Putin says the West’s ‘economic blitzkrieg’ has failed — but Russia’s central banker warns the country’s reserves can’t last forever

“The period when the economy can live on reserves is finite,” Russian central bank governor Elvira Nabiullina said on Monday, according to Reuters.

Russia can’t use nearly half of its $640 billion foreign exchange reserves as they have been frozen by sanctions imposed by the US, Europe, and other Western nations. The country is now holding mostly Chinese yuan and gold, according to Bloomberg.

In an address to Russia’s Members of Parliament, Nabiullina said sweeping Western sanctions had thus far mainly impacted the country’s financial market, “but now they will begin to increasingly affect the economy,” Reuters reported.

“The main problems will be associated with restrictions on imports and logistics of foreign trade, and in the future with restrictions on exports,” said Nabiullina, per the news agency.

She said Russian firms need to adapt by searching for new business models, partners, logistics “or switch to the production of products of previous generations,” according to Reuters.

Adding to the bad news, Moscow’s mayor warned in an official blog post on Monday that 200,000 city residents could lose their jobs as Western companies exit the economy en masse amid sanctions and corporate boycotts against Russia over the Ukraine war.

The comments from the Russian officials came even as the country’s coffers appear to be holding up. The energy powerhouse was repaying its foreign debt on time until April 4, when the US Treasury blocked the country’s payment in dollars held with US banks. Russia then transferred the money in rubles. The ruble has also bounced back to prewar levels thanks to Russia’s strict capital controls.

But the Russian economy is expected to contract 11.2% in 2022, the World Bank said in a report released earlier this month. 

Putin appeared unfazed by all the negative news.

“The calculation (by the West) was to quickly undermine the financial and economic situation in our country, to provoke panic in the markets, the collapse of the banking system, and a large-scale shortage of goods in stores,” said Putin at a meeting with government ministers on Monday, according to a Wall Street Journal translation.

“But we can already confidently say that such a policy towards Russia has failed, the strategy of economic blitzkrieg has failed,” he added, per the Journal.