Russia’s economy is on the ropes. According to Bloomberg, the ruble fell 19% in just the past three days, and plummeting oil prices are also hammering Russia’s oil-based market. As the Russian government scrambles to implement emergency fiscal measures, retailers are taking cautious steps of their own, with some warning consumers about imminent and steep price hikes, and others, such as Apple, suspending online sales in the country entirely. The above-embedded video by CNBC‘s Nightly Business Report highlights some of the specifics of Russia’s current financial woes.
Daily Mail is reporting that consumers in Russia have begun a mad rush to stores in an effort to make purchases on expensive items like automobiles and furniture before prices surge further. Many stores that have remained open for business through the crisis are reporting sales records, though the temporary boosts in revenue are not being hailed as a productive economic indicator.
“This is a very dangerous situation. We are just a few days away from a full-blown run on the banks… If one does not calm down the currency market right now, the banking system will need robust emergency care,” noted an editorial in the Russian business magazine Vedomosti.
Authorities in Russia responded to the collapsing currency by pushing up interest rates to 17%, according to Business Insider. A Russian bank manager, quoted by Vedomosti, said of the rate hikes, “Raising rates up to 17% — that’s the end of the banking system.”
With consumers forming long lines at retailers, Russia’s current currency crisis risks worsening into a situation like the one that devastated the pre-World War II economy of the Weimar Republic, when shoppers carried money in wheelbarrows to purchase groceries. Daily Mail quoted a Russian shopper, who compared Russia’s modern woes to the nation’s 1998 ruble crisis and said, “What’s pressuring us is the fact that many people [back then] rushed to withdraw money from bank cards, accounts… We want to safeguard ourselves so that things wouldn’t be as bad as they were back then.” Currency fears are pushing consumers to invest their money into durable goods rather than financial instruments.
Financial experts have blamed falling oil prices and US sanctions for creating Russia’s current crisis. According to New York Daily News, President Obama plans to sign a bill imposing additional sanctions on Russia, despite the fact that the nation’s economy is on the brink of a potential collapse. RT notes that Obama has yet to sign the Russian sanctions bill, a geopolitical chess move aimed at influencing Putin’s response to Ukraine’s political crisis, but could as soon as the end of the week.