While speaking to Ukrainian refugees near Warsaw, Polish Prime Minister Mateusz Morawiecki said sanctions against Russia are failing.
“I must say this very clearly: the sanctions we have imposed so far don’t work. The best evidence is the ruble exchange rate. The ruble exchange rate, this litmus test, has returned to the level it was before the Russian aggression against Ukraine. What does it mean? It means that all economic, financial, budgetary, and monetary measures have not worked as some leaders wished. It needs to be said very loudly” – Mateusz Morawiecki, April 1st, 2022
Correct me if I’m wrong, but it seems like Poland was one of the primary countries demanding that everyone else enact harsh sanctions.
Japanese Economic Minister Hagiuda Koichi announced yesterday that Japan would continue buying oil and natural gas from Russia. Siegfried Russwurm, the Federation of German Industries (BDI) president, says that a proposed embargo on Russian energy would cause an economic calamity far worse than Covid-19. He stated, “we are talking about a completely different kind of collapse of our industry.” India and Pakistan have already agreed to buy more Russian commodities at discounted prices.
There are many signs that the level of short-term economic pain for the Russian economy, that world leaders predicted, is failing to materialize. While there will be inevitable medium-term economic pain for Russia, the long-term consequences are totally up in the air. The Russian economy could be stronger than ever five years from now, for all we know. All while Europe experiences roving blackouts trying to produce enough electricity with taxpayer-subsidized windmills.
Last week, the Russian stock market finally re-opened, and the Micex rebounded by about 12%. During the lead-up to the war and the enacting of sanctions, the Micex dropped about 29%. Now it is only down about 20%.
Keep in mind that markets worldwide were doing poorly when the war started anyway. While US markets went into a surprise rally for the second half of March (which I believe will be short-lived), we had seen a 20%+ decline in US stock market indexes between early November and mid-March. The NASDAQ hit a one-year low. The NYSE hit an 11 month low. The Russell 200 hit a 15 month low.
It will take months to learn the true repercussions for world markets.
However, the Ruble hit highs of 1.23 cents last week. It was 1.3 cents before the sanctions started. It went back down some on Friday, closing at 1.16. However, this is far from the low of .667 cents on March 7th. Many were celebrating the ruination of the Ruble, only to watch it bounce back in a short amount of time.
A realization is setting in that very little planning or foresight was shown when enacting these sanctions.
They should have said, what do we buy and Russia, and what does Russia buy from us? The West gets gas, oil, fertilizer, and many other raw materials. Russia gets manufactured goods, particularly from the more luxury end of the spectrum. Russia can more easily do without iMacs and Nike shoes than the West without energy and fertilizer.
The big metric everyone is looking for is how much immediate economic pain is being caused. While some media have claimed to show pictures of empty grocery stores in Russia, you can go on YoutTube and see that this is false. Grocery stores have some empty shelves where certain foreign brands used to be, but the store itself is still 90% full. While remaining foreign brands are up in price, Russian brands still cost the same.
However, rising energy costs have an immediate detrimental effect on the West. Russians are still paying one of the lowest gas prices globally, while parts of America and Europe are experiencing record-high gas prices. This money comes directly out of people’s disposable income, and anyone leaving paycheck to paycheck will experience immediate increased economic hardship.
As I have said before, Putin’s own goal for over a decade has been to get Russians to keep their money in Russia. So in that respect, sanctions assist him in achieving one of his major goals. We were told that the “oligarchs” would reign Putin in. Instead, Putin snubbed them and said it was their fault for needing villas in Europe and Miami and not keeping their money in Russia.
Report on sanctions from state sponsored Belarusian tv:
Inside a department store in Moscow: