Russia: implications of the rouble's slump?

Spotmedia sees life getting harder and harder for the Russian population:

“Although support for Putin is still strong, a deterioration in the quality of life could lead to people turning their backs on the president and protests against the regime in Moscow. ... Life in Russia has changed since the war began and continues to change, despite the attempts by representatives of the government to maintain a semblance of normality. Censorship, arrests, recruitment arrests, drone attacks and also price increases have caused many Russians to leave the country. Those who have stayed lead a double life. They're afraid to speak out and struggle from one day to the next.”

The Neue Zürcher Zeitung sees the Russian economy and Vladimir Putin facing a catastrophic situation:

“Economic policy in Russia is now nothing more than an appendage of the war. The country is sliding even further into a war economy that will destroy Russia's economic potential for a long time to come. Kremlin boss Vladimir Putin took office in 2000 with the promise of providing stability after the 1990s and strengthening Russia's standing in the world. If that was what he really wanted, he has failed miserably. In this respect, the exchange rate is indeed a measure of international prestige and Russia's perception of its self-worth.”

Russia is losing out on its sales of oil, economist Igor Lipsitz explains on The Insider:

“Foreign currency inflows have declined for two reasons: the low oil prices and the deteriorating quality of foreign exchange earnings. Due to the disruption of traditional channels, much of the oil and gas exports now go to India and China, which pay in currencies that are not fully convertible (in particular India). Russia is stubbornly supplying oil to India and even increasing its deliveries, but mainly receives rupees in return. What it will do with them remains unclear, as they cannot be converted or traded on the foreign exchange market.”

Polityka sees dark clouds gathering over Russia's economy:

“If the authorities fail to stabilise the currency's exchange rate, the psychological impact could trigger a spiral of fear and weaken confidence in the financial institutes. Out of fear of inflation and depreciation of the rouble, people increase their purchases of things like household appliances, cars and flats. But consumption usually drops dramatically shortly afterwards.”

Clearly the sanctions are having an effect after all, Corriere della Sera comments:

“This is obvious in these hours: an extraordinary summit of the Bank of Russia will be convened today to try to slow the slide of the rouble, which has been going on for months but is now accelerating. ... But the emergency measures will not be enough to cover up the problems at the political level or the structural problems of an economy that is almost exclusively geared towards financing the war.”

The consequences within Russia are limited, says the BBC:

“Russia has been here before - the rouble fell steeply after the full-scale invasion of Ukraine. But then it recovered. ... There is no panic in Russia. There are no queues outside banks here. After 18 months of war and isolation, Russians are getting used to bad news. This is the most sanctioned country in the world. ... The economy has not collapsed - as many in the West had predicted. The Kremlin still has sufficient resources to maintain tight control over the country.”

In a Telegram post picked up by Echo, opposition politician Elvira Vikhareva explains why the weakness of the rouble actually plays into the Kremlin's hands:

“Firstly, it allows the authorities to recruit more contract soldiers and mercenaries. They are paid in roubles, if at all. And the state now has significantly more roubles. Secondly, it is a blow to the emigrants. Try living abroad if you earn money in Russia. Everyone will come back and there will be a second wave of mobilisation. Thirdly, there is the isolation of Russians from Europe and the world as a whole. People no longer go on holiday or even see what life is like in the 'unfriendly countries'. The walls of the besieged fortress are being reinforced by the rouble exchange rate.”

Video blogger Maxim Katz points to the major increase in government spending in a post republished by Echo:

“Government spending has risen to unbelievable levels, the state is having to take care of industrial production, buy lots of components and equipment as well as drones from Iran and artillery from North Korea. ... The state has to spend money on building defence positions, invest in import substitution - basically pay for everything endlessly. The state is now the only investor and it is flooding the economy with roubles.”

Commenting in the pro-Kremlin newspaper Izvestia, financial analyst Alexander Dzhioev says there is no reason to worry:

“If we assess the macroeconomic conditions, the reaction of market participants to recent events seems overemotional. The real effective exchange rate of the rouble, taking into account price levels in different countries, is currently at a level comparable to that in 2021. So the value of the national currency is close to historically appropriate levels. And given the restrictive Central Bank policy and the rising prices, which should curb the demand for imports, there is little reason to expect a further depreciation of the rouble.”