After months of speculation, Vladimir Putin invaded Ukraine on February 24, 2022, the largest conventional military attack on any sovereign state since World War II. The world has responded quickly. In an unprecedented move designed to ruin Russia’s economy, the Western powers are leading the charge to create a banking crisis, which they believe will plunge Russia into a deep recession. The whole world is watching as Vladimir Putin leads the assault on Ukraine, and the West creates an attack of their own, focusing on the banking industry.
As the old saying goes, hit them where it hurts. And for Russia, this means dismantling something they hold so dear: their economy. Russia has a $1.5 trillion economy, the 11th largest in the world. But if Western countries have their way, it won’t be for long. The coalition of Western countries has cut off Russia’s two largest banks, Sberbank (SBRCY) and VTB, from being able to directly access the US dollar. Some banks have also been removed from SWIFT, a global messaging system connecting financial institutions to create fast and efficient payments. Preventing Russia’s central bank from selling dollars and other foreign currencies to defend the ruble, means that currently about $1 trillion in Russian assets have been frozen.
“We will provoke the collapse of the Russian economy,” French Finance Minister Bruno Le Maire said.
The plan seems to be working. According to the BBC, “The US says its actions hit 80% of banking assets in Russia; and the EU 70%. The allies have also taken steps to limit Russia’s access to key technology, such as microchips and lasers; and moved against cryptocurrencies.” The two major Moscow stock indexes are down more than 20%, and the ruble has dropped astronomically. Russian families will find it hard to make ends meet, especially when life is already difficult there.
“Western democracies have surprised many by pursuing a strategy of exerting intense economic pressure on Russia through effectively cutting it off from global financial markets,” Oliver Allen, markets economist at Capital Economics, said.
“Our strategy, to put it simply, is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine,” a senior US administration official told reporters.