The FINANCIAL — Russian citizens are already feeling the punishing effects of economic sanctions imposed by Western powers over the invasion of Ukraine, and the financial situation for most people is likely to deteriorate.
The ruble is now worth less than a penny and the economy is teetering, with Russia expected to default on billions of dollars in foreign debt. Multinational companies across all sectors are pulling out of the country, taking their products, services, and jobs with them, according to University of Pennsylvania.
“Pretty much anybody who has participation in the banking system, which is a vast majority of the population, feels it one way or another,” Wharton finance professor Nikolai Roussanov says. “This is felt by all strata of society, maybe in different ways.”
The G7 nations of the United States, Canada, Germany, Italy, France, United Kingdom, and Japan are leading at least 20 other countries in placing unprecedented economic sanctions and export controls on Russia following President Vladimir Putin’s unprovoked conflict with Ukraine. After weeks of massing troops along the border, Putin ordered the invasion on February 24.
Roussanov said Russian citizens are seeing their purchasing power erode sharply because of the depreciation of the ruble. They are prohibited from withdrawing hard currency in excess of $10,000 due to emergency regulations imposed by the Russian Central Bank, and they can no longer use bank cards issued by Visa or Mastercard, which have suspended operations in the country. And product shortages are beginning to show in stores ranging from supermarkets to luxury goods.
“The disappearance of goods from stores, as well as rising prices, is going to make it quite unpleasant in the short run,” Roussanov says. “In the longer run, the question is whether jobs will start disappearing as well.”