Don't downplay influence: Russian central bank governor: "Sanctions are very powerful"

In the spring, Putin still doubted the effectiveness of Western sanctions. The head of the Russian central bank, which is at the center of the punitive measures, now clearly warns against underestimating them. Potential new partners are afraid of the sanctions whirlpool, she says.

The head of the Russian central bank, Elvira Nabiullina, warns against underestimating the consequences of western sanctions for the domestic economy. “Sanctions are very powerful, their impact on the Russian and global economy should not be downplayed,” Nabiullina told lawmakers. “It is not possible to isolate yourself from their influence.” Potential new Russian partners are afraid of getting caught up in the sanctions maelstrom.

The western punitive measures as a result of the Russian war against Ukraine were primarily aimed at the banks. At the same time, their adaptability is proof that the structural restructuring of the economy is underway, said Nabiullina. Lending to businesses rose 9.9 percent from January to October, faster than the 9.7 percent recorded in the same period last year. “We expect that the positive dynamics in lending will continue and that at the same time banks will be able to fulfill the new program of providing vacation credits for mobilized soldiers and their family members,” Nabiullina said.

Those drafted into military service under President Vladimir Putin’s partial mobilization are entitled to grace periods on mortgage, consumer and credit card loans for the duration of their service and for 30 days thereafter. The mobilization is already having a negative impact on Russia’s public finances, consumer demand and businesses.

Nabiullina currently sees no need to further relax the capital controls that have been in place since the spring. The ruble has performed better than other major currencies this year, also thanks to capital controls. However, this also has a disadvantage: the income from Russian exports – such as oil, gas and other raw materials – is reduced because they are often settled in dollars and euros.