On Wednesday, the European Union announced that it intends to remove seven Russian banks from the SWIFT messaging system within 10 days.
The list of sanctioned banks includes VTB, Russia’s second largest bank, Otkritie Bank, Novikombank, Promsvyazbank, Bank of Russia, Sovcombank and VEB. Without access to SWIFT, the Belgian messaging system that links more than 11,000 financial institutions worldwide, Russian banks and, by proxy, the Russian economy are likely to suffer severe losses. For example, Iran lost 30% of its foreign trade after the SWIFT ban in 2012.
VTB share price |Source: Yahoo Finance |Note. Currently, trading on the Moscow Exchange is suspended.
But in the context of sanctions, they have a more devastating effect on ordinary Russians than on the dictators themselves. While no one knows for sure, Vladimir Putin is estimated to be worth billions of dollars, meaning the Russian president could still lead a relatively luxurious life even if the vast majority of his net worth evaporates due to such punitive measures.
However, this cannot be said about the Russian people. According to XE, the Russian ruble has lost almost 30% of its value since the invasion of Ukraine began a week before. The economic fallout is said to have devastated the savings of ordinary Russians. To make matters worse, the EU on the same day banned the transfer of euro banknotes to Russia.
The exchange rate of the ruble against the dollar | Source: XE
Cryptocurrency trading volume is rising in part due to strong demand from Russia and Ukraine, where both countries face serious risks of currency destabilization. Stablecoins in particular are playing a vital role in countries facing tougher sanctions. For example, Venezuelan expats told Cointelegraph how they support their families still in the country by converting their local salary into Tether (USDT) through an app called Reserve amid the ongoing hyperinflation.
On the same topic, “ArDashir”, a cryptocurrency enthusiast from Iran whose name has been changed to protect his identity, previously described to Cointelegraph how digital currencies have become a vital tool for accessing services amid sanctions against the country:
“We don’t have Visa, MasterCard or any other credit card here. So thanks to bitcoin and cryptocurrency, we can buy things like Xbox, Apple gift cards, VPNs, flights, etc.”
Asked about how crypto plays a role in fighting Iranian fog inflation, ArDashir added:
“If you want to buy, for example, a box of matches today, it is better to wait until tomorrow, when it will be much cheaper, as the real value of a toman is falling. Thus, people want to store the value of their money with digital currency.”
The Russian ruble fell to a new historical low of 122.24 rubles / dollar. The US is in auction today. The conflict with Ukraine is affecting the ruble, which has lost 37.7% of its value against the US dollar since January 1, 2022. I currently estimate inflation in Russia at 78% per annum.pic.twitter.com/wKO4hylHwA — Steve Hanke (@steve_hanke) March 2, 2022