Russia’s Finance Ministry Issues Economic Crisis Warning as Western Countries Impose SanctionsMay 22, 2022
It has been three months since Russia and Ukraine wars. Since that time, the Western Bloc, including USA, NATO, and Japan, have joined forces to impose harsh economic restrictions and financial sanctions on the country. Owing to the social boycott, the Russian ruble value has crashed in the international market. On the other hand, many countries have severed ties with Russia citing and revoking trade deals.
The people of Russia are also participating in protesting against the war continuation, as the country is facing exponential backlash from the west. Journalists published leaked documentation from Kremlin this week citing the concerning remarks of the Russian Finance Minister on the dire condition of the country. The FM suggested that the country was facing its worst economic crisis since 1994 and simultaneously estimated an additional 12% GDP deficit.
Russian Oil Market is also Facing Pressure
Russian President Vladimir Putin recently announced making budget cuts and decreasing the festivities of the annual victory day parade celebrations that commemorate the horrors of World War II and the end of the international skirmishes in Europe. Amid the continued financial sanctions from Europe, the Russian oil market can face more pressure after the announcement from Brussels to revoke its oil import contract.
On the other hand, Kremlin is struggling to make ends meet, and the country was unable to settle its foreign debts for the first time since the Bolshevik revolution around ten years ago. The leaked Finance Ministry documents published by Bloomberg suggest that the economic projections of the Russian Central Bank are more discouraging than expectations citing an 8-10 percent shrinking rate before year-end.
Krishna Guha is an analyst from Evercore. Guha suggests that Putin is facing pressure from the inside of the country, and he seems hesitant to risk losing his internal support by opting to continue the war for a longer duration. Recently, Russian forces withdrew their forces from multiple fronts to concentrate the special operation on the northern border of Ukraine.
On the other hand, the EU countries are also planning to fund the East European nations to empower them to sever ties with Russia and discourage any type of trade deals in the region. On the other hand, the UK and UShave alliances have also opted out of their oil trade contracts with Moscow. The Central Bank of Russia has decided to decrease the interest rates to ease the increasing economic decline in the region.