Economic warnings clash with Putin’s optimism

Russia’s central bank chief warned Monday that the consequences of Western sanctions were only beginning to be felt, and Moscow’s mayor warned that 200,000 jobs were at risk in the Russian capital alone, stark acknowledgments that undermined President Vladimir Putin’s contention that sanctions had failed to destabilize the Russian economy.

The diverging assessments showed how the effect of the West’s sanctions in response to Russia’s invasion of Ukraine — and their ability to weaken Putin’s grip on power — remains uncertain nearly two months into the war.

Although experts say Russia faces an economic time bomb as its inventory of imported goods and parts runs low, Putin is using the fact that the Russian economy has not yet collapsed to bolster his contention that sanctions will not deter him.

Western sanctions, Putin said Monday in a televised videoconference with senior officials, were meant to “rapidly undermine the financial and economic situation in our country, provoke panic in the markets, the collapse of the banking system and a large-scale shortage of goods in stores.”

“But we can already confidently say that this policy toward Russia has failed.”

Putin was, in part, addressing a domestic audience, seeking to reassure Russians who have had to endure worries about cash shortages, a battered stock market and the shuttering of popular Western retailers such as Ikea.

Putin said he was prepared to increase government spending to stimulate the economy, an indication that continued revenues from energy exports give the Kremlin the flexibility to soften the blow of sanctions.

Aggressive capital controls imposed by the central bank have helped the ruble recover from its crash in the days after the invasion.

Contrary to Putin’s optimism, two senior officials cautioned Monday that the real economic pain was yet to come. Moscow Mayor Sergei Sobyanin announced a $40 million program to help people laid off by foreign companies find temporary employment and new jobs; according to his office’s estimates, he said, “around 200,000 people are at risk of losing their jobs” in the city of 13 million.

And in an appearance at the lower house of parliament, Elvia Nabiullina, chair of the Russian Central Bank, gave a more farreaching, negative assessment. She told lawmakers that although the sanctions’ effect had largely been on the financial markets at first, they “will now begin to increasingly affect the real sectors of the economy.”