Tensions have reportedly erupted among Russia’s elite due to the heavy toll of sanctions on the economy as Vladimir Putin is issued a dire warning about impending bankruptcies.
Business moguls are increasingly voicing concerns that central bank rate hikes aimed at taming spiralling inflation a direct result of sanctions and Putin’s lavish wartime expenditure could grind economic activity to a standstill in the coming year.
Amid anticipation of further interest rate increases by the central bank this month, even Putin’s typically mute inner circle have escalated their criticism of policies maintaining the key rate at 21%.
Insiders warn of potential bankruptcy waves, potentially striking Russia’s critical military sector, which is experiencing a production boom to support the Ukraine conflict.
Boris Kovalchuk, who runs the nation’s financial regulatory body and is a close ally of Putin, cautioned on that the escalation of interest rates was « limiting the investment possibilities of business and leading to a growth in federal budget spending ».
Igor Sechin, one of Putin’s close associates and the chief of oil behemoth Rosneft, criticised the central bank in the firm’s quarterly earnings release.
He said the heightened rates were detrimentally affecting the company’s financing costs, as well as those of its contractors and suppliers, thereby diminishing profits.
Sergei Chemezov, another of the president’s allies and the head of Russia‘s state defence enterprise RosTec, issued a stark warning that if interest rates persisted at their current levels, « practically a majority of our enterprises will go bankrupt ».
Steel tycoon Alexei Mordashov added: « It is more profitable for companies to stop development, even reduce the scale of business and put funds on deposit, than to conduct business and bear the risks associated with it. »
The central bank has already projected a significant deceleration in growth, anticipating it to dwindle to between 0.5 and 1.5% next year.
Stringent new US sanctions on 50 Russian financial institutions have escalated transaction costs for Russian traders and recently sent the ruble tumbling to its weakest point since the onset of Russia‘s invasion of Ukraine in 2022.
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