A line for an A.T.M. in Moscow. Fears of runs on Russian banks are rising.Victor Berzkin/Associated Press
The financial front
As the Russian military meets stiff resistance on the ground in Ukraine, the U.S. and its allies are aggressively escalating financial sanctions. The effects on the Russian economy could be devastating, and the global reverberations of the punishments, unheard-of in severity and scope for an economy of Russia’s size and interconnectedness, are destabilizing, too.
A quick catch up: On the financial front, the U.S., the E.U., Britain and others moved to exclude big Russian banks from SWIFT, the financial messaging system that underpins most international transactions. These countries also said that they would freeze assets belonging to Russia’s central bank, depriving the institution of hundreds of billions of dollars in foreign reserves. Nicolas Véron, a senior fellow at Bruegel and at the Peterson Institute for International Economics, called the combination of financial sanctions “completely unprecedented.”
The impact in Russia: The ruble cratered against the dollar in early trading. And fears of bank runs are rising, as the depreciation threatens to stoke inflation, which some estimate could now be running as high as 70 percent. Today, the Russian central bank more than doubled its benchmark interest rate, to 20 percent, to stem the ruble’s fall. Russia has banned foreigners from selling local securities and ordered domestic exporters to sell most of their foreign-currency holdings. Russia’s stock exchange was shut for the day.