Russian rubles could become "worthless"

After the EU, Canada and the United States have decided to remove some Russian banks from the SWIFT messaging system, the next target will be the Russian central bank, which could make the rubles "worthless". In a joint statement on Saturday evening, the Allies said they are committed to ensuring that Russian banks are disconnected from the international financial system and damage their ability to operate globally. What comes as a more unexpected and perhaps more painful move is that the Allies have also said they are "committed to imposing restrictive measures that will prevent the Central Bank of Russia from deploying its international reserves in ways that undermine the impact of our sanctions" . According to Rob Person, associate professor of international relations at the US Military Academy in West Point, this would mean that the central bank will not be able to access most of its reserves for foreign exchange intervention or exchange dollars and euros for rubles. “Rubles could (in theory) become nearly useless, with ordinary citizens trading in dollars. It should be on the black market, since it is technically illegal to pay for things directly with dollars / euros. Dollars will be scarce and valuable on the street, ”Person said. According to Bloomberg data, Russia has around $ 640 billion in reserves, while its central bank held 16.4% of its holdings in dollars and 32% in euros at the end of June 2021.

Elina Ribakova, deputy chief economist for the Institute of International Finance, also said that sanctioning the Russian central bank is likely to have a dramatic effect on the Russian economy and its banking system. She also told Bloomberg that: "This would likely lead to massive bank runs and dollarization, with a large sell-off, a drain on reserves and, perhaps, a complete collapse of the Russian financial system." However, it is unclear how severe these restrictions will be. Meanwhile, on Monday, traders are preparing for a "catastrophe" on the Russian currency market. Former Russian Central Bank Vice President Sergei Aleksashenko told Reuters: "I think they will stop trading and then the exchange rate will be fixed at an artificial level, just like in Soviet times." More volatility is expected in other markets on Monday as well. "Inevitably there would be fallout and fallout, including a greater stagflationary drive to the global economy and a greater likelihood of Russian arrears for Western corporations and creditors," Mohamed El-Erian, part-time Chief Economic Adviser of Allianz and chairman of Gramercy Fund Management, he told Reuters. Meanwhile, Ukrainian Deputy Prime Minister and Minister for Digital Transformation Mykhailo Fedorov said yesterday that "the Ukrainian crypto community is ready to provide a generous reward for any information on the crypto wallets of Russian and Belarusian politicians and their surroundings".

Yesterday the allies also pledged to: • take action against the people and entities facilitating the war in Ukraine and the harmful activities of the Russian government. • take measures to limit the sale of citizenship, the so-called golden passports, which allow wealthy Russians linked to the Russian government to become citizens of these countries and access their financial systems. • launch a transatlantic task force next week that will ensure the effective implementation of financial sanctions. • Engage sanctions and other financial and executive measures on additional Russian officials and elites close to the Russian government, as well as their families and managers to identify and freeze assets they hold in allied jurisdictions. “Russia's war represents an assault on the fundamental international rules and norms that have prevailed since the Second World War, which we are committed to upholding. We will respond to Russia and collectively ensure that this war is a strategic failure for Putin, ”the allies said, stressing that they are ready to take further steps to force Russia to answer for its attack on Ukraine. On Sunday morning, Kiev would still be under Ukrainian control despite major Russian efforts to take over the Ukrainian capital.

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