Russia to see ‘rampant inflation’ and ‘shortages in shops’ as sanctions take hold

Ukraine: Counter-attack close to 'cutting off' Russian supplies

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There are fears that the Kremlin’s invasion of Ukraine will see Russia slide back to the shortages and endless queues that characterised the Soviet Union. Just a week after Russia launched its invasion, bags of sugar and buckwheat began disappearing from local markets. Meanwhile, shops in some major cities have reported shortages of essential products such as tampons, and the prices of imported goods such as clothing have also skyrocketed.

Yet despite a sharp rise in the price of basic products, the Kremlin has blamed panic buying and insisted that there is more than enough supply to satisfy demand. 

The West widely condemned Putin’s invasion of Ukraine, and responded by imposing sanctions that the Russian President labelled “economic blitzkrieg”.

According to former BBC Moscow correspondent Mr Connolly, the sanctions are beginning to take effect.

Mr Connolly told “[Sanctions] are starting to have an effect.

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“You’re going to see rampant inflation in Russia and there will be some shortages in shops.

“There were already shortages of goods from the European Union because there was a mutual exchange of sanctions after the invasion of Crimea.”

A weakening ruble has sent prices soaring across the country.

Meanwhile, Russia’s annual inflation has shot up to 12.5 percent, the country’s highest level since 2015 when the country’s economy was reeling from a global drop in oil prices and sanctions over the annexation of Crimea.

Russia’s Economy Ministry announced that Russia inflation was at 12.5 percent as of March 11, having a week earlier been at 10.4 percent. 

Mr Connolly noted that Russia had tried to ‘sanction-proof’ its economy in recent years, though the unprecedented severity of the West’s sanctions was still having an effect.

The Russia expert said: “One of the things that Putin was trying to do was develop Russia’s ability to make its own cheeses.

“That sounds fairly banal, but he was trying to develop a capacity to say to the Russian people ‘look we don’t need these foreign foods coming in because we can do much more ourselves’.

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“So there has been an effort to ‘sanction-proof’ the Russian economy.

“But the closure of the Russian stock market for an entire week tells you that the Russian authorities are terrified that these sanctions will cause a massive drop in the value of the ruble ‒ that’s already begun to happen.

“Russia won’t be able to pay its debts on the world stage.

“It’s going to start trying to pay its foreign debt in rubles instead of dollars and euros. That is going to look like a default.

“All of this will eventually feed through into higher and higher prices [and] fewer and fewer choices for ordinary Russians.”

In response to the ruble plunging by a fifth in the wake of sanctions, Russia’s central bank more than doubled interest rate to 20 percent.

The central bank tried to prevent the currency falling further by increasing the main rate from 9.5 percent to 20 percent. 

It also sought to protect the country’s economy by refusing to open the Moscow Stock Exchange.

The Moscow Stock Exchange will partially reopen on Thursday after a record closure that lasted almost a month. 

It will resume trading in stocks for some of Russia’s biggest companies including Gazprom, Rosneft and Sberbank. 

Russia’s central bank said that short selling will be banned however, while foreign shareholders will also be unable to withdraw their investments due to restrictions having been implemented on foreigners exiting local stocks.

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