After February 24, all EU countries, the United States and several other states imposed sanctions against the Russian Federation as a result of the attack on Ukraine and the start of hostilities. Already politicians and businessmen, as well as ordinary people in Russia, are feeling the consequences, but things could get even worse in the near future. What to expect from sanctions? What will be the consequences for the Russian economy? How will sanctions affect ordinary Russians? What are the sanctions against Russia?
Main sanctions against Russia and their explanations
The first package of sanctions against Russia was introduced after Russia recognized the LPR and DPR (the first were in 2014, but more active in 2022). In the best part, they consisted in the prohibition of activities in the territory of the republics, the work of banks, investments and commerce. They did not affect the work of companies on the territory of the Russian Federation and do not affect the life of an ordinary citizen.
But shortly after February 24, the European Union and most countries launched new daily sanctions against Russia, which are already having a more serious impact.
What is the essence of sanctions against Russia?
The sanctions are certain coercive legal measures that are applied by some states (alliances, united powers) against another to influence it and citizens, to prevent certain actions.
In simple terms, this is a kind of punishment for violating some norms of international law. As with signing any contract, there are penalties for breaking or breaking any clause.
Flights and airlines
Russia (Russian planes) was banned from flying over more than 36 countries (information as of March 1), and with each new hour their number increases. All of Europe, USA, Canada, part of South America, several countries in the East, Africa and others have banned Russian planes from landing and flying over their countries.
What this means? With the introduction of this ban – no one will be able to fly through these countries, land in them or even fly over them. It turns out that for the Saint Petersburg – Kaliningrad flight you need to fly over Estonia, Latvia and Lithuania, and this is now impossible. To get to Kaliningrad you will need to fly in the neutral waters of the Baltic, but this will increase the cost of the ticket and the duration of the flight.
If we talk about other countries, the situation is even more complicated. It will take much longer and more difficult paths to get to France. The main option now is to fly to a country that allows Russian aircraft to land, transfer to other flights from other companies, and then there is a chance of arriving in another country. At the same time, there aren't that many “open” countries left, and not all of them have international flights.
What is another problem with sanctions against airlines? HNot all Russian companies fly in “their” planes. Many aircraft are leased (about 90% of all aircraft) from international companies – they must undergo regular inspections and receive spare parts for repairs, which, after the imposition of sanctions against Russia, will no longer work. And that means that next month they must return to the main company. Yes, the owners will suffer losses with the return of the aircraft and the need to repair it, but this is a necessity associated with sanctions.
As a result, flights in the near future will be carried out with great difficulty, including the return of Russians to the country, and in the future it will become much more difficult.
Sanctions against banks
Sanctions were imposed on VTB, FC Otkritie, Sovcombank, Promsvyazbank and Novikombank banks. They limit the operation of the banking system both in Russia and abroad. Already at this time, the situation has affected the card users of these banks, who are now abroad – they cannot buy goods with bank cards, they cannot withdraw money at ATMs in foreign currency and various other difficulties. Also, due to economic problems, banks are forced to raise interest rates on consumer loans, mortgages and other types of loans. They have already started to grow. For example, Sberbank increased mortgage by 18%.
Ban on the export of “high-tech products”
High-tech products are almost all modern technology, from aviation components to wristwatches or office monitors. Sanctions were introduced prohibiting the introduction of parts or complete equipment for work into the country.
The difficulty is that many companies in Russia work with these products or are involved in the manufacture of goods using individual components. Respectively, several companies will have to close down or significantly limit their work.
This ban will affect the cost of equipment and various goods, as well as the jobs themselves.
Investment ban for companies
Many companies were banned from foreign investment. Most often, they are manufacturers of goods used to participate in the war in Ukraine. Between them:
- “Uralvagonzavod”;
- Kalashnikov;
- “Almaz-Antey”;
- various aircraft manufacturing companies;
- shipbuilding companies;
- MiG;
- Russian helicopters;
- "Dry";
- “Tupolev”;
- CEC;
- rocket and space center “Progress”.
All companies will no longer be able to receive foreign investment, which has partially maintained the full operation of many companies.
Supply of goods, products and technologies for oil refining
Because of this sanction against Russia, refiners will have to switch to domestically produced machinery and equipment or replace them with Chinese equivalents. This is not believed to weaken the industry, but at the time of transition from one component and product to another, as well as during the period when there will be none, the cost and demand for any refined products (in particular, gasoline) will grow strongly.
In the near future, the price of refined products will not change significantly, but over time, the cost will increase.
Issuing visas for citizens of the Russian Federation
Part of the sanctions affect flights and visa benefits for politicians and parliamentarians, but Latvia, Lithuania and the Czech Republic (and it is not yet known how many countries will join) have already suspended the issuance of Schengen visas for all Russians.
No one will be able to travel to most countries in the world.
The sanctions against Putin, deputies and various other politicians, businessmen and artists only affect their personal assets, so they will not affect the economy of the country as a whole.
The situation with the ruble in Russia – buying dollars and euros
The global financial market is a unique system across the world, which is corrected according to the situation. After the start of hostilities on the territory of Ukraine, panic around the world and in Russia in particular, the exchange rate began to change very quickly. The ruble on the world market “collapsed” drastically.
When such situations occur, people start actively buying “safe” coins. Firstly, they include the dollar – against the background of such demand, this currency rose in price against the euro by 1.6%. The ruble and the Belarusian ruble fell in value, while the euro and the dollar rose in price. On average, on February 28, the dollar grew by 7.5%, the euro – 5.8%, and the ruble fell by 2.8%. This is the best historical drop in the Exchange rate.
In the future, an even better fall of the ruble and an increase in the value of the dollar and the euro are expected. In addition, due to the large number of restrictions on banks, the price of currency will increase, even with a relative stabilization of the situation. The Central Bank claims that it will be able to keep the growth of the value of the currency within the limits of 100-150 rubles, but the psychological factor also strongly influences, so more growth is expected. In addition, the amount of currency in the country will be relatively limited and many industrial companies will still have to pay in dollars or euros for purchases.
So the exchange rate will fluctuate and change.
Rising prices of goods and products
The Russian Federation has a lot of its own production capacities and facilities, but despite this, the growth in cost will affect absolutely everything. Many companies buy parts and components abroad, where transactions are made in euros or dollars. As purchases are almost impossible or only possible with a limited number of countries, and the exchange rate keeps going up, the price of everything that is now in Russia and everything that will be delivered in the future will start to increase proportionately.
Problems with production will affect absolutely all goods and products. From vegetables and fruits that need greenhouses, fertilizers, processing equipment (and hence spare parts for them) to grow, to plastic windows and cars.
Even industrial purchases (and many international companies have already cut ties with Russia) will cost more, because payments will take longer and the percentage of transfers will be much better. So, every step of any company's work and production will affect the final cost of products for a person.
Not to mention the goods that are entirely delivered from abroad. For example clothes or furniture. TSUM has already started to raise prices on purchased clothing collections and removed discounts from last year's collections.
An even better rise in prices is predicted, which Russians will feel in the near future.
What is happening with Visa and Mastercard?
Visa and Mastercard continue to operate within the country, as all transactions here are processed by the National Payment Card System (NSPK). It was created by the Central Bank in 2014 specifically for these cases, because the statements about blocking payment systems were made even earlier.
But another problem remains – all customers of banks that are under sanctions (and this is the majority of Russian residents) will not be able to use Visa and Mastercard outside the Russian Federation. Now, everyone abroad is advised to withdraw all the money or transfer it to other accounts.
Visa and Mastercard cards cannot be connected to Apple Pay and Google Pay.
also soon banning the purchase of goods or services on foreign websites. It should be understood that not all online stores or companies operating in Russia are registered in the same country, therefore, many products may become unavailable for purchase with a card.
Chances are that Asian banks will allow customers to pay abroad with their cards, but even here not everything is so simple. Even eastern countries have already declared their readiness to “connect” to sanctions, and many may simply refuse Russian customers as a precaution.
Bottom line: you can pay with Russian cards within the country and no restrictions are expected, but there will be difficulties with purchases abroad and outside Russia.
The results of the whole situation: what are the consequences of sanctions against Russia and what can be done?
Almost all of the new sanctions against Russia from the United States and the European Union take effect on March 28, although the price tag changes are already visible. And that's not talking about severed ties with car companies, sports unions, streaming companies, international distribution companies and several other companies that will close cooperation with Russia in the coming days. In this context, turning off SWIFT is not the worst alternative.
The European Union and the United States explained that sanctions would be eased or lifted if the aggression against Ukraine ceased. Today, the only possibility for this is the removal of the government or the refusal of V. Putin of his actions and the reduction of hostilities, which essentially consist in the withdrawal of troops from the territory of Ukraine and the complete cessation of the war.
Otherwise, sanctions will intensify and experts predict that Russia will face the “Iranian scenario”, when the country was isolated from the whole world and, having remained in its own production, an economic crisis began there and the situation seriously worsened. At best, the situation will be the same as in North Korea.
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