Russia’s economy is set to descend into turmoil after an alliance of Western nations over the weekend launched a sweeping set of sanctions to hobble the country’s financial system.
The measures prompted Russia’s central bank yesterday to plead with the country’s citizens to exercise calm amid growing concerns among Russian citizens that their money could soon disappear.
Analysts expect the rouble, Russia’s currency, to come under intense pressure as traders dump Russian assets and Moscow’s grip over the functioning of the country’s financial system slips.
“If I were Russian, I would take my money out now. Bank runs could begin in Russia on Monday,” Bill Ackman, the top US hedge fund manager, said in a tweet.
On the same day the Kremlin launched the incursion of Ukraine last week, the rouble plunged to its lowest ever level against the dollar.
The UK, US, Germany, France, Italy, Canada and the European Commission said late on Saturday evening several top Russian banks will be booted out of SWIFT, the global banking payments system, and Moscow’s central bank’s reserves will be frozen in retaliation to the Kremlin ramping up its assault on Ukraine.
Denying access to the central bank’s £470bn of reserves will limit its ability to funnel money into the Russian banking system to cope with a sudden surge in deposit demands.
This could result in a flurry of collapses in the country’s banking sector, leaving Russian citizens out of pocket.
The central bank “has the necessary resources and tools to maintain financial stability and ensure the operational continuity of the financial sector,” it said in a statement.
Kicking Russian banks out of SWIFT will essentially block the country’s access to the global financial system, adding to the likelihood of intense financial instability hitting the Russian economy.