Moscow (AP) — Russians are facing the threat of aggressive inflation and the prospect of being unable to travel abroad, as Western powers impose harsh economic sanctions in response to Russia’s invasion of Ukraine.
The ruble was dropping sharply on Monday, prompting many Russians to sprint to ATMs to withdraw cash.
The Russian currency shed about 30% of its value against the U.S. dollar after Western nations announced steps to isolate certain Russian banks from the international SWIFT payments system and to curb Moscow’s ability to use its foreign currency reserves. The exchange rate recovered somewhat following a rapid intervention by Russia’s central bank.
But soon afterward, the U.S. Treasury announced new sanctions that would freeze any assets held by Russia’s central bank in the United States or in the hands of Americans. Washington estimates that hundreds of millions of dollars in Russian funds could be affected.
Officials said Germany, France, Britain, Italy, Japan, the European Union and others would join the measure.
In Russia, long lines formed at banks and ATM machines, while social media posts circulated claiming some cash-dispenser machines were running dry.
Moscow’s public transit department warned users that they might not be able to pay with Apple Pay, Google Pay or Samsung Pay because the sanctions affect VTB, the Russian bank that runs payment systems for the city’s subway, buses and trams.
A steep devaluation of the ruble would translate into a rapid decline in the standard of living for ordinary Russians, economists cautioned. Russia relies heavily on imports, and prices for imported goods are likely to surge. International travel could become prohibitively expensive as rubles buy fewer goods abroad. And the economic situation could deteriorate in the coming weeks as sudden price hikes and supply-chain disruptions force factories to shutter their doors.
“This is going to ripple through the economy quickly,” predicted David Feldman, a professor of economics at the College of William & Mary in Virginia.
“Everything imported is going to see a marked rise in prices because of the shift in the exchange rate. The only way to avoid that would be massive subsidies,” he added.
The Russian government would likely need to step in to shore up industries, banks and other sectors of the economy, but without access to hard currencies like the euro or the dollar, it could be forced to print more rubles. That, in turn, could spur hyperinflation.
The ruble’s tumble recalled past crises. The currency lost a large portion of its value in the 1990s as the Soviet Union collapsed, and inflation became so severe that the government was compelled to remove three zeros from the banknotes in 1997. There was another collapse in 1998 sparked by a financial crisis that wiped out many people’s savings, and yet another drop in 2014 tied to falling oil prices and sanctions imposed over Russia’s annexation of Crimea.
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Sweet filed from New York and McHugh from Frankfurt, Germany. Daria Litvinova contributed from Moscow.
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