Following the August 14th strikes on the Ukrainian city of Odessa, Moscow banks have reported the lowest value of the ruble in the last 16 months, with 1 RUB currently worst less than 0.01 U.S.D. As the Russian government is currently spending more than it is earning, and with many businesses having pulled out of the country since the war began, the country has found itself in a recently unprecedented economic decline, placing nearly 20 million people’s income below the subsistence minimum according to Statista data.
At the same time, the Putin-aligned Russian aristocracy have only been getting richer on war contracts, further increasing the economic divide. The central bank of Russia has stopped purchasing foreign currencies and is strongly considering raising interest rates.
The Russian government is the obvious culprit responsible for the fall in value. “The state has essentially raised demand for imports through spending and subsidized borrowing, which fundamentally weakens the ruble,” Alexandra Prokopenko, a former central bank official and scholar at the Carnegie Russia Eurasia Center, told Financial Times. “Blaming the central bank is like a drunkard’s search – looking for the guilty where the light is.”
Even one of the, so far, pro-war Russian oligarchs, Yandex founder Arkady Volozh, has been driven by the sudden economic decline to speak up. Volozh has been sanctioned by the E.U. for supporting the invasion and is believed to have previously benefitted from the conflict financially, but the falling ruble seems to have changed his mind. “Russia’s invasion of Ukraine is barbaric, and I am categorically against it,” Volozh stated.
From a pro-Ukrainian point of view, it might be tempting to view the ruble’s decrease of value as a purely positive event. From an economic standpoint, the weakening ruble indicates that Russia’s war effort is failing and that the war itself is becoming unsustainable. We should not forget, however, that the failure of Russia’s economy is not just an abstract statistic. It is the shrinking of the middle class as more and more find themselves without sufficient incomes. It is the lack of healthcare and education in rural areas and it is young men in Eastern Russia being forced to join the military due to a lack of other ways to support themselves and their families. It is just another side of the tragedy that the Russian government brought about by invading Ukraine.
One group, however, has not only avoided being negatively affected by the war, but even profited. According to the data collected by Proekt, an independent Russian media outlet that the government has denounced as an “undesirable organization,” 81 out of Forbes’ 200 wealthiest Russians have openly participated in providing equipment for the Russian army. The oligarchs, despite sanctions placed on them by the West and possessions seized at the beginning of the conflict, are still left richer by the war. This has led to them providing support for Putin and his regime, with denunciations such as Mr. Volozh’s being an extreme rarity. Previously the only known example was Oleg Tinkov, who, after criticizing the invasion during his medically motivated stay in London, was then forced to sell off his shares in Bank Tinkoff for pennies to magnate Vladimir Potanin, the wealthiest man in Russia.
The longer the war goes on, the more we can expect the Russian economy to disintegrate. And while we can hope for other members of the 1% to follow Volozh and, for one reason or another, pull their support, the chances of that are low while they continue to benefit from the conflict. Realistically, it must fall to the people of Russia to do whatever is in their power to end the war, and to the people of the West to not lose sympathy for Russia’s citizens even as we condemn the actions of those in power. The longer the Russia-Ukraine war goes on, the more blood is shed, be it directly on the battlefield or indirectly from poverty.
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