Putin Acknowledges Impact of Sanctions on Russian Economy

The impression of sanctions has reverberated throughout Russia, resulting in manufacturing unit closures, job losses, a doubling of rates of interest and a decline of the ruble. Inflation has galloped forward of the central financial institution’s goal. Russia is susceptible to defaulting on its debt.

Mr. Putin mentioned the West’s effort to arrange an “financial blitzkrieg” in opposition to Russia had failed, however warned there would probably be additional makes an attempt to step up stress on Russia.

Referring to an exodus of Western firms from Russia in current weeks, Mr. Putin held out an olive department to these multinational firms nonetheless doing enterprise in his nation.

“We worth the place of these overseas firms that, regardless of the inexcusable stress from the U.S. and its vassals, proceed to work in our nation,” he mentioned. “Going ahead, they are going to positively obtain further alternatives for improvement.”

The remarks got here as Ukrainian President

Volodymyr Zelensky

spoke to the U.S. Congress, urging lawmakers to additional ratchet up financial stress on Russia for the invasion. He additionally known as on legislators to stress American firms of their districts which might be nonetheless doing enterprise with Russia to cease.

Mr. Putin pledged to hold out a raft of measures to offset the ache of the sanctions on Russians, together with elevated funds to pensioners and state workers, a hike within the minimal wage and monetary help to companies. The buying energy of odd Russians has been deeply eroded after Western sanctions triggered a pointy devaluation of the ruble.

However Mr. Putin stopped in need of endorsing Soviet-style worth controls. He additionally mentioned Russia’s central financial institution wouldn’t resort to printing cash to satisfy the federal government’s spending wants.

Coordinated U.S. and European Union sanctions have hammered the Russian financial system, chopping off a lot of Russia’s monetary system from the remainder of the world and choking off the circulate of many imported items. Western firms starting from

Boeing Co.

to

McDonald’s Corp.

to

Volkswagen AG

have pulled again from Russia, both to adjust to sanctions or due to public anger over the struggle in Ukraine.

In his remarks on Wednesday, Mr. Putin blasted one of many West’s foremost monetary weapons in opposition to Russia—freezing the belongings of Russia’s central financial institution held in North America and Europe. That prevented Moscow from utilizing a lot of its stockpile of $630 billion in reserves to prop up the ruble.

“Now everybody is aware of that monetary reserves can merely be stolen,” Mr. Putin mentioned. He known as the freezing of Russia’s central-bank belongings illegitimate and warned it could lead nations all over the world to retailer their reserves in tangible belongings akin to gold, land and uncooked supplies as a substitute of monetary belongings.

Since Russia attacked Ukraine in late February, the ruble has misplaced about 18% of its worth in opposition to the greenback, based on FactSet. It had been down greater than 40% earlier this month earlier than recovering losses.

Russian shoppers have reported worth will increase and shortages of some items in shops. The nation’s statistics company mentioned on Wednesday that shopper costs rose by 2.09% within the week ending March 11, bringing the rise for the reason that begin of the 12 months to five.62%. That simply exceeds the 4% goal set by the central financial institution for your complete 12 months.

In the meantime, a cutoff of elements from Western suppliers has threatened to halt manufacturing throughout a swath of Russian trade. Throughout the video assembly with Mr. Putin on Wednesday, the chief of Russia’s Tatarstan area mentioned manufacturing at truck maker Kamaz, which employs tens of 1000’s of individuals in his area, might fall by 40%.

Russia is also on the cusp of defaulting on its debt for the primary time since 1998. The Russian authorities was required to pay $117 million in curiosity funds on two dollar-denominated authorities bonds Wednesday. Russia’s finance minister mentioned the cost had been made and seemed to be tied up on the U.S. financial institution the place Moscow holds its {dollars}. The U.S. Treasury Division countered that sanctions didn’t stop Russia from servicing its debt.

Russia’s central financial institution is about to satisfy Friday to debate potential interest-rate adjustments. At its final assembly on Feb. 28, simply as Western sanctions had been starting to chunk, the central financial institution greater than doubled its benchmark charge to twenty% to make holding the ruble extra enticing and cushion its anticipated fall.

—Caitlin Ostroff and Paul Hannon contributed to this text.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com