in terms of ADRs, or American Depositary Receipts, negotiable securities issued by a bank) in London just nearly hit zero.
The European Central Bank has warned that Sberbank’s European arm could fail, and be unable to pay its debts. This of course can hurt other banks in the system too: non-Russian banks that have debts, or other relations with Russian banks.
But, the collateral financial damage in Europe will be nothing compared to the headache that the failure of the state bank would give the Kremlin.
Moscow Exchange
The overall Moscow stock exchange index, the MOEX, has seen a rough few days.
Over $150 billion was wiped out in trading on Thursday last week. The value of companies on the market is being hit by investor worries over sanctions, inability to trade, and a possible recession in Russia.
Bitcoin
If you can trade rubles for dollars, where else do you go? One answer is cryptocurrency.
Ruble-denominted bitcoin trades have surged in recent days, with volumes over 1.5 billion, according to Coindesk.
What About Oil?
Newsweek has not put the oil price or price of natural gas in this list as it debatable to what extent Russia will be able to continue trading those commodities.
Certainly, higher prices should help Russia, given that it is the world’s second largest oil exporter, but with Russian financial institutions barred from using the SWIFT payment system there will be major disruption.
According to Reuters, oil and commodities traders have said flows of Russian commodities to the West will be severely disrupted or totally halted for days, if not weeks, until some clarity is established on payment exemptions.
