“Putin Robbed Russians of $1 Trillion” by Helen Izbor

 

St. Petersburg, Russia, site of mass arrest of Russian protestors
photo by Helen Izbor

 

Over the last two weeks, almost all major Western media outlets have been filled with predictions of Russia’s dooming default. Moody’s, Bloomberg, JP Morgan, and many other respectable sources are expecting the collapse of the Russian economy to occur no later than mid-April of 2022. But they underestimate the Kremlin whose officials can turn the worst possible Armageddon-like scenarios to their advantage at the expense of entire populations. Over centuries, Moscow officials never saw the people as their constituency; they were “subjects,” nothing more than slaves and cannon fodder.

 

But Putin has done better than the tsars! Before the Russian military invasion in Ukraine, the sum of all money in the bank accounts of individuals and legal entities in the country was approximately 140 trillion rubles. The dollar to ruble ratio was around 72. Now, even officially, this rate has at least doubled. Far worse, the currency exchange rate is generally at 200 rubles for one dollar on the black market. 

           

Let us do the math. First, divide 140 trillion rubles by the drastically escalated rate of 150, the current dollar cost on the Russian market. Next, divide this sum by 70, the pre-war currency exchange value. The final result of this calculation in rubles equals 1 trillion American dollars. Let me emphasize that this is the pre-war value. Even under the official convertibility selling price, the difference between two weeks ago and now is 1 trillion. If we follow the black market values, the number will rise up to $1.4 trillion. In other words, by depreciating the ruble and blocking the citizens’ ability to withdraw the money from their bank accounts, the Russian government has actually managed to put this difference of $1 trillion in its own pocket.

           

Putin’s corrupt state machine just robbed Russia’s population of 1 trillion dollars. 

           

So, going back to the claims of an impending default, it is simply impossible. However, the difference between factual and juridical default should be noted. Yes, the Russian Federation is facing the legal one, as it was reported by multiple resources, which means that the state will not be able to fulfill its external obligations under foreign bonds, etc. Nonetheless, the chance of an actual domestic economic default does not seem to be high. Everything was compensated at the expense of the population, and now Moscow has more than enough money to pay for its toys. The ordinary people—who make up 80% of the country—will suffer impoverishment in the face of looming inflation and economic catastrophe. But Russia’s top elite will be fine. Putin and the oligarchs will be fine.

           

Yet again, as we all know, pink skies often rapidly turn into dark storms. The money... it might be there. But money is not butter, and you can’t spread it on bread.