Putin signed Russia’s verdict? How the recognition of “LDNR” will hit the economy of the Russian Federation

Russian President Vladimir Putin on February 21 signed a decree recognizing the independence of the pseudo-republics “LPR” and “DPR”.

After that, the head of the Kremlin asked the Federal Assembly to ratify the documents on the recognition of the groups that occupied part of Donbas as soon as possible.

According to Putin, this decision has been brewing for a long time, and recognition of the independence of the quasi-republics is required immediately.

Despite the jubilation of the militants, many Russians do not share their enthusiasm, because in anticipation of sanctions from the West, the stock markets of the Russian Federation and the Russian ruble collapsed to unusually low levels.

What are the allies saying?

The overwhelming majority of the world community reacted negatively to such a step by Putin and promised to impose really painful sanctions against the Russian Federation.

EU representative for foreign affairs and security policy Josep Borrell said that the first set of EU sanctions will be adopted on February 22, and this is not the end.

According to Bloomberg, EU sanctions against Russia may include a limited list of individuals and organizations, a ban on mining and trade with the LDNR.

Sanctions against Russia are being prepared not only by the European Union and the United States, but also Japanwhich wants to impose restrictions on the export of high-tech products, chips and robotics to the Russian Federation.

“Putin will understand that he seriously miscalculated by recognizing the LDNR,” British Prime Minister Boris Johnson said.

Later, the UK announced the imposition of sanctions against five Russian banks.

What will happen to the Russian economy?

As told in an exclusive comment “Today” economist and financial analyst Alexey Kushchby recognizing “LDNR” Putin really got himself into trouble, but it’s too early to talk about a death sentence for the entire economy.

“The fact that the Russian economy will face problems is obvious. But we can already see that in terms of disconnecting Russia from the Swift payment system, the position of the West is unequivocal – they will not be disconnected from it. Accordingly, the Russian Federation will not have any serious transactional problems” , says the expert.

Also, according to the analyst, no sanctions will be imposed against the funds of the Central Bank and Russian residents of the fund, and no energy embargo will be introduced.

Sanctions may affect investments in the Russian economy, the supply of some technology, international cooperation, the expert says.

They have already touched on Nord Stream 2, the certification of which was stopped by the German Ministry of Economy.

The problem is that since 2014 the Russian economy has become more resilient to such shocks, an import substitution policy has been implemented, and the economic model itself has been taking shape. as if inside a capsule.

“What we are seeing is just a wave of investment shock, since the scenario of recognizing the so-called “LDNR” was very poorly read in the applications of Western politicians and we are seeing the withdrawal of capital from foreign investors from the Russian Federation,” says Kushch.

It was these massive sales of assets that caused the collapse in the stock market. Now the shares that non-residents “dumped” for next to nothing, bought by domestic market players.

Sanctions are meaningless?

Certainly not, says Aleksey Kushch and adds that it is even more than the allies could do for Ukraine, since their economy also suffers tremendously from this.

The purpose of sanctions, the expert emphasized, is not to punish someone or force someone to do something, but to deter Russia from further advance.

If you immediately throw out all the trump cards, it will be for the Russian Federation “ticket to war”therefore, sanctions will be introduced “by the teaspoon”.

The current measures, although they will not destroy the Russian economy to the ground, but gradually worsen the condition of the population and slow down economic growth.

“It’s impossible to say that Russia will not pay attention to sanctions. If there weren’t any, we would have seen a much sadder scenario for Ukraine,” the expert says.

What is happening with the hryvnia?

On the morning of February 22, the Ukrainian hryvnia on the interbank market fell sharply against the US dollar due to Putin’s recognition of the independence of the LDNR.

The hryvnia exchange rate fell to 29.13 UAH/USDbut a little later the National Bank still managed to stabilize the situation a little.

Andrey Shevchishin, head of the analytics department at the Forex Club Group of Companies, told Segodnya that the mood in the market is pessimistic and further everything will depend on the incoming news.

Segodnya also wrote that Germany was stopping the certification of Nord Stream 2 and told what was happening to the Russian stock market.