Economic bottom. On Russia’s economic state in simple words
Russia has already suffered enormous losses on all fronts. Ukrainian defenders destroy Russian soldiers. And the sanctions of European countries destroy the remnants of Russia's hopes for a good, or at least normal life. The default has technically already taken place. We explain what this means.
After Russia attacked Ukraine, the occupying country gradually began to suffocate from sanctions. But what exactly does this mean? Rubryka explains in simple words how the actions of Russia will turn on them.
What is the problem?
Obviously, in Russians
Russia. Mid-March 2022. Queues for ATMs stretch for hundreds of meters. The number of people who lost their jobs exceeded 100,000. About a thousand Russians are detained every day at rallies against the war or future famines. And at one of the Russian factories, the first "hungry" riot already took place.
Putin's army planned to capture the Ukrainian capital in a few days. But it did not happen. It is Russia that began cover with an "iron dome" in just a couple of days. The European Union has already agreed on the fourth package of tough sanctions, global companies are leaving the Russian market, and the entire aggressor country is gradually breaking down under the weight of its geopolitical ambitions.
What is the solution?
Deprive them of the opportunity to spend money on war.
There are many sanctions, and they target everything. If you look at the basic needs of any country, you can see – they have all become sore points for the aggressor.
"Russia has surpassed Iran and North Korea and become the most sanctioned state in the world. Russia has become a world exile, a toxic country from which the world is turning away," said Ukrainian Foreign Minister Dmytro Kuleba.
He also said that during the eight years of war with Ukraine, more than 6000 sanctions were imposed. Half of them have been introduced since the beginning of the full-scale invasion on February 24.
How does it work?
Russians want to eat
And they, in less than a month, can not eat everything they want. And we're not even talking about McDonald's here, no. In some Russian regions, supermarkets have started selling no more than five pieces of various goods in one pair of hands.
Russia is currently suffering from a sugar shortage. So much so that it is sold only in the morning. The Internet is actively watching videos not only of queues for sugar, but also fights for it.
However, the situation here should improve shortly, because this is the product, production of which is localized in Russia, so Russia will be able to cover its own needs.
The same will happen with grain, oil, and meat. Russia will not be left without this, although these products will become more expensive due to the shortage of fertilizers and certain specific components.
Instead, vegetables, berries, and fruits will become scarce goods. Suppliers who are still working with the aggressor are already demanding 100% prepayment, deliveries depend on the situation in the Black and Azov Seas, and not all possible sanctions have been imposed on the occupier yet.
It will also be more difficult with dairy products. Although Russia can produce enough milk, it has already lost access to the specific components needed to pasteurize and process dairy products. Based on this, the Russians will have to switch to less expensive "milk". And less quality, too.
There is a high probability of potato shortage because in Russia it is rarely grown. Its prices have risen almost the fastest.
In addition, before the blocking of Instagram, Tik-Tok, and Facebook in Russia, Russians there complained about the lack of buckwheat, salt, and soda. However, domestic production of these goods is also expected to increase soon.
Russians want to drink
Russian mornings are now the mornings that do not start with coffee. The Finnish company Pauling, which covered more than 17% of the coffee market in Russia, was one of the first to refuse to work with the country.
Other suppliers already have problems with export routes. The ocean routes to Russia are closed. Airways are very limited. Terrestrial – too. To this, we add the rise in prices for raw materials and Russia's inability to pay for goods ordered through international payment systems.
Imported alcohol also comes from the Russian market. Several companies that have announced the severance of relations with Russia will continue to produce in Russia for some time. This applies, for example, to Heineken, which has localized production in Russia. But this production will not receive any more investments, so it will probably stop at some point.
Russians want to be clean
Not when it comes to the blood of Ukrainians on their hands, but still… The British company Unilever, the leader in the market of food and household chemicals have stopped importing and exporting its products from Russia. Importantly, the company owns about 400 brands, including Domestos, Rexona, and Dove.
In addition, several manufacturers of hygienic products also left Russia. Videos and photos of empty shelves where there should be women's pads and tampons, baby diapers, powders, and so on are spreading on the Internet.
Russians want to work and have fun
Instead, they lose their jobs. The number of newly unemployed alone exceeded one hundred thousand.
- The McDonald's network employed 62,000 Russians.
- PepsiCo Corporation – 20,000.
- IKEA – 15,000.
- Inditex – 9,000.
- KPMG – 4,500
As of March 16, more than 600 companies have completely left or partially suspended operations in the Russian market. This means the loss of hundreds of thousands of jobs.
The EU, the United States, and the United Kingdom are also abandoning Russian oil and petroleum products. And this also means there is a bunch of people who are about to lose their jobs.
The unemployed will not have anything to do. Netflix, Megogo, Tik-Tok left Russia, and Russia banned Instagram, Facebook, and Twitter. It also forced several non-state TV channels to stop their work.
Russians want to raise children
We have already mentioned the shortage of diapers. But children also need education. And in Europe, all Russian universities have lost their accreditation. This means that the diploma obtained in Russia will have some weight only in Russia and a few other countries that remain relatively friendly to it. And these are not the most civilized and developed countries.
Russians want to kill
In Russia, as we have all noticed, war is being cultivated. Although at the state level it is forbidden to call war a war. But to continue existing wars or to start new ones, the state requires a lot.
Russia will no longer be able to produce quality weapons, as it has received many components from abroad.
Russia will no longer be able to produce machines to transport those weapons. The Russian company AvtoVAZ has already announced the closure due to a lack of spare parts.
Russia will no longer be able to feed its soldiers. It is already appealing to China to help with individual ration packs for the military. And the United States warns China that even such assistance to Russia will end badly.
Does it really work?
A few words on default
According to Morgan Stanley & Co and the forecasts of many analysts, Russia will have the default in April. Most bets are put on April 15. What does it mean?
Default is the inability of an individual, company, or country as a whole to repay its external or internal debt obligations. By declaring default, the country is giving up all its debts, but this does not mean that it simply does not pay and goes with it.
Default means that all or almost all investors will leave the country. All oligarchs, businessmen, and even small entrepreneurs in the country go bankrupt. It is possible that some businesses will be bought out by the state and then the president will control everything. A kind of "USSR 2.0" where there is no private business, but also no opportunity to earn money.
The standard of living of all Russians after the default will fall sharply. And although the default has not been officially announced and it is not a fact that it will be announced, technically it has already happened. One of the signs is Putin's statement that Russia will pay its debts in rubles. And this will lead to inflation, the devaluation of the currency.
"When default is a protracted event caused by bad management, the economic impact and losses can be curbed by the gradual sale of assets. The uniqueness of today's events is that it all happened unexpectedly and took everyone by surprise," said Amherst Pierpont investment specialist Siobhan Morden.
And Ukrainian banker and economist Serhii Fursa has already explained to journalists that Russia risks becoming too dependent on another state.
"Russia will now become a raw material appendage of China; it will be much weaker and dependent on China. For the latter, this situation is favorable on the one hand, but on the other, China is still not interested in the complete destabilization of the world, including food. What is happening now with the prices of food, gas, etc.? It's not in China's interests. So they don't need this situation," Fursa said.
