With the ruble now being worth less than one cent, here's how the biggest currency crash in Russian history could affect the country.
Yesterday, March 1, the ruble dropped past 100 against the dollar in Moscow trade while also hitting a record low of 117 in other markets, per Reuters.
The dramatic decline in the value of the ruble was caused by the US, UK, European Union and other countries imposing unprecedented sanctions on the country following President Vladimir Putin's invasion of Ukraine. These included banning Russia banks from the SWIFT global banking system and restricting the Russian Central Bank from using $640 billion of international dollar reserves.
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So, what does the currency crash mean for Russia?
Put simply, when a currency collapses, people can buy significantly less with their money than they could before the crash.
The sanctions have been a huge blow for ordinary Russian citizens, with reports of people waiting in long lines outside ATMs to withdraw money.
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The current economic turmoil in Russia and the suggestion of further sanctions being imposed by the West has had a significant impact. Indeed, Alexander Titov, a Russian historian at Queen’s University Belfast, has said the 'economy and life in Russia will never be the same again', Vice reports.
The impact of the sanctions and subsequent falling value of the ruble could spell even worse news for Russians.
Titov explained, 'With drastically falling living standards, faltering economy, and dissent among elites, more political crackdown and suppression seems likely.'
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Meanwhile, Steve Hamilton, an economist at George Washington University, has said the impact of the unprecedented sanctions would be felt across Russia's different sectors.
Hamilton noted, 'This is going to generate a kind of currency crisis, financial crisis, and an economic crisis in Russia,' and added that the sanctions have also made it difficult for the Bank of Russia to take measures to try and control the situation.
The ruble collapse, Hamilton suggested, could see businesses struggling to borrow money from overseas or repay their debts, drastically cutting investment interests in Russia.
Any resulting inflation from the fall in value of the ruble could undermine the public living standard in Russia.
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However, energy exports offer some income to the country, as some Western countries have allowed the sector to be exempt from the sanctions that target Russia's banks.
This is because it is feared that Russian citizens would be those who really suffered as a result of a total embargo on Russian oil and gas. There is also the danger that these hardships would unite them behind Putin, the Los Angeles Times reports.
The Western governments also are cautious about creating a situation that leads to serious economic and political consequences in their own countries, which is entirely possible in the event of a total embargo.
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Topics: Ukraine, Russia, World News, Vladimir Putin, Life
