IN response Russia's aggression in Ukraine, Westerners start economic war. The United States has banned the sale of a wide range of goods to Russia; Big companies withdraw by the dozen; And several countries together have frozen 60% of the central bank's international reserves. The idea was to send Russia's economy into a free fall, punishing President Vladimir Putin for his aggression. The ruble fell more than a third against the dollar in the week following the attack, and shares of many Russian companies fell.
Is Western strategy still going to be planned? The chaos in the Russian market seems to have subsided. The ruble has jumped since its inception in early March, and has now reached its pre-war level. The main benchmark of Russian stocks sank by one-third, but has since stabilized. The government and most companies are keeping up with their payments in foreign currency bonds. A race has ended with banks withdrawing about 3trn rubles (31bn), with the Russians returning most of the cash to their accounts.
The policy has helped stabilize a battery market. Some are orthodox. The central bank has raised interest rates from 9.5% to 20%, encouraging people to keep interest-bearing Russian assets. Other principles are less common. The government has ordered exporters to convert 80% of their foreign exchange earnings into rubles. Trading on the Moscow Stock Exchange has become, to use the central bank's accent, "negotiable". Short-selling is prohibited, and non-residents will not be able to offload the stock until April 1st.
The real economy, though, is in some ways a financial mirror image: it's healthier than it seems at first glance. A weekly measure of consumer prices shows that they have risen more than 5% since the beginning of March alone. Many foreign companies have pulled out, reducing supply of goods, while a weaker currency and sanctions have made imports more expensive. However, the price of everything is not increasing. Vodka, primarily domestically produced, costs a little more than before the war. The price of petrol is almost the same. And although this is early days, there is still very little evidence of a major blow to economic activity.
Produced by and by an estimate based on Internet-search data OECDThink-tank of a rich country, Russia GDP The week of March 26th was about 5% higher than the previous year Collected by other "real-time" data Economist, Such as electricity consumption and rail loading of goods, are up. A cost tracker, produced by Sberbank, Russia's largest lender, has grown slightly over the years. Part of that reflects the fact that people stockpile products before prices rise: the cost to household is particularly strong. However, the cost of services has dropped slightly and is much healthier in most epidemics.
Russia looks set to enter recession this year. But it could turn out badly in the end, as most economists have predicted. GDP Fall of 10-15% - depending on three factors. The first is that ordinary Russians began to worry about the economy as soon as the war broke out and cut spending - as happened in 2014, when Russia invaded Crimea. The second is whether imports from the West will eventually shut down production due to restrictions on companies' access. Russia's aviation sector is particularly vulnerable, as is the car industry. Yet many large businesses that began during the Soviet era are accustomed to operating without imports. If any economy can come close to dealing with isolation from the world, it will be Russia.
The third and most important factor relates to Russia's fossil-fuel exports. Despite many sanctions, Russia still sells about $ 10 billion worth of oil a month to foreign buyers, equivalent to a quarter of its pre-war exports; Revenue from the sale of natural gas and other petroleum products is still flowing, too. It provides a valuable source of foreign exchange through which it can buy some consumer goods and parts from neutral or friendly countries. If this does not change, the Russian economy may reject the worst forecast. 3
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This article was published in the print edition of the section entitled "Wounded Bears"