Russian economy teeters as rouble plunges amidst sanctions

The harshest insults are found on Telegram directed at Kremlin spokesman Dmitry Peskov, who blatantly mocked Russians shocked by the rouble's decline. On 27th November, one US dollar cost over 120 roubles in Russia (compared to 90 in September). This is the largest weakening of the Russian currency since the start of the invasion of Ukraine in 2022. On Thursday, the rate recovered slightly.

"The rise in the dollar exchange rate will not affect Russians because they receive their salaries in rubles" - Peskov said. On the Russian-language Telegram service, there's a special stamp, an image of a clown, which users can use to mark those making particularly foolish remarks. Peskov's statement gathered thousands of clowns. Russians pointed out that "his daughter worked in Paris and earned in euros". "In our hellish land, heroes are left with lard and potatoes". "Brilliant strategist Putin, we started the war with the dollar at 60 roubles, now it’s double." "No more foreign trips, and what about food prices?" - these are the most common complaints from Russians.

Below are the words of consolation to Russians spoken by Dmitry Peskov, the Kremlin spokesman

Russian economist Vyacheslav Shirayev warned that if the rouble's devaluation continues, food in Russia will rise by 20-30%, fuelling inflation. It's not just about imported products. Vladimir Fisinin, head of the Russian poultry industry, warned that 98% of chickens are raised using foreign additives, so meat prices will increase.

Gazprombank has been subject to American sanctions cutting it off from the dollar settlement system. The bank handled payments of Russian corporations selling oil and gas abroad. Blocking Russia's cash flow, and thus blocking trade exchange, would be the ideal way to stop the war. It’s a shame it's happening only now - this is how Dr Adam Karpinski, an economist and expert at WSB Merito University in Wroclaw, Poland, explains the fall in the rouble's value.

Let's add that Washington introduced the threat of so-called secondary sanctions, which involve similar restrictions on entities continuing cooperation with Gazprombank.

- We would like to see Russia descending into the abyss of an economic crisis, like the eruption of a societal rebellion, but for now, these are Western wishes - commented the WP interlocutor. He emphasises that the costs of the war and economic effects, such as high prices, will be borne by average citizens, but it's hard to gauge how much they will endure. - This could be several years - he believes.

- In Russia, all imported goods will become more expensive, but are they essential for the Russians themselves? McDonald's has withdrawn from the market, but their lives didn't collapse. This society is structured somewhat differently. The average Russian - outside of large cities - believes they can survive as long as there are potatoes, alcoholic beverages, and tea from a samovar. They usually calculate: since there is a war, one has to suffer so that things will be better later - Dr Karpinski continues.

According to Karpinski, Russia's economic problems will depend on the behaviour of countries like China or India and South American countries. - If they are willing to engage in barter, e.g., goods for raw materials, new restrictions won't be painful for Russia. As for food, Belarus, a long-time key supplier of these types of products, could be Russia's saving grace. Russia may import some goods via Kazakhstan or Turkmenistan - adds Dr Karpinski.

On major Russian portals, the most read articles are about the rouble and the effects of its devaluation. - We will see price increases as early as February. Cucumbers and tomatoes will be the most expensive. Prices are hard to predict - said Russian journalists Alexei Elayev, deputy general director of the Spar chain in Russia.

The popular blog "Yarnarnyi Kaliningrad" considered this statement to be the "quote of the day". It sarcastically remarked that tomatoes and cucumbers are becoming the gold of Russian cuisine.

Earlier, a wave of publications went through Russian media with titles like "people stopped using butter". In Russia, people eat "bare bread" with cold cuts or cheese. This is said to be the result of butter prices rising above the equivalent of £2 per stick. There were reports of decreased sales of butter.

The customs services of Kaliningrad reported cases of smuggling food from Poland. Dozens of kilograms of sausages were seized. As for foreign trips, for many, they are now over - report Russian business editors.

Inflation in Russia is expected to reach 15%, but bank lending rates are already 30% annually, Russian economists claim. - However, I don't see any catastrophe for the authorities. My colleagues and I have always said that the stability of the economy is its ability to support Putin's war, and that's all - commented Russian economist Vyacheslav Inozemtsev. He is quoted by "The Insider" magazine.

- With such a rouble exchange rate, the country's budget will be implemented with a surplus because oil is sold for dollars. The authorities will have additional roubles for the war and social spending. Yes, they will largely be devalued money, as we already lived in the '90s - Inozemtsev further explains.

It is possible that in response to reports about the effects of sanctions and the currency crisis, Vladimir Putin appeared in television broadcasts. He boasted about new Oreshnik missiles. He read from a note the test results that dozens of guided warheads attack the target at a speed of about 3,200 km/h. The temperature at the centre of the explosion reaches 4,000 degrees Celsius. Putin threatened that decision-making centres in Kyiv could be targeted.