Can Russia withstand international isolation after attacking Ukraine?

Vladimir Putin’s press secretary Dmitry Peskov has not confirmed reports about the resignation of the head of the Russian Central Bank. The fact that Elvira Nabiullina allegedly resigned, but President Vladimir Putin refused to fire her, was reported on Facebook by former Ukrainian Prime Minister Oleksiy Honcharuk, as well as the Ukrainian portal OBOZREVATEL.

After Russia attacked Ukraine, the Kremlin faced unprecedented financial problems.

Russian rubles. Photo: Moscow-Live / Flickr, CC BY-NC-SA 2.0

Russia has money to pay interest on bonds and pay back loans, Finance Minister Anton Siluanov said today. However, he proposed to take it from foreign currency accounts abroad, blocked by the decision of the EU and the U.S.

The Russian Finance Ministry has offered to pay back the debts in rubles — the currency that has depreciated by 40% in a month. As the rating agency Fitch explains, this means default. Still, the reputation of the defaulter is not the Kremlin’s biggest problem.

“The Russian state borrowed money. Then it committed a crime for which that money was seized. If a person has tens and thousands of deaths hanging over them, it does not matter whether they owe someone money or not. Moreover, the debt there is not the most gigantic there could be,” explains economic commentator Maksim Blunt.

Russia already owes $117 million to those who bought Russian government bonds. Refusal to pay will cause panic among those who have lent money to Moscow. State companies and the government owe foreign creditors $150 billion. Of these, the Russian government owes $40 billion, Gazprom owes $25 billion, and the Russian Railways own almost $5 billion.

“We no longer view a Russian default as an unlikely event. Russia has money to service its debt, but it can’t access it. What worries me more is that there are consequences beyond Ukraine and Russia,” said IMF Director Kristalina Georgieva.

The Kremlin’s losses from the attack on Ukraine continue to grow. German energy concern E.ON has stopped buying new volumes of Russian gas. By the end of the year, the European Commission promised to cut the purchase of Russian oil and gas by three times, and the U.S. refused to buy it at all. Besides, the EU stopped buying Russian steel. Energy carriers and metals account for more than half of Russian exports. Last year, they brought $280 billion to Moscow. Russia’s exports of arms, aircraft, and nuclear materials bring another 40 billion.

“China will buy something, but the illusion that we will now sell everything to China and buy everything from them runs into logistical problems. Russia has been trading energy with Europe since Soviet times. And there has been an infrastructure since Soviet times: oil pipelines, product pipelines, gas pipelines,” explains Maksim Blunt.

Russia buys high-tech goods abroad – machine tools, equipment, computers, household chemicals, and chemical raw materials, as well as transport. There is no ban on selling these to Russia, but global companies have announced a boycott of the country. More than 400 companies have already left Russia. Ford, General Motors, Jaguar, Volvo, and Renault have stopped their assembly lines, while Mcdonald’s restaurants and AppleStores are closing. Today, Michelin Corporation suspended the production and sale of tires in Russia.

“If everything that works on imported components stops, we will be left with agriculture, the oil and gas sector, and fertilizer production. But if no one buys them, it will be a pointless production,” warns Maksim Blunt.

The Central Bank of Russia predicts that the country’s GDP will fall by 8% in 2022. This is also the forecast of most global financial corporations. At the same time, the Institute of International Finance in Washington predicts that as a result of sanctions the Russian economy will shrink by 30% – like in the early 90s.

Aliaksandr Papko,