Russia moves to stabilize its economy as war takes a toll
By Eshe Nelson and Shashank Bengali
As the financial pain of the war weighs on Russia, the country’s central bank cut interest rates again Thursday, the latest in a raft of measures by Moscow aimed at stabilizing an economy buffeted by Western sanctions and four months of fighting in Ukraine.
The move came as President Vladimir Putin promised to increase the minimum wage and military benefits, a rare acknowledgment of the costs of his war, even as he insisted that Russia’s economy was weathering the asset freezes and departures of foreign companies that have followed his invasion of Ukraine.
Russia has taken drastic action to stabilize its economy since the Feb. 24 invasion deepened its isolation and sparked fears of a crash. Since the Russian central bank doubled interest rates to 20% to shore up a plunging currency, the ruble has rebounded, leading the bank to reduce its benchmark rate to 11% Thursday, with analysts saying that further cuts could come.
Yet the war’s toll in Russia, although difficult to quantify, is becoming unmistakable. Prices of consumer goods are soaring. Basic items, from paper to buttons, are in short supply. Sales in the lucrative energy sector are projected to fall this year as European customers begin to pivot away from Russian oil. In announcing the interest rate cut, the head of the central bank warned that the coming months would be “difficult for both companies and citizens.”
The proposals announced by Putin on state television Wednesday were an attempt to ease the pain for Russia’s people. In video clips released by the Kremlin, he was seen directing senior officials to raise payments to service members deployed in Ukraine and double child care allowances for women in the military. He also pledged an increase of 10% next month in the minimum wage and pensions for older people who are not in paid employment.
In other developments:
— Russia’s Supreme Court has delayed until June 29 a hearing to determine whether the Azov battalion, a regiment of the Ukrainian national guard that made up the bulk of the fighters at the Azovstal steel plant in Mariupol, Ukraine, should be designated a terrorist organization.
— Two Russian soldiers pleaded guilty Thursday to firing on a town in eastern Ukraine’s Kharkiv region from a position across the border in Russia. It is the second war crimes trial to take place in Ukraine since Russia’s full-scale invasion began.
— On the battlefield, Russia’s ambitions are narrowing to three cities in eastern Ukraine’s Donbas region. With the depletion of troops and equipment, some analysts expect the battle to be Russia’s last major offensive of the war.
— The European Union has stalled on its proposed ban on Russian oil, held up by Hungary’s refusal to back the measure along with the other 26 members of the bloc. Earlier this week, Prime Minister Viktor Orban asked that the proposed embargo remain off the table. He said that his concerns about it had not been resolved.