Russia’s ruble is now facing crash crisis in the global market after Western nations agreed on Saturday to impose severe financial sanctions on the country in response for its invasion of Ukraine. According to experts, a weak ruble will likely cause inflation to rise and add strains to Russia’s financial system.

According to Reuters, the ruble has dropped by 100 against the dollar in Moscow trade on March 1, while also touching a record low of 117 in other markets.

Following President Vladimir Putin’s invasion of Ukraine, the United States, the United Kingdom, the European Union, and other countries imposed unprecedented sanctions on the country, causing the ruble’s value to collapse. Russia’s banks were barred from utilising the SWIFT global banking system, and the Russian Central Bank was restricted from using $640 billion in worldwide dollar reserves.

So, what does Russia’s currency crash crisis mean?

Simply put, when a currency devalues, people can buy far less with their money than they could before the crash.

The sanctions have been a major setback for ordinary Russians, with stories of long lineups forming outside ATMs to withdraw cash.

The current economic upheaval in Russia, as well as the prospect of additional sanctions from the West, has had a huge influence. Indeed, according to Vice, Alexander Titov, a Russian historian at Queen’s University Belfast, “Russia’s economy and life will never be the same again.”

The impact of the sanctions, as well as the ensuing collapse in the ruble’s value, could herald even more bad news for Russians. Titov explained, ‘With drastically falling living standards, faltering economy, and dissent among elites, more political crackdown and suppression seems likely.’

The impact of the unprecedented sanctions, according to Steve Hamilton, an economist at George Washington University, will be felt across Russia’s various sectors.

Hamilton noted, ‘This is going to generate a kind of currency crisis, financial crisis, and an economic crisis in Russia,’ and added that the sanctions have also made it difficult for the Bank of Russia to take measures to try and control the situation.

Businesses may struggle to borrow money or repay loans as a result of the ruble’s devaluation, according to Hamilton, reducing investment interest in Russia.

Inflationary consequences of the ruble’s devaluation could undermine Russia’s public living standards.

Energy exports, on the other hand, provide some revenue for Russia, as several Western countries have allowed the sector to be exempt from the sanctions imposed on the country’s banks.

This is because it is feared that Russian residents would suffer the most as a result of a complete embargo on Russian oil and gas. According to the Los Angeles Times, there is also a risk that these sufferings will unite them behind Putin.

Western nations are also wary of creating a situation that may have major economic and political consequences in their own countries, which is a distinct possibility in the event of a total embargo.

Source: unilad.co