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After Vladimir Putin’s warmongering speech last night, Westerners say they are ready to adopt economic sanctions once morest Russia in the coming hours. The threat seems to have no effect on the head of the Kremlin. Because he prepared his country for this eventuality.
Yesterday, Monday February 21, the Russian Stock Exchange lost 12%. The ruble also fell under the pressure of events. Russian investors are nervous, but the Kremlin remains unfazed. On 18th February Vladimir Putin hailed the performance of the Russian economy. With a 4.5% rise in GDP in 2021, the losses of 2020 have been erased and the national wealth is now above the pre-pandemic level, the Kremlin leader said. He had no word on the situation in Ukraine, as if the Russian economy had become impervious to external dangers.
Vladimir Putin believes that the efforts made since 2014 will bear fruit.
Since the beginning of the conflict with Ukraine, the Russian economy has diversified, it is less dependent on oil and gas, and it has boosted its strengths. Its exports of minerals, aluminum, nickel, gold, diamonds and wheat, of which it has become the world’s leading player, give it a commercial advantage over the rest of the world.
The head of the Kremlin also took care to consolidate the public accounts. State debt is under control. It represents only 13% of the GDP, whereas it is more like 80% in Europe. The budget is built on a barrel of crude at 44 dollars, it is worth almost double today. This prudent management of public funds even resulted in a budget surplus last year. Dollar-denominated corporate debt was restructured into rouble.
This is part of the vast dedollarization plan started eight years ago, following the sanctions decided following the annexation of Crimea. To protect itself from a new salvo of sanctions, Moscow sought to free itself from the dollar.
In particular, by signing agreements with China
The two countries seek to settle their bilateral trade in their national currency. It is above all Russia that has intensified its efforts. Only 20% of its exports to China are denominated in greenbacks. On the other hand, 60% of Chinese exports to Russia are still in dollars.
Finally, the Russian Central Bank completely renewed its portfolio of foreign exchange reserves. Abandoning the dollar in favor of the yuan, the euro and gold. It has also considerably increased its reserves, bringing them to a record level, exceeding 630 billion dollars at the end of January.
Are these fully inflated reserves Russia’s life insurance?
Absolutely. This is what will allow it to support the ruble and the banks if they are targeted by sanctions, to regulate imports. And with 630 billion dollars in reserve, the Kremlin has plenty to see coming!
This is almost twice the reserves of 2014. They are the fourth in the world, equivalent to that of a petro-monarchy. Will this anti-crisis weapon be enough to resist the sanctions? Some American experts doubt it. In any case, this is the conviction of the Kremlin.
► IN BRIEF
Asian stocks open lower today
They are weighed down by this atmosphere of war which prevails throughout the world: -2% for Tokyo at mid-session, -3% in Hong Kong.
