DNA Explainer: Impact of Ukraine war on Russian economy
Some experts suggest Russian economy could shrink by 7% in 2023, instead of 2% growth that was forecast. Others suggest drop could be as much as 15%.
The war imposed on Ukraine by Russia has not just left Ukraine in tatters but will have a long lasting economic impact on the communist country. If economists, investors and diplomats are to be believed, the unprovoked war on Ukraine and the resulting global sanctions will put Russia's economy back by at least 30 years
Experts say the impact of the war will also lower the standard of living of the Russian people for at least the next five years. Russia is already on the verge of bankruptcy. Interest rates have doubled, the stock market has closed, and the currency rouble has fallen to its lowest level ever.
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Economic sanctions
With sanctions from across many countries of the world, the Russians are now not allowed to convert any of the money they do have into foreign currency.
Some experts suggest the economy could shrink by 7% next year, instead of 2% growth that was forecast. Others suggest drop could be as much as 15%.
The sweeping Western sanctions have resulted in expelling Russia from the global markets and freezing assets around the world.
What took decades to achieve has been undone in just the last 20 days when the war first began on February 24.
In the 1980s, Soviet Union entered into landmark economic and social reforms under the former leader Mikhail Gorbachev.
But decades of hard work and policies to integrate the economy into Europe ended in the past few weeks with the Ukraine invasion.
Most blue chip companies have quit the Russian market and the US and Britain moved to wind down trade and tourism with Russia.
More than 300 of the world's most iconic brands halt business
Since the start of the war, more than 300 of the world's most iconic brands have voluntarily halted or dialed back their business.
Companies like PepsiCo, Levi Strauss, Coca-Cola suspended their sales, while one of the most symbolic departures was that of McDonald's.
The fast food chain opened its first restaurant in Moscow in early 1990, marking historical change in Russia's opening to the West.
Last week, McDonald's announced that all 850 of its restaurants in Russia would temporarily close in retaliation to the Ukraine invasion.
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Two sanctions to hit Russia hard
Two sanctions particularly have hit Russia hard. One, Russia's largest banks have been expelled from the global payments network known as SWIFT, making it very difficult for them to process overseas transactions.
Second, by freezing hundreds of billions of euros held in reserve by Russia's central bank, the country has been hit hard. Without reserve funds to shore up the ruble, there is very little the Kremlin can do to prevent its value from collapsing.
Ban on Russian oil and natural gas
One of the biggest exporters of oil and natural gas, Russia has now been banned by many top importers of the world. The United States and the United Kingdom have halted imports of Russian oil and gas, while the European Union has announced a cut in its imports.
The United States has imposed export controls on high tech equipment and luxury goods, and a growing list of countries have barred Russian ships from their ports. Presently, Russia's main trading partners include China and Belarus.
Ukrainian estimates put the material cost to Putin from the destruction of tanks, planes and weapons at around USD 5 billion for just the first two days of the war. So far in Ukraine, there are estimates that as many as 12,000 Russian soldiers have been killed.