Putin acknowledges impact of sanctions on Russian economy
“Our economy will need deep structural changes in these new realities, and I won’t hide it: it won’t be easy; they will lead to a temporary spike in inflation and unemployment,” Putin said in televised remarks on Wednesday ahead of a video meeting with Russian government officials.
The impact of the sanctions has reverberated across Russia, leading to factory closures, job losses, a doubling of interest rates and a falling ruble. Inflation has galloped past the central bank’s target. Russia is in danger of defaulting on its debt.
Mr Putin said Western efforts to stage an “economic blitzkrieg” against Russia had failed, but warned there were likely to be further attempts to step up pressure on Russia.
Referring to an exodus of Western companies from Russia in recent weeks, Mr Putin extended an olive branch to multinationals still doing business in his country.
“We appreciate the position of these foreign companies which, despite inexcusable pressure from the United States and its vassals, continue to work in our country,” he said. “In the future, they will definitely receive additional development opportunities.”
The remarks came as Ukrainian President Volodymyr Zelensky addressed the US Congress, urging lawmakers to further step up economic pressure on Russia for the invasion. He also called on lawmakers to pressure U.S. companies in their districts that continue to do business with Russia to stop.
Mr Putin has pledged to implement a series of measures to offset the pain of sanctions imposed on Russians, including increased payments to pensioners and state employees, a hike in the minimum wage and financial aid to businesses. The purchasing power of ordinary Russians has been deeply eroded after Western sanctions triggered a sharp devaluation of the rouble.
But Mr. Putin did not approve of Soviet-style price controls. He also said Russia’s central bank would not press money to meet government spending needs.
Coordinated US and EU sanctions have hammered the Russian economy, cutting off much of Russia’s financial system from the rest of the world and stifling the flow of many imported goods. Western companies ranging from Boeing Co.
at McDonald’s Corp.
at Volkswagen HER
withdrew from Russia, either to comply with sanctions or because of public anger over the war in Ukraine.
In his remarks on Wednesday, Putin blasted one of the West’s main financial weapons against Russia: the freezing of Russian central bank assets held in North America and Europe. This has prevented Moscow from using much of its $630 billion stockpile of reserves to prop up the rouble.
“Now everyone knows that financial reserves can simply be stolen,” Putin said. He called the Russian central bank’s asset freeze illegitimate and warned that it would lead countries around the world to store their reserves in tangible assets such as gold, land and commodities instead of ‘Financial assets.
Since Russia attacked Ukraine in late February, the ruble has lost about 18% of its value against the dollar, according to FactSet. It was down more than 40% at the start of the month before recouping losses.
Russian consumers have reported price increases and shortages of certain products in stores. The country’s statistics agency said on Wednesday consumer prices rose 2.09% in the week ending March 11, bringing the year-to-date rise to 5.62%. This is well above the 4% target set by the central bank for the year as a whole.
Meanwhile, a component outage from Western suppliers has threatened to shut down production in part of Russian industry. During the video meeting with Mr Putin on Wednesday, the leader of Russia’s Tatarstan region said production at truckmaker Kamaz, which employs tens of thousands of people in his region, could fall by 40%.
Russia could also be on the verge of defaulting on its debt for the first time since 1998. The Russian government had to pay $117 million in interest on two dollar-denominated government bonds on Wednesday. Russia’s finance minister said the payment had been made and appeared to be stuck at the US bank where Moscow holds its dollars. The US Treasury Department countered that the sanctions did not prevent Russia from servicing its debt.
Russia’s central bank is due to meet on Friday to discuss possible interest rate changes. At its last meeting on February 28, as Western sanctions began to take effect, the central bank more than doubled its key rate to 20% to make holding the ruble more attractive and cushion its expected fall.
—Caitlin Ostroff and Paul Hannon contributed to this article.
Write to Alexander Osipovich at [email protected]
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