Putin's fortress didn't last long

After the Russian economy took a hit from sanctions post its 2014 annexation of Crimea, Putin set about to create a fortress economy. External debt was kept in check, forex reserves were built up to $630bn or an import cover of 26 months, and the country’s reliance on imports was reduced. But in just a few days, EU and US sanctions have demolished some of the protective walls. On Monday, the Russian central bank was forced to dramatically raise its policy rate to 20%. The higher rate and central bank intervention was not enough to protect the Russian currency from a free fall, down 25% since the invasion. Putin’s attempts to re-unify the former Soviet Union has cost the country dearly. The ruble has gone from RUB36/$ pre-Crimea annexation to over RUB100/$ today. While Russians have been hesitant to speak out against Putin’s repressive regime for fear of arrest (we note that there have been some Russians brave enough to do so), they are protesting with their wallets, with demand for US dollars rising and ATM lines lengthening as they pull money from banks. And authorities were forced to keep the Moscow stock exchange closed today to avoid a collapse. The economic impact of the invasion is definitely not going according to Putin’s carefully laid plans.