Six months after the confrontation over
The effects of successive rounds of sanctions on the Russian economy are starting to trickle down, despite the many loopholes and exceptions. Foreign banks have tightened credit for all Russian companies. Retail prices are rising on the back of
As a result, not a single US dollar, euro or Swiss franc was lent to a Russian company in July, according to
"We are starting to finally see some impact from sanctions, not because any of any of the official sanctions, but because of the accumulation of self-sanctions," says
For now, although
Ash thinks sanctions will weigh on the Russian economy, but not cause imminent panic. "Are you going to see a financial crisis in the short-term? Probably not on the back of this. Does the west have the capability to do that? Absolutely. Do they want to? Clearly not."
But the tightening of credit cascades through the economy like falling dominoes: big Russian companies, sensing reluctance from western creditors, turn to Russian banks for loans. They in turn go to the central bank, which reacts by raising interest rates.
Higher interest rates help prop up the rouble, but make it more expensive to pay off debts, so Russian consumers begin to rein in spending. Car sales were down 23% on last July.
Just as credit is becoming more expensive, Russian shoppers face higher grocery bills, after
Government officials are already beginning to see the writing on the wall.
With other state firms are expected to join the queue for a share of the state's cash pile, economists have been downgrading growth forecasts.
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