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Russian Economy is now Permanently Destroyed! | Ukraine vs Russia | Dhruv Rathee - YouTube
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Hello, friends!
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The war is raging on in Ukraine.
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But the destruction is caused in Russia too.
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The common Russians are in a bad condition.
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The Russian currency, Ruble, has crashed in the last few days,
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now, there are long lines outside the ATMs in Russia.
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The Banks are out of cash to give to people.
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People have started hoarding phones and electronic items
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they are buying as many as they can,
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because they are the only things whose value wouldn't depreciate.
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The hard-earned money of the people has started losing its value.
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Thousands of Russians that deal with foreign countries aren't getting their salaries.
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There's so much inflation
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people are worried that Russia might end up like Venezuela.
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Why is it happening in Russia?
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When a country goes to war,
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how does it affect the economy of the country?
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How are the citizens affected?
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These are seldom discussed topics.
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This video will shock you.
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Because you can't even imagine that in today's day and age,
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what a Superpower Country has to go through,
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when that country goes to war.
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Even though the war isn't fought in the country.
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Come, let's take a look.
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"Sanctions from the west are already having a major impact on Russia's economy."
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"A 30% loss in value is seen in Ruble."
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"Many people are worried about their income."
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"Microsoft, Apple, Samsung, HP, Intel,
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all stopping new sales."
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"At McDonald's, final orders,
it's suspending business in Russia."
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"All western businesses are shutting down.
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Everyone who can is leaving.
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We'll be left isolated."
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"Netflix has pulled out.
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TikTok, won't allow posts by Russian users.
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The Ruble: worth less than a penny!"
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A study conducted by the Centre for Economic Recovery,
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claims that in the first four days Russia had to
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incur expenses to the amount of $7 billion
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for starting this war.
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Approximately more than ₹500 billion.
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This was only for the first four days.
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With the continuation of the war,
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the same study has estimated that
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this cost can eventually cross $20 billion per day for Russia.
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It means that each day Russia has to spend $20 billion to fight this war.
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This is only the direct expense borne by the Russian government.
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The Russian taxpayers' money is used for fighting this war.
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But this is only the tip of the iceberg.
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Let me list out the impact of the responses from the rest of the world.
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33 countries have closed off their airspace for Russian airplanes.
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It means that Russian aircraft aren't allowed entry into the airspace of those countries.
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It includes the USA, Canada and numerous European countries.
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The result?
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According to the estimates, about 150,000 Russian tourists in these countries
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they were there for a visit,
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it is now extremely difficult for them to return.
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Airbus and Boeing are two major companies in the world building aircraft.
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They've said that they would stop sending their spare parts to Russia
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to the Russian airlines,
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and would suspend their operations in Russia.
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In the near future, it would be very difficult for anyone to fly into Russia
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or to fly out from Russia.
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Moving on, the major clothing companies and shoe brands,
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like H&M, Puma,
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they have suspended their operations in Russia.
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BMW, Volkswagen, Mercedes,
Jaguar, Toyota, and Honda,
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the major car companies,
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they have said that they would stop exporting their cars to Russia,
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and their operations in Russia,
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the car production, for example,
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were also stopped.
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Ikea, a major furniture company from Sweden,
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has closed down all its stores in Russia.
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Airbnb, quite useful for travellers,
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have now stopped their operations.
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Netflix has made it impossible for Russians to sign up for new accounts.
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They've withdrawn the option.
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The big tech companies,
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Apple and Microsoft have said that
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they would stop selling their products in Russia.
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Samsung, a South Korean company,
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Samsung has said that it wouldn't ship its products to Russia.
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Imagine that these major multinational companies,
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we use their products and services in our daily lives,
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for the Russians, suddenly they can't access them anymore.
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The oil giants, like BP and Exxon Mobil,
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they had similar responses too.
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BP has said that it would dump the 19% stake in the Russian state-owned energy company.
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It shows that the foreign companies
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are pulling out their investments from Russia.
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And the other foreign companies that were thinking about investing some money in Russia,
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have since dropped the idea.
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These affect the economy of a country
and the funds that are available to it.
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Apart from this, the two most powerful bodies of football,
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FIFA and UEFA,
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they have decided to suspend the Russian team
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from all international soccer events.
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Meaning that the Russian team wouldn't participate in the FIFA World Cup.
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Formula 1 racing,
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the Grand Prix was supposed to be held in Russia,
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it stands cancelled now.
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Visa and Mastercard,
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two of the biggest payment processing networks in the world,
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millions of their credit cards are used worldwide,
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the two companies have decided to block Russian banks.
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74% payment transactions in Russia,
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were processed through Visa and Mastercard.
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They wouldn't work now.
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The international payment transfer companies
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Remitly and Wise,
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the two have also suspended their Russian operations.
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Apple Pay, Google Pay and Samsung Pay.
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The Russian banks against whom sanctions have been issued,
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cannot use these platforms either.
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Making normal payments for their daily lives have become difficult for people.
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That's why people ran to the ATMs, to withdraw cash.
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And you can imagine what happens when a large number of people try to withdraw cash.
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I talked about it in the video on the Business Model of Banks.
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Banks don't have so much cash.
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If everyone wants to withdraw their money from the bank,
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it wouldn't be possible.
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This situation is known as Bank Run.
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This is happening in Russia now.
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ATMs are running out of cash and people are desperate.
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Seeing all this happening,
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the stock market of any country would crash horribly.
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That's why, for a week now, the Russian stock market is closed.
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Ever since Russia invaded Ukraine,
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the Russian stock market hasn't opened up for trade.
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Fearing a major crash when they open next,
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they're keeping it closed as long as they can.
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Now, let's return to the topic.
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The examples that I told you about till now,
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were of multinational companies that decided to suspend their operations in Russia.
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Companies.
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But apart from these, Governments have also taken action against Russia.
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Governments have declared sanctions against Russia.
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Broadly speaking, sanctions mean
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imposing a penalty or punishment
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on a country for violating an international law
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or for their aggressive behaviour.
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These punishments can be imposed on a country via various means.
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But mostly, they are economic sanctions.
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They target and attack the economy of a country.
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A major sanction imposed on Russia currently,
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is the SWIFT block.
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The Russian banks have been cut off from the SWIFT system.
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What is this SWIFT system?
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SWIFT stands for
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Society for Worldwide Interbank Financial Telecommunications.
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It is a payment system used internationally
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by more than 11,000 financial institutions.
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More than 200 countries used this globally.
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The central bank of almost every major country uses this SWIFT system.
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The USA, Japan, India, China,
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any country you can think of.
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But the SWIFT system doesn't actually move the money.
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It merely communicates the source, amount, and destination when money is to be moved.
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You can think of it as SMS,
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or like FB Messenger
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of the payment transfer.
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It gives instructions to a bank
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to transfer the amount of money to the destination bank.
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That's why every bank has a SWIFT code.
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You might already know this.
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The SWIFT code is 11-digits long.
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The first four of the 11 characters represent the name of the bank.
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The next two are the country code.
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Seventh and eighth represent the location code,
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And the last three are for the branch code where the money is to be transferred to.
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For example, SBI's main branch in Delhi
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has the SWIFT code SBIN
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IN: India's country code.
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BB: the location code,
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and 104 is the branch code.
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Overall, the SWIFT code can be considered as the postcode of a bank.
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If you have to transfer money from SBI
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to an American friend's account in an American Bank,
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along with their account number,
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you will write down the SWIFT code of the bank,
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and when you send the money,
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SWIFT will work by communicating to the bank
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the fact that money is being transferred and the amount of transfer.
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Since Russian banks have been cut off from SWIFT,
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it means that
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neither can Russian banks accept money from international sources
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nor can they send money.
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But the interesting thing is that,
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Russia isn't the first country this has been done to.
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Before this, Iran was blocked from SWIFT access.
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It resulted in Iran losing one-third of its foreign trade.
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But it isn't like Russia wasn't prepared for this.
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Because when Russia invaded Crimea in 2014,
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lighter levels of SWIFT sanctions were imposed on Russia.
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Since then, Russia worked on creating its domestic messaging system for payments.
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This would lead to severe effects in the short term,
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but in the long-term, Russia will come up with some way or the other,
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it will develop its payment processing system.
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Another major example of these sanctions is
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freezing the assets of Russia's central bank.
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The thing is,
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the central bank of every country has some foreign exchange reserves.
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Known as Forex Reserves.
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It basically means that the banks keep some money in foreign currency.
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The reason for maintaining forex reserves is that
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payments have to be made to other countries
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or for facilitating any global trade.
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Like every country, Russia's central bank maintains reserves in US Dollar.
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It keeps some amount with itself in US currency.
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America and other countries have freezed these dollar reserves.
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They have said that they wouldn't accept the USD Russia has.
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That the forex it has will now be a complete waste.
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It amounts to $630 billion.
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There's another very shocking and interesting way to impose sanctions.
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Putin, his friends, and Russian billionaires,
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own assets outside Russia.
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They have properties in foreign countries.
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Private airplanes and huge yachts,
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the US and other countries have decided that
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all these assets
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these properties and these private planes,
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would be seized.
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As a specific example, a Russian oligarch named Egor Sechin,
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had a superyacht worth $120 million,
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think of this as a uber-luxury boat,
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the French government has now seized it.
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They've kept the yacht with them.
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The news also had that a superyacht worth $600 million,
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owned by the Russian billionaire Usmanov,
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was seized by the German government.
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But this turned out to be false.
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But fearing this, the Russian billionaires,
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are moving their yachts to countries where
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the Western governments cannot seize them.
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Like the Middle East or the Maldives.
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According to the news, at least 5 superyachts of Russian billionaires
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were found in the Maldives.
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Apart from this, any property they own in foreign countries,
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is being seized.
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Flight bans are imposed on the Russian oligarchs.
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They wouldn't be allowed to travel anywhere outside Russia.
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There's a simple reason behind taking these actions,
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to pressurize Putin to stop this war.
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When these Oligarchs and Russian billionaires are targetted,
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people who are said to be controlling Putin,
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it's possible that they can convince Putin into stopping this war.
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One thing that proved very hard to cut off from Russia,
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was oil and gas.
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For European countries, one-third of their gas supply is from Russia.
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They import gas from Russia.
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And if they cut that off,
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the gas price in the European countries would skyrocket.
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And where would they get gas from?
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Despite that, Germany suspended the approval of Nord Stream 2 Pipeline,
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a pipeline that's already built,
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but they hadn't begun using it.
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How can they overcome their existing gas dependency on Russia?
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They are trying to come up with alternatives.
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America said that they have large oil and gas reserves,
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that they are willing to send to Europe,
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so that Europe can cut off their dependency on Russia.
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But anyway, as I told you earlier,
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what is the result of this?
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These measures are so harsh that
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the Russian Ruble, Russia's currency,
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is crashing so fast that you wouldn't believe it.
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In 2012, $1 was equal to ₽30.
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At the beginning of 2022,
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$1 was around ₽70,
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but since this war began, as of the day of this recording,
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$1 is poised to cross ₽150.
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Their currency is losing its value this rapidly.
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The money that people had earned and saved is now losing value.
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There's high inflation.
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People fear hyperinflation.
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Apart from this, people can't use the basic payment systems.
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People are trying to get cash from the banks but can't.
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It has a terrible impact on the common citizens of Russia.
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What can the citizens do?
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People are going to supermarkets
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and are buying electronic items like laptops and smartphones,
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because these are the assets whose value isn't depreciating.
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The money they have with the banks is losing its value,
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but the currency is losing its value.
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But if they hoard the electronic items at home,
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they'd be sure that they wouldn't lose value.
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They'll be able to sell it in a foreign country at the same price.
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People started doing this.
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In the near future, the standard of living of an average Russian would fall.
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Many people would be pushed into poverty because of this.
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Unemployment and inflation are also rising.
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Knowing all this is important for those people
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who think that starting a war is a good thing for the country.
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Russia invaded Ukraine.
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The war is being fought in Ukraine.
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But the common Russian people are paying the price with their own money.
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If you want to understand how inflation happens because of these factors,
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do watch this video on inflation.
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In it, I explained how inflation works in detail.
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The exact reason why it happens.
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You can simply click here to watch it.
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Thank you very much!
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