“Our economy will need profound structural changes in these new realities, and I won’t hide it: they won’t be easy; they will lead to a temporary increase in inflation and unemployment, “Putin said in a televised commentary on Wednesday before a video meeting with Russian government officials.
The impact of the sanctions reverberated across Russia, leading to factory closures, job losses, doubling interest rates and falling ruble. Inflation has galloped beyond the central bank’s target. Russia risks defaulting on its debt.
Putin said the West’s effort to organize an “economic blitzkrieg” against Russia had failed, but warned that there would likely be further attempts to increase pressure on Russia.
Referring to an exodus of Western companies from Russia in recent weeks, Putin has offered an olive branch to those multinationals that still do business in his country.
“We appreciate the position of those foreign companies that, despite the unforgivable pressures of the United States and its vassals, continue to work in our country,” he said. “Going forward, they will certainly receive further development opportunities.”
The remarks came when Ukrainian President Volodymyr Zelensky spoke to the US Congress, urging lawmakers to further step up economic pressure on Russia for the invasion. He also called on lawmakers to pressure American companies in their districts that are still doing business with Russia to stop.
Putin pledged to implement a number of measures to offset the pain of sanctions against the Russians, including increased payments to retirees and state employees, an increase in the minimum wage and financial assistance to businesses. The purchasing power of Russian municipalities was deeply eroded after Western sanctions triggered a sharp devaluation of the ruble.
But Mr. Putin stopped short of approving Soviet-style price controls. He also said that the Russian central bank will not resort to printing money to meet the government’s spending needs.
Coordinated US and EU sanctions have hammered the Russian economy, isolating much of the Russian financial system from the rest of the world and stifling the flow of many imported goods. Western companies ranging from Boeing co.
at McDonald’s corporate
to Volkswagen AG
they withdrew from Russia, either to comply with sanctions or because of public anger over the war in Ukraine.
In his remarks on Wednesday, Putin detonated one of the West’s main financial weapons against Russia, freezing Russian central bank assets held in North America and Europe. This prevented Moscow from using much of its $ 630 billion reserve holdings to support the ruble.
“Now everyone knows that financial reserves can simply be stolen,” Putin said. He called the Russian central bank asset freeze illegitimate and warned that it would lead countries around the world to store their reserves in tangible assets like gold, land and commodities rather than financial assets.
Since Russia attacked Ukraine in late February, the ruble has lost about 18% of its value against the dollar, according to FactSet. It was down more than 40% earlier this month before recovering losses.
Russian consumers have reported price increases and shortages of some products in stores. The country’s statistics agency said Wednesday that consumer prices rose 2.09% in the week ending March 11, bringing the year-to-date increase to 5.62%. This easily exceeds the 4% target set by the central bank for the full year.
Meanwhile, the cutting of components from Western suppliers has threatened to stop production in part of the Russian industry. During a video meeting with Putin on Wednesday, the leader of the Russian region of Tatarstan said that the production of the truck manufacturer Kamaz, which employs tens of thousands of people in his region, could decrease by 40%.
Russia may also be on the verge of defaulting on its debt for the first time since 1998. The Russian government was required to pay $ 117 million in interest payments on two dollar-denominated government bonds on Wednesday. The Russian finance minister said the payment had been made and appeared to be tied to the US bank where Moscow holds its dollars. The US Treasury Department retorted that the sanctions did not stop Russia from servicing its debt.
Russia’s central bank will meet on Friday to discuss possible interest rate changes. In its last meeting on February 2, 28, just as Western sanctions were starting to be felt, the central bank more than doubled its benchmark rate to 20% to make holding the ruble more attractive and cushion the expected drop.
—Caitlin Ostroff and Paul Hannon contributed to this article.
Write to Alexander Osipovich at firstname.lastname@example.org
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