Economic sanctions against Russia began to work

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The Russian currency plunged about 30% against the U.S. dollar making it worth less than 1 U.S. cent after Western nations announced unprecedented moves to block some Russian banks from the SWIFT international payment system and to restrict Russia’s use of its massive foreign currency reserves. A sharp devaluation of the ruble would mean a drop in the standard of living for the average Russian, economists and analysts said. Kremlin spokesman Dmitry Peskov described the sanctions as “heavy,” but argued that “Russia has the necessary potential to compensate the damage.” A weaker ruble could cause inflation to surge, potentially angering Russians whose budgets will be stretched by soaring prices. It will also add to strains across Russia’s financial system.

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The deeper economic turmoil will come in the coming weeks if price shocks and supply-chain issues cause Russian factories to shut down due to lower demand. In another move to isolate Russia’s financial system, the U.S. Department of Treasury on Monday barred Americans from doing business with Russia’s central bank. The Russian government will have to step in to support declining industries, banks and economic sectors, but without access to hard currencies. The European subsidiary of Russia’s biggest bank was on the brink of collapse as savers rushed to withdraw their deposits. “Our strategy, to put it simply, is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine,” An American senior administration official said.