As The U.S. Faces Recession, Russia’s Oil And Gas Industry Is Booming
Russia’s financial system is booming in spite of strict sanctions, according to the International Institute of Finance.
Deputy Chief Economist Elina Ribakova outlined in a Twitter thread how Russia’s massive oil and gas revenues have positively impacted the Russian financial system, even after Western nations cut Russia off from other global financial markets in response to its invasion of Ukraine in February. [bold, links added]
“Those who thought that cutting Russia from financing for a few weeks at the beginning of the war would stop the war have proven naive,” she said, displaying data from the International Institute of Finance that shows a significant increase in Russian asset liquidity since March.
1/ Russia’s financial system is back to business as usual after a few weeks of severe bank runs (nearly Rub 10 trillion in liquidity withdrawn). Those who though that cutting Russia from financing for a few weeks at the beginning of the war would stop the war have proven naive. pic.twitter.com/NPhE14Fpu2
— Elina Ribakova 🇺🇦 (@elinaribakova) June 23, 2022
The Russian ruble surged in May; it’s now one of the world’s strongest currencies against the U.S. dollar, according to Business Insider. Some experts argued that this is not necessarily a good thing for Russia, however.
“So the strong ruble only reflects the fact that there is no use for foreign currency in Russia right now,” Ilya Matveev, a political scientist, told NPR. “And this is, of course, a very bad thing for the economy.”
Mateev also pointed out that Russia is experiencing significant inflation, supply shortages, and soaring prices — things the U.S. is also dealing with.
Russia is operating in a budget surplus to the tune of ₽1.6 trillion rubles, having piled up over $100 billion in foreign exchange reserves since invading Ukraine in February, according to Ribakova.
Russia defaulted on roughly $100 million in debt on Sunday after sanctions prevented it from paying out U.S. dollar and Euro-denominated debts to overseas creditors, Reuters reported.
U.S. officials called the default a consequence of the economic actions the U.S. and its allies have taken to disrupt the Russian economy.
“This morning’s news around the finding of Russia’s default, for the first time in more than a century, situates just how strong the actions are that the U.S., along with allies and partners have taken, as well as how dramatic the impact has been on Russia’s economy,” a U.S. official said at the G7 summit Sunday, Reuters reported.
G7 leaders also proposed sanctions on Russian gold exports and a cap on oil prices at the meeting, according to Reuters.
Ribakova countered, saying the short-term effects of default are “not very significant” in an interview with Marketplace in March. It would take time for the more severe consequences to materialize, she explained.
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