Wounded bear

Under unprecedented sanctions, how is the Russian economy faring?

Better than you might think

In response to Russia’s invasion of Ukraine, the West launched an economic war. America banned the sale of a wide range of goods to Russia; big companies pulled out by the dozen; and a number of countries together froze 60% of the central bank’s international reserves. The idea was to send Russia’s economy into free fall, punishing President Vladimir Putin for his aggression. In the week after the invasion the rouble fell by more than a third against the dollar, and the share prices of many Russian companies collapsed.

Is the West’s strategy still going to plan? The chaos in Russian markets seems to have subsided. Since its low in early March the rouble has jumped, and is now approaching its pre-war level. The main benchmark of Russian stocks plunged by a third, but has since stabilised. The government and most firms are keeping up with their payments on foreign-currency bonds. A run on banks that saw nearly 3trn roubles ($31bn) withdrawn came to an end, with Russians returning much of the cash to their accounts.

A battery of policies has helped stabilise the markets. Some are orthodox. The central bank has raised interest rates from 9.5% to 20%, encouraging people to hold interest-bearing Russian assets. Other policies are less conventional. The government has decreed that exporters must convert 80% of their foreign-exchange proceeds into roubles. Trading on the Moscow stock exchange has become, to use the central bank’s euphemism, "negotiated”. Short-selling is banned, and non-residents cannot offload stocks until April 1st.