Russians queue for cash as West targets banks over Ukraine

Russians waited in long queues outside automated teller machines on Sunday, February 27, worried that new Western sanctions over Moscow’s invasion of Ukraine will trigger cash shortages and disrupt payments.

Moves to block some Russian banks from the SWIFT global payments system and freeze the Bank of Russia’s reserves are expected to deal a severe economic blow, although Russian authorities and lenders sought to assuage fears.

“Since Thursday, everyone has been running from ATM to ATM to get cash. Some are lucky, others not so much,” Saint Petersburg resident, Pyotr, who declined to give his last name, said.

Russians waited in long lines amid concerns bank cards may cease to function, or that banks would limit cash withdrawals.

While the SWIFT move will hinder Russian banks from communicating with international peers, analysts say limiting the use of more than $630 billion in international reserves could prove even costlier for Russia.

Sergey Aleksashenko, a former deputy chairman of the Russian central bank who now lives in the United States, said that Russia’s national wealth fund would effectively disappear.

“[President Vladimir] Putin and [former finance minister Alexei] Kudrin built it up for years, thinking about a major war,” he said. “War has come, and there is no money.”

Banks urge calm

Russian banks sought on Sunday to calm fears over money supplies and online payment systems.

Meanwhile, rates offered for foreign exchange shot up. The rouble closed on Friday, February 25, at 83 to the dollar, but some lenders were offering rates of above 100 on Sunday.

Russia’s biggest lender, Sberbank, said it was not seeing any interruptions in customer transactions through its own and partner payment systems. State development bank VEB said external restrictions would not stop it supporting projects within Russia.

Otkritie, bailed out by the central bank in 2017, said new restrictions would not have a significant impact beyond use of its bank cards abroad.

The central bank, however, advised people to carry their bank cards with them, saying that mobile payment systems may not work at all with terminals or online shops operated by one of the five banks under the harshest sanctions.

Moscow resident Sergei said he would need to order a new card and remember how to live as he had five years previously when he stopped using cash.

“I’m used to living in the 21st century, without carrying plastic cards around. Everything is installed on my smartphone,” he said. “I’m definitely against it.”

Senior Russian lawmaker Andrei Klimov was cited by RIA as saying, “Russia’s exit from SWIFT poses no threat to our domestic settlements, stimulates the rouble as an international currency, and at the same time reduces the possibility for the West’s destructive control of our settlement operations.”

Catastrophe

But some warned of catastrophic economic damage now that the West has announced it is freezing the central bank’s reserves.

“The most important thing is that the West is freezing the central bank’s reserves,” former Russian prime minister Mikhail Kasyanov wrote on Twitter. “There is nothing to support the rouble with. They will turn on the printing press. Hyperinflation and catastrophe for the economy is not far away.”

The Russian central bank did not respond on Sunday to requests for comment on the asset freeze.

Roman Borisovich, a former Moscow investment banker, said markets would be “messy” on Monday, February 28.

“[The Russian authorities] will put controls in place for sure. They can’t defend the rouble but they will probably halt trading and fix the rouble at an artificial rate like they used to do. There will be a black market,” he said.

The central bank said its repo auction on Monday would have no limit.

In Moscow, one resident, Tatiana, said she did not expect to suffer too much because she does not earn much and, despite the inevitable fallout, believed Russians would get by.

“We are people who have overcome lots of ups and downs over the years,” she said. “We will also overcome this because it is for a good cause. I salute everything Putin does.” – Rappler.com