The launch of the military operation in Ukraine drew the ire of the United States and its allies, which hit Russia with unprecedented sanctions in order to destabilize the country’s economy and pressure Moscow to end to the conflict.
Among the many sanctions imposed on the country over the past month, its financial system, energy exports and foreign exchange reserves have been targeted.
However, difficult times call for rapid response measures, and Russia has offered some of these.
The national payment system Mir takes over from SWIFT
Major Russian banks have been cut off from the global financial messaging system SWIFT, effectively denying them access to international markets.
However, Russia can now accept wire transfers through Mir, the Russian alternative payment system, and work with foreign banks and companies, bypassing Western restrictions.
Mir also offers an alternative to Visa and MasterCard, which have stopped providing international transaction services to Russian customers.
Domestic currency trade and new export destinations
The sanctions also targeted Russia’s holdings of euros and US dollars to prevent the country from trading internationally.
However, Moscow is implementing trade mechanisms to allow domestic currency payments with foreign business partners. Russia and China have had ruble payment mechanisms for some time, and earlier this month Turkey expressed a willingness to trade in rubles.
In addition, a ruble swap system was announced for Russian oil exports to India. India, which until now only bought 3% of its oil imports from Russia, has been quick to increase its purchases, as has Serbia.
This is a sign that Russia has alternatives for exports if the West continues to isolate the country.
Exporters urged to get rid of the dollar
To prop up the rouble, which has fallen sharply against major currencies this month, Russian companies trading abroad have been ordered to sell 80% of their foreign exchange earnings and convert to rubles.
It should stabilize the national currency and encourage more investment in Russia instead of moving it abroad.
Cereal export ban to secure national supplies
Russia temporarily banned grain exports to Eurasian Economic Union (EAEU) countries this week. The restrictions cover shipments to post-Soviet states that share a free customs zone with Russia.
They include Armenia, Belarus, Kazakhstan and Kyrgyzstan. The measure aims to keep the domestic food market well supplied and prevent prices from skyrocketing.
Rise in interest rates to support the national currency
With almost half of the country’s foreign exchange reserves frozen and unavailable to support the ruble’s depreciation, the Russian Central Bank urgently raised the key rate in late February from 9.5 to a record 20% a year.
This measure was taken to compensate for the increased risks of devaluation and inflation, or simply to help maintain price stability and protect citizens’ savings against depreciation.
The regulator also launched additional measures to support lending institutions and recommended that banks not charge interest and penalties on loans, while allowing the restructuring of payments and repayment holidays.
The moves helped stabilize the rouble, which has posted six straight days of gains against the euro and the dollar, starting Thursday.
Ruble debt payments to avoid default
Russia authorized two payments to bondholders totaling $117 million due Wednesday in US dollars. The money comes from the country’s accounts frozen abroad.
It is now up to the United States and its allies to approve the transfer. If they don’t, the Russian government has ordered that the debt be paid in rubles at the central bank’s official exchange rate at the time of the transfer.
Western-based institutions insist that unless the debt is paid in the currency of issue, Russia faces its first default in a century.
Moscow insists the West is trying to engineer “an artificial default” since the country has the money to pay its debts, to which it is being denied access.
Targeted support for citizens
On Wednesday, President Vladimir Putin ordered new measures to support Russian citizens amid rising prices, unemployment and sanctions-related supply problems.
The measures will focus on protecting families with children and the elderly.
He said a decision to raise the minimum wage, public sector wages and benefits, including pensions, will be made within days.
Financial support for entrepreneurs
The Russian government has approved a draft support plan for small and medium-sized enterprises.
Local authorities have been tasked with providing organisations, individual entrepreneurs and independent citizens with support measures, including grants and credits.
Exporters invited to turn to the domestic market
President Putin urged Russian exporters not to cut production in response to sanctions, but to supply the domestic market.
This will prevent prices in the country from skyrocketing, including for gasoline, diesel, metals and other export goods, he said, adding that import substitution projects have never were also important.
Foreign companies offered ways to stay in Russia
Facing sanctions pressure, a number of foreign companies announced their temporary withdrawal from Russia this month, including IKEA, Microsoft, Volkswagen, Apple, Shell, McDonald’s, H&M and others.
Proposals have been made to nationalize these companies in order to keep the companies in operation. However, in his speech on Wednesday, President Putin said Russia would respect the private ownership of foreign companies.
Earlier, he expressed support for another idea: introducing external management, so that foreign companies can be run by partners in Russia.
The Ministry of Economy is drafting a bill to regulate the procedure.