The Russian central bank more than doubled interest rates Monday, to 20 percent from 9.5 percent, in a emergency move to try and stabilize the plummeting ruble, which dropped more than 30 percent Monday, to its lowest rate ever against the dollar.
The U.S., Europe, and other nations moved over the weekend to freeze Russia's hard-currency reserves, cut off some of its largest lenders from the SWIFT global payment system, crack down on Russian oligarchs and their assets, and enact other punitive sanctions to punish Russia for invading Ukraine. Russians have rushed to ATMs to withdraw cash, and Russia's central bank said Monday's rate increase was designed to support "financial and price stability and protect the savings of citizens from depreciation." Losing access to much of its $640 billion in foreign reserves limits the bank's options.
"Put simply, Russia's ability to transact with any financial institution at a global level will be severely impaired, because most international banks across any jurisdiction use SWIFT," Deutsche Bank analyst George Saravelos wrote in a note to clients.
South Korea and, notably, Singapore joined the global efforts to isolate Russia from global finance and trade on Monday. Norway on Sunday said its $1.3 trillion oil-based sovereign wealth fund is freezing its Russian assets and divesting from the country, and BP said it would divest its 20 percent stake in Russian state oil company Rosneft. S&P Global cut Russia's debt rating to "junk" status on Friday, and the sanctions have only gotten harsher since then.
Whatever Russian President Vladimir Putin hoped to accomplish with his Ukraine invasion, it's probably not this: financial chaos, domestic protests, a lockstep NATO, Germany shedding its post–World War II pacifism, and what appears to be, from all indications, a failed strategy of storming into Kyiv and overthrowing Ukraine's government. "Russia is actually showing the world they are not as strong as we thought they were," John Spencer, an Army veteran and urban warfare expert, tells The Washington Post. "It's not showing a superpower military, that's for sure. It's showing major weakness."
But Putin has also responded by escalating nuclear tensions, and his much larger and better equipped army is expected to adapt tactics and ramp up its destructive force against Ukraine. Which is something to keep in mind as you watch Russia's economy crumble, notes the Post's Paul Sonne.