The Russian economy (catch all)

[Firn]

A timely piece by the NYT.

Anxiety over possible economic fallout has begun to radiate from business circles, and some wondered whether Mr. Putin had been warned clearly about the magnitude of the possible damage to the economy. One analyst described their mind-set as one of “cognitive dissonance.”

“I’ve seen 10 people from the Forbes list in the recent few days. They’re pale; they don’t understand,” said Aleksandr Y. Lebedev, a prominent banker who sold most of his Russian assets after public disputes with Mr. Putin. But the oligarchs realize, he said, that their interests carry no weight in this situation, especially if they, like Mr. Lebedev himself, own property outside Russia.
“It’s those who are here who will take the burden,” said Mr. Lebedev, speaking from Moscow. “They all keep their mouths shut.”

There is no doubt that Putin has been able to concentrate much of the power on his person. The rules of the game have changed a lot in this regard since the years after the SU fall.

“Of course they’re upset, but it doesn’t mean they are prepared to challenge Russia’s foreign policy,” said Mikhail E. Dmitriyev, an economist whose research group, the Center for Strategic Research, was originally founded to shape Mr. Putin’s economic platform. “This is a new reality. Even if somebody has reservations with regard to the policy’s effectiveness, I strongly doubt they would express it. This is a policy which, for the moment, is backed by the vast majority of the public. It’s not an exaggeration.”

In private conversations, though, several people described high anxiety within corporations, especially about the prospect of any sanctions’ affecting banks. Large Russian corporations have significantly increased foreign borrowing in recent years, and 10 were negotiating loans when the crisis boiled over, said Ben Aris, the editor and publisher of Business New Europe. Financial sanctions could set off a chain reaction of blocked transactions, frozen accounts and bank closings. “Those oligarchs who are already having trouble would be completely cut off,” he said.

It certainly could hardly happen to a nicer bunch. Liquidity could indeed become a massive problem if the West decides to implement harsh sanctions. Freezing and blocking Russian capital could have devastating effects on the oligarchs and the Russian economy as a whole.

P.S: Interestingly today the ruble has lost far more against the Euro vs the USD then the €/$ exchange rate explains. We know that the Bank Rossii has tried to defend the ruble by selling lots of USD which became hard to come by and got perhaps controlled. So perhaps now much demand has shifted to the Euro. This is obviously a quick speculation, the thing just catched my attention.