On the economic collisions associated with the Russian-Ukrainian war

Baku/01.03.22/Turan: The war between Russia and Ukraine has been going on for six days. The economic sanctions imposed by the West on Russia have put the Kremlin in a difficult position. Every minute the Russian ruble depreciates more and more.

What steps will Russia, which has lost supporters and trading partners in the West, take to get out of this situation? Are these sanctions capable of ruining Russia? What fate awaits the Azerbaijanis who came to Russia to work in order to support their families in Azerbaijan? How will the economic downturn in Russia affect the economy of Azerbaijan?

Economist Natig Jafarli answers these and other questions in the “Difficult Question” program.

According to him, one can hardly take seriously the fact that Russia can disappear from the political map of the world.

“Even against Iran, which was subjected to the most severe sanctions, such severe sanctions were not applied, which are currently applied against Russia. But this does not mean at all that Russia has completely “blocked oxygen”. Because out of 296 Russian banks connected to the SWIFT system, only 5 banks will be excommunicated from SWIFT (one of the most severe sanctions). For the time being, control over the remaining 291 banks in Russia will be strengthened. Those. for known areas of activity, money transfers will be possible. But banks that are not excommunicated from SWIFT will not work as before.

In addition, the economist said, Russia has invested in long-term treasury bonds (Bonds), "golden shares", etc. about 300 billion dollars. Also, it has gold reserves of about $130-135 billion, a significant part of which - about $100 billion is stored in Russia, and the rest in London.

“The gold stored in Russia is a so-called safety cushion. Also in the banks of Russia there is a cash currency (dollars and euros) for about 40-45 billion dollars. These resources will allow Russia to stay afloat for some time. Despite the fact that after an unprecedented collapse of shares occurred on the trading floors in Russia, after which the Moscow Interbank Currency Exchange was closed until March 5, and almost simultaneously, the Central Bank of Azerbaijan (CBA) and the Russian government chose the most unsuccessful , a restrictive scenario (the decision to raise the key rate to 20% per annum), which contributed to the emergence of a black market, and the dollar began to be sold on them at a price of 140 to 160 rubles, and in some cities for 200 and even 300 rubles,” Jafarli said, adding that in addition, Russia has invested in long-term treasury bonds (Bonds), "golden shares", etc. about 300 billion dollars.

“Therefore, despite the severity of the sanctions applied by the West against Russia, it is doubtful that they will be able to stifle the Russian economy. Because Russia and Western countries have mutual dependence,” Jafarli believes.

However, according to him, if Russia's aggression in Ukraine is not put to an end in the near future, then an embargo on the purchase of Russian oil will become inevitable. The next step could be the complete disconnection of Russia from SWIFT. It is also possible to confiscate (so far, the talk is only about freezing) movable and immovable foreign property of Putin, his relatives and his entourage.

“Of course, Russia will try to find an antidote and build schemes to circumvent sanctions. However, it is obvious that the current sanctions, unlike the previous ones, will also hit ordinary Russian citizens, as if inviting them to account for the actions of their government. At the same time, this means that the inflow of money from Russia to Azerbaijan will sharply decrease,” the economist predicts.

Jafarli does not rule out the bankruptcy and return of Azerbaijani medium and small businessmen from Russia in the near future.

“Tens of thousands of people can return to their homeland. Azerbaijan is not ready for this. This, of course, will lead to a worsening of the social situation in the country. We have significant unemployment, there is no favorable environment for business development, and their return may create additional problems,” he concluded.—0—