Business Insider
Russia is so cut off from the international financial system that the Kremlin thinks Western sanctions have ‘insured’ the country against the banking crisis
Huileng Tan – March 15, 2023
- The Kremlin said Russia will not be impacted by the US bank crisis.
- Kremlin’s spokesperson said Russia is ‘insured’ against the fallout from Silicon Valley Bank’s collapse.
- Sanctions over the Ukraine war have cut Russia off from the international financial system.
It’s been a rocky week for US banks. But the Kremlin’s looking at the bright side of things.
Russia is now so cut off from the global financial system that the Kremlin thinks it will face no impact from the collapse of Silicon Valley Bank.
“Our banking system has certain connections with some segments of the international financial system, but it is mostly under illegal restrictions from the collective West,” the spokesperson for Kremlin, Dmitry Peskov, said Tuesday, according to TASS state news agency. He was referring to sanctions against the country over its invasion of Ukraine one year ago.
“We are, to a certain extent, insured against the negative impact of the crisis that is now unfolding overseas,” Peskov said, per the media outlet.
In contrast, Russia — like much of the world — faced a credit crunch due to the fallout from the US subprime mortgage crisis in 2008, which ultimately led to the Global Financial Crisis.
As the country recovered from the recession, it started working towards its grand ambition of making Moscow a global financial hub. But that dream has now been bruised with Russia under sweeping sanctions.
International banks and accounting giants have pulled out of Russia or are working on their exits over the Ukraine war. Two days after the invasion, some Russian banks were also banned from SWIFT, the Belgium-based messaging service that lets banks around the world communicate about cross-border transactions. This ban has hampered cross-border transactions for Russia’s trade and financial systems, isolating the country economically and financially. The country is also facing restrictions on its key energy exports, including a $60 per barrel oil price cap.
Still, Russian President Vladimir Putin has touted the resilience of Russia’s economy and the country’s statistics service said its GDP contracted by just 2.1% in 2022 — although there are some questions over its numbers because it stopped publishing certain key economic statistics last year.
Indeed, aluminum oligarch Oleg Deripaska told the Krasnoyarsk Economic Forum in Siberia that Russia “will need foreign investors” as its funds were running low, Bloomberg reported on March 2.
“There will be no money already next year,” Deripaska said, per the media outlet.
The Kremlin did not immediately respond to Insider’s request for comment.