Russian forces continue to march deeper and the conflict is intensifying. Russia has also put its nuclear force on alert. On the other hand, to stop Russian President Vladimir Putin, Western countries have imposed strict sanctions. Despite such sanctions Russia is not restraining, which shows Russia has planned this in mind much before. In this context, let’s see how much Russia is prepared for sanctions.
Sanctions on Russia:
Sanctions are considered the most effective diplomacy. This is because most of the global trade transactions are done in US dollars. If the US blacklists the banks of the sanctioned country from its financial system, then it becomes impossible to transact with them. The purpose of sanctions is to hurt the economy of a country.
The European Union imposed sanctions on 27 people and institutions earlier this week. The UK has banned three businessmen, including Gennady Timchenko. Apart from these, sanctions have also been imposed on Rossia, IS Bank, GenBank, Promsvyazbank and the Black Sea Bank. At the same time, America has imposed sanctions on Promsvyazbank and VEB Bank. Restrictions on Russia’s government debt have also been increased. On the other hand, Germany has banned the Nord Stream 2 gas pipeline. It is designed to supply gas directly from Russia through the Baltic Sea.
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The Russian banks are also denied the access of SWIFT system used by banks for international transactions. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. Swift is a global messaging service. It is used by thousands of financial institutions in 200 countries. If Russia is disconnected from the SWIFT network, it will be very difficult for Russian banks to do business abroad, but these sanctions will have an impact on other countries as well. The SWIFT ban was also used against Iran. Because of this, Iran lost the earnings from the sale of oil.
How much Russia is prepared?
US President Joe Biden warned about a month ago that Russia would not be able to trade in dollars if it attacked Ukraine. According to experts, Russian institutions are better prepared than before to face sanctions.
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- Russia has distanced itself from the US Treasury and the dollar since 2014.
- Russia has included more gold and euro in foreign reserves than dollars.
- Russia has also reduced its dependence on foreign investors by taking lessons from sanctions imposed after the annexation of Crimea in 2014.
- Russia has stocked $635 billion in foreign exchange reserves, which puts it at number 5 in the world. Russia’s reserves have grown by more than 70% since 2015. This is almost equal to one and a half years’ export revenue for Russia. Of this, 16.4% is in dollars, more than 30% is in euros and 22% in gold. Foreign reserves also hold 13% Renminbi. Russia has reduced the share of the dollar by 22.2% since June 2020.
- Talking about debt, the average of debt with GDP is 18%. In this case, he is at number 6 in the world. Corporate debt from foreign lenders was around $150 billion in 2014, which has come down to nearly half in 2021.
- Russia is a major producer of crude oil and natural gas and is also the world’s largest exporter of wheat. The country is also Europe’s major food supplier. Russia supplies about 40% of the European Union’s natural gas imports. Russia sends gas to Europe through pipelines such as Nord Stream 1, Yamal-Europe and Brotherhood, but Germany’s decision to withdraw approval for Nord Stream 2 has pushed up gas prices in Europe significantly. In such a situation, if Russia stops the supply of gas, then Europe may have to bear the brunt of it
Russia has the backing of China:
Russian President Putin and Chinese President Xi Jinping are uniting against America. On the opening day of the Beijing Winter Olympics, Xi Jinping openly supported the denial of NATO membership to Ukraine. China being the biggest global value chain in the world can provide all items to Russia bypassing the sanctions.
Self-reliant:
According to a report, Russia has the capability to stop the supply for the next two years without any financial crisis. Recently, Russia’s ambassador to Sweden told Aftenbladet newspaper that Russia does not mind Western sanctions in the slightest. Moreover, after the 2014 Crimea crisis Russia has strengthened its domestic industry and worked on self-reliance.