Let's look at Iran. Iran's economy is much smaller and less diversified than Russia's. However, under the severe sanctions of western countries led by the United States for decades, Iran's economy has not completely collapsed. Therefore, we have reason to believe that Russia's economy will not collapse under the sanctions of western countries led by the United States.
However, Russia's economy will feel the pain caused by the sanctions imposed by western countries led by the United States.
The ruble has depreciated sharply, foreign companies have fled in large numbers, prices will soar soon, many familiar goods will disappear from the shelves of shops, and traveling abroad may become a luxury. In addition to these short-term pains, Russia's economic stagnation will further deepen. Long before the conflict between Russia and Ukraine, Russia's economic development had stagnated. In fact, Russia's economic growth has been stagnant for many years.
On February 23rd, before the military conflict between Russia and Ukraine, 80 rubles were exchanged for 1 USD, but on Thursday, 1 19 rubles were exchanged for 1 USD, although the Russian central bank has taken severe measures to prevent the ruble from depreciating, including raising the interest rate to 20%. The sharp depreciation of the ruble will inevitably lead to a sharp rise in the prices of imported goods, and now Russia's inflation has reached 9%.
On the other hand, although a large number of Russian foreign exchange reserves have been frozen due to western sanctions, the Russian state's financial situation is still good and its debt ratio is low. When the Russian government really needs to borrow, it can mainly borrow from local banks, not foreign investors. Foreign investors will abandon it in times of crisis, but local banks will not.
This week, the Russian government announced that large companies that are vital to the Russian economy will receive various support from the government.
How the Russian economy will be affected in the short term is still inconclusive, because it is unknown what the outcome of the Russian-Ukrainian conflict will be and what sanctions the western countries will take, but the Russian people will definitely become poorer.
Pessimistic analysts believe that Russia's economic growth will decline by 10% in the short term, but optimistic analysts believe that Russia's economic growth will only decline by 2% in the short term.
In the long run, Russia's economic growth is also not optimistic, because this situation exists for a long time: Russia's large companies and major industries lack competitiveness and have no intention of making new investments; The Russian economy has never been able to get rid of its dependence on oil and natural gas. From 20 14 to 2020, the per capita income of Russia has hardly increased.
Foreign investment is leaving, taking away the jobs they have brought to Russians. Large foreign companies such as Volkswagen, IKEA and Apple stopped producing or selling in Russia. Energy giants such as BP, Exxon and Shell said that they would stop buying Russian oil and gas or cut off cooperation with Russian companies.
On Wednesday, Fitch Ratings, one of the world's three major international rating agencies, downgraded Russia's credit rating to junk status and warned that Russia's sovereign debt default was imminent.
Faced with the above unfavorable situation, the Russian central bank took measures to boost the ruble and the Russian banking system, restrict foreign currency withdrawal, close the stock market, and restrict foreign capital from fleeing Russia. On the one hand, these measures have prevented the collapse of the Russian financial system; On the other hand, they also closed the trade and investment channels of Russian economy, which hindered Russia's economic growth.
After the 20 14 Crimean incident, Russia knew that sanctions would be the main weapon used by the West to deal with it in any future conflict with the West, so Russia established a unique economic system. This system is characterized by low debt, the banking system is mostly controlled by the government, and the central bank has the ability to intervene and boost the currency and banks. This system is primitive, but it can stand the test.
In fact, the devaluation of the ruble also has a good side for Russia. Since oil is denominated in dollars, the devaluation of the ruble means that the Russian government gets more rubles when it sells oil. This gives the Russian government enough rubles to pay wages and pensions.
Although the United States and Britain, which usually do not buy Russian oil, prohibit Russian oil, European countries that rely heavily on Russian oil dare not do so. In short, there are many loopholes in the sanctions that can be exploited by Russia, thus enabling Russia to persist economically.