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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.
