By Peter McLaren-Kennedy • 28 February 2022 • 8:08
Sanctions imposed by the West after Russia invaded the Ukraine have begun to bite as the Rouble plunges 30 percent and the run on banks begins with people fearful of losing their money.
Despite the central bank calling for calm many people in Russia are fearing a cash shortage and have begun to empty their bank accounts, forcing the central bank to top up ATMs across the country.
The Rouble also fell heavily following the announcement that some Russian banks would be removed from the SWIFT international payment system, effectively removing their ability to transfer money in and out of the country.
A joint statement over the weekend said that the assets of Russia’s central bank will also be frozen, limiting the country’s ability to access its overseas reserves with the intention to: “further isolate Russia from the international financial system.”
Russia is heavily reliant on the Swift system for its key oil and gas exports.
Ari Redbord from blockchain analytics firm TRM Labs told the BBC: “Unless the Russian central bank and Russia’s largest banks, which have already been cut off from correspondent banking, find an alternative means of reaching the global financial system Russia faces Iran and North Korea-style isolation from the global economy,”.
Mr Redbord was formerly at the US Treasury Department, where he was a senior advisor to the Under Secretary for Terrorism and Financial Intelligence.
With the financial markets closing to Russia, Moody’s e rating agency said it was reviewing Russian bonds to possibly downgrade them to ‘”junk”, which would put Russia in a league of riskier countries that usually have to pay more to borrow. Rival credit ratings agency S&P has already lowered the country to junk status.
Katrina Ell, an economist at Moody’s Analytics in Sydney, told the BBC: “Financial markets are guided by the unfolding of events in Ukraine.
“Announcements regarding sanctions and military action will remain market movers this week.”
It is also understood that many companies and wealth funds are moving to dump Russian assets with BP and the Norwegian Sovereign Wealth Fund among those mentioned.
Reports are also coming in of the first Russian bank likely to fail as Sberbank reportedly in trouble as a result of the sanctions.
As the Rouble plunges and the run on banks grows, it is likely there will be more many more financial casualties in Russia.
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Originally from South Africa, Peter is based on the Costa Blanca and is a web reporter for the Euro Weekly News covering international and Spanish national news.
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