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Russian President Vladimir Putin

Russian President Vladimir Putin on Monday announced emergency measures intended to prop up the plunging ruble, including banning residents from transferring money abroad and forcing exporters to buy the currency. Sanctions imposed by the West over the weekend had an immediate impact in Moscow on Monday, with the ruble falling to a record low and the central bank more than doubling its key interest rate to 20 percent.

A decree from the Kremlin banned foreign cash transfers and said exporters would now be required to hold 80 percent of their reserves in rubles, meaning big groups such as energy giant Gazprom would have to buy the currency. State TV showed a meeting of Putin with his prime minister, finance minister and the head of the country’s biggest private bank, Sberbank, and the central bank.

“I’ve invited you here to talk about issues to do with the economy,” he told them. “I mean of course the sanctions which the so-called Western community, the empire of lies, is trying to implement against our country.”

Earlier Kremlin spokesman Dmitry Peskov told journalists that “the Western sanctions on Russia are hard, but our country has the necessary potential to compensate the damage.” The sanctions are designed to freeze Russian banks out of the international financial system and limit the ability of the Russian central bank to use its reserves to help prop up the ailing national currency.

The United States said Monday that it had banned all US transactions with Russia’s central bank and had frozen its reserves, while Switzerland also said it would adopt the same measures announced by the EU at the weekend.

The value of the ruble against the dollar is around a third of its level of 2014 before Putin annexed the Crimea region of Ukraine, sparking sanctions and a major crisis with the West.

‘Rushed to the bank’

For Sergei Khestanov, an advisor at Open Broker, a brokerage, Russia can survive the onslaught of sanctions providing it can continue exporting gas and oil. 

“For as long as there are no real sanctions on Russian exports, above all oil and gas, there won’t be a catastrophe,” he said, while adding that “people will of course feel the effects.”

The ruble’s plummet revived memories of financial instability of the 1990s, when millions of Russians saw their savings evaporate under the effect of a devaluating currency and soaring inflation.

Natalia Proshina, 75, like many Russians, feared her savings would vanish overnight.

“As soon as I saw the ruble nosedive, I rushed to the bank,” she told AFP Monday.

The huge devaluation of the ruble would be expected to fuel inflation in Russia, while the sanctions will hit the ability of non-energy-related companies to export and import goods and services.

The massive hike in interest rates meanwhile will also raise the cost of borrowing, hitting Russian consumers and companies with debt. The Moscow Stock Exchange was closed all day on Monday to forestall what is expected to be a massive sell-off of Russian equities. 

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