Sanctions on Russia - What would be the impact of it on social life in Azerbaijan? -

9 August, Tuesday

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Sanctions on Russia - What would be the impact of it on social life in Azerbaijan?

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Russia's invasion against Ukraine enters eighth day, however Kremlin still resists to raise a white flag. Preferring economic blows rather than retaliating with armed forces, the West is trying to squeeze Russia in all directions and bring it to a state of surrender.

According to Western sources, since yesterday, several Russian banks have been excluded from SWIFT. Currently, VTB Bank PJSC, Bank Russia, Bank Otkritie, Novikombank, Promsvyazbank PJSC, Sovcombank PJSC and VEB banks are included in the black list of the European Union.

In addition, the United Kingdom and the European Union have suspended the broadcasting of Sputnik and RT TV channels in the country under a new decision.

Having plunged itself into a swamp, Russia is moving towards a great tragedy, even in the foreign exchange market. According to the latest data, currently the dollar is valued at 110.17 rubles, 1 euro at 122.49 rubles and 1 Azerbaijani manat at 64.87 rubles in the foreign exchange market. Due to the situation in the country, investors have suffered significantly. According to reliable sources, the ongoing war costs investors in Russia to lose about $ 39 billion every day. As a result, many investors have begun to leave the country.

But what awaits Russia after all these things happened?

Speaking to Ednews, Azerbaijani economic expert Natig Jafarli commented on the situation.

Natiq-Ceferli |

"Honestly, sanctions against Russia have now been very effective. Obviously, the previous ones done before in 2008-2014 did not affect the Russian economy so much. Now, total sanctions, especially those targeting the banking and financial system, will, of course, lead to very serious fluctuations and complications in the Russian economy.

At present, it is not clear how much the Russian ruble will depreciate. Because the exchange rate is falling freely, and the day before yesterday, for the first time, the EU imposed restrictions on Russia's stock exchanges and certain sales," the economist said.

The expert also noted that the forced sale of 80% of its foreign exchange reserves to Russian foreign exchange earning companies will also lead to the suffocation of domestic companies.

"Despite the reduction of access to the currency and the restrictions imposed on the whole, the Russian ruble is still falling freely. It is possible that the exchange rates against the dollar will be even lower than today. In other words, the ruble may depreciate further. In fact, many analysts estimate that in the coming weeks Russian ruble may hit record low - 200 rubles to 1 US dollar. This figure is quite high. Although the Central Bank of Russia is currently tightening monetary policy to raise domestic interest rates from 9% to 20% to solve domestic problems, there will be a need to release additional money supply to address additional domestic problems. In this case, the increase in the ruble will lead to domestic inflation.

Economist N. Jafarli also spoke about Russia's spending on the war.

"There are different opinions on the current situation at the moment. According to some sources, Russia's daily war spending is between $ 20 billion and $ 40 billion. Of course, this is quite a large number, and as a result, it is one of the factors that will have a very serious impact on the Russian economy. We are talking not only about economic, but also about future political losses. Russia's attempt to invade Ukraine could result in its long-term isolation from international relations, which will seriously damage its economic situation.

Jafarli also spoke about the impact of economic sanctions on Russia and its bitter consequences on Azerbaijan.

"Russia's economic collapse may have different effects on Azerbaijan. For example, last year the trade turnover between Azerbaijan and Russia was about $ 3.4 billion. However, we buy more goods from Russia than we sell. However, the weak point here is that more than two-thirds of Azerbaijan's agricultural exports are to Russia.

In addition, the ban on remittances, including the complete exclusion of Russia from the SWIFT system, can create serious problems in the transfer of money between Russia and Azerbaijan and the payment of the cost of trade. In addition, there may be indirect effects. For example, about 2 million Azerbaijanis currently live in Russia. In the past, they earned quite a lot of money in Russia and sent it to Azerbaijan. This had a very positive effect on the solution of the social problems of their families living in Azerbaijan. It was also a factor influencing trade and economic activity in the country. In the current situation, the incomes are expected to decline sharply, and as a result, the social situation in Azerbaijan may change in a negative direction. I think that if this situation continues for a long time, some Azerbaijanis in Russia will be forced to return to the country. This can subsequesntly lead to additional unemployment problems in the country.

By Elnur Enveroglu

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