Russia is heading toward economic collapse

Meanwhile, the West is supporting Ukraine with deliveries of weapons, food, medicine, fuel, and military equipment. Germany, as the EU’s leader, significantly changed its stance and announced a new era in which it will allocate 2% of GDP to defense, which would approach EUR 100 billion. For comparison, Russia’s military budget is about half of that. Fear of Moscow stems mainly from the largest nuclear arsenal in the world, which Putin likes to use to intimidate the world. The German chancellor also announced a significant move away from dependence on Russian gas and plans to build two LNG terminals. Renewables are also expected to help Germany, and therefore investments in this sector will increase. After this conflict, the EU will significantly increase defense spending and move away from energy dependence on Russia.

The Russian economy is bleeding massively

Allies eventually agreed on sanctions and approved removing certain Russian banking institutions from the SWIFT system and freezing the assets of all oligarchs and their families linked to Putin. They halted all exports of key technologies to all industrial sectors and froze all assets of the Russian central bank abroad. Switzerland is also joining the sanctions; it no longer wants to stand on the sidelines and will participate in freezing Russian assets in its country. Putin and his associates could not have imagined today’s scenario even in their dreams. Western sanctions have reached such high levels that the Russian ruble has fallen to a historic low, and residents are panicking and withdrawing their money mainly in “evil U.S. dollars.” The reason is simple: it is highly likely that if Putin does not change his policy, Russia is heading for bankruptcy. In panic over the falling ruble and attacks on the financial system, the central bank raised the key interest rate from 9.5% to a record 20%. The EU also closed its airspace to Russian airlines and restricted visa issuance. Canada is even talking today about banning imports of oil from Russia into their country. Sports associations are also joining in and will not allow Russia to participate in any international competitions. These sanctions will put pressure not only on Putin and those close to him, but also on the entire Russian nation, which will create enormous pressure on its president. This plan is slowly taking effect, and protests are taking place in the Russian Federation every day. Russian oligarchs have also begun speaking out and are calling for an end to the war. Private Western companies are also not sleeping and are massively divesting from activities in Russia, mainly in the refining business. The departing know-how will hurt Russia even more over time, because thanks to these companies Russia had an advanced refining industry with high commodity output. Some state investment funds are also taking a similar stance and are selling off assets in Russia.

The impact on the economy came immediately

Western sanctions have literally destroyed Russia’s banking system and the biggest banks are facing bankruptcy. Sberbank, Russia’s largest bank, has lost more than 99% of its value on stock markets from its recent peak. All Russian stocks that are still traded in London are bleeding in a similar way. Sberbank has fallen into insolvency in several EU countries and announced its withdrawal from the West. It is now clearly visible that the Russian economy is in ruins and Putin has brought his country to its knees. Naturally, fears are rising about whether Russia can continue to repay its debt. If the war continues, it is highly likely that the West’s last economic weapon against Russia will be energy commodities. If that step were taken, the Russian Federation would certainly go bankrupt. According to some analyses, the EU could survive the next winter without Russian gas, but it would have to tighten its belt and reduce consumption by 10%. Putin’s unconsidered moves are causing enormous economic damage that will likely push a huge part of Russia into extreme poverty. At present, it is a race against time, and for that reason more and more soldiers and equipment are being sent into Ukraine. According to military experts, approximately 75% of Russia’s armed forces are deployed, compared to the original 40%. However, Russia will not suffer only economic and military losses in its army, but also humiliation in the world stemming from its aggressive actions toward Ukraine. The Kremlin has been pushed to the periphery of foreign relations with almost the entire world. In addition, it can be seen that some ideas about the extreme strength of the Russian army are probably distorted. Everyone is now aware that Ukrainians will never surrender and will never obey a puppet government, and therefore the current battles are losing their rational basis. It is certain that Putin is not fighting for Ukraine in these times, but for his political survival. Let us hope that the fighting ends as soon as possible and that this madness becomes another historic warning sign for Europe.