How sanctions on Russia have affected banking, shopping

New Delhi, March 24: Russia’s war in Ukraine has entered its 29th day and Russian forces are still attempting to take control of Kyiv. The invasion has seen several international banks and business brands halt their operations in Russia.

French automobile manufacturer Renault said on Thursday that it suspended operations at its plant in Moscow while it assesses options on its majority stake in Avtovaz, Russia’s top carmaker.

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Nestle will also halt the sale of a wide range of brands in Russia, including KitKat chocolate bars and Nesquik. The popular fast-food restaurant, McDonald’s, has also shut down operations in Russia. Sources say that employees have been given three months of salary.

INTERNATIONAL BRANDS IN RUSSIAN MALLS

India Today spoke to a young Russian student who works part time in GUM (a historical shopping complex from the Soviet era) on the sanctions and the impact of international brands suspending operations.

IT: While some international brands have closed operations, most of them remain open?

Russian student: Yes, of course. It’s like 50-50. Half the brands have left our market. I don’t know for how long, but they will come back, I’m sure.

IT: As a young person working here, do you think a lot of people are losing money because of these brands going away from Russia?

Russian student: I don’t think people lose money due to the state of the shops. People lose money and their savings due to the state of the stock market. In a way, it is an advantage, because people have fewer shops they spend money on.

IT: That’s an interesting take. But, in terms of employment, many were getting part-time jobs. That has taken a hit.

Russian student: These companies that have left Russian markets have saved themselves wages. They still pay for the marketplaces, still pay rent, but they don’t have sales. They still have shops here. So, shutting operations is only a half measure.

The young man is convinced that international brands have not shut down operations completely and that it is only a half-measure.

People across the world will just have to wait and see if Russia and Ukraine can negotiate and come to an understanding.

STATE OF BANKS IN RUSSIA

Russia is one of the most sanctioned regimes in the world right now. Russia has learnt to live with them.

The domestic and financial structures in Russia are working as normally as they can. People are not feeling the brunt of it right now. But, at the macro level, for people involved in foreign trade, it is a huge problem, since international institutions have shut operations.

Only a handful of foreign banks are still functional in Russia. These include Credit Europe Bank, Raiffeisen Bank and Alfabank. People are still able to withdraw money, but there are problems with using cards.

People are resorting to plastic cards, which is a form of digital currency. Sofia, a resident of Moscow, said she has no problems withdrawing money. Cards are a problem, but then there are plastic cards that work like digital currency.

MAJOR COUNTER-ACTION BY RUSSIA

President of Russia Vladimir Putin, at a meeting with government members said, “I have decided to implement, in the shortest possible time, a package of measures to transfer payments (to begin with) for natural gas supplied to “unfriendly countries” to Russian rubles; that is, we will not accept any compromised currency to be used in these transactions.”

Russia will continue to supply natural gas at the agreed-to volumes and for the agreed-on prices as indicated in the existing contracts. Unlike some of our colleagues, we value our business reputation as a reliable partner and supplier, said Putin.

These changes will affect only the transaction currency, which will now be Russian rubles.

HOW IS RUSSIA HANDLING ECONOMIC SANCTIONS?

Victoria Polikarpova, Head of International Desk, Sputnik News Agency, said “China saw the opportunity, came in and linked its UnionPay to Russia’s Mir system. Also, Russia is looking at self dependence and sustenance. This is an opportunity to work with partners and create a resilient structure.”

Russia is the most sanctioned country and knows how to deal with the restrictions, she said, adding that there were many countries that were working with Russia.

“European nations have all but stopped buying gas from Russia. They are trying to look for alternatives but it will take them years before they can stop reliance on Russian gas. Manufacturing in Russia has increased. We are manufacturing things that we only used to import,” added Victoria Polikarpova.

-India Today