Russia Ukraine conflict

Russia facing most difficult situation in three decades, PM says

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Russia is facing its most difficult situation in three decades due to unprecedented Western sanctions, but foreign attempts to isolate it from the global economy will fail, Prime Minister Mikhail Mishustin said on Thursday.

Western countries are progressively broadening an array of economic sanctions imposed to try to force Russia to end its military operation in Ukraine and withdraw its forces.

Russia calls its actions in Ukraine a “special operation” that it says is not designed to occupy territory but to destroy its southern neighbor’s military capabilities and capture what it regards as dangerous nationalists.

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“No doubt, the current situation could be called the most difficult in three decades for Russia,” Mishustin told the Duma, or lower house of parliament.

“Such sanctions were not used even in the darkest times of the Cold War.”

Western sanctions have already cut Russia off from the global financial network and left a number of its top banks with no access to the international SWIFT banking messaging system, while some traders have started to refuse Russian oil cargoes, intensifying pressure on Moscow’s finances.

Before the recent sanctions, Russia planned to run a budget surplus of 1.3 trillion rubles ($17 billion) this year, equal to 1 percent of gross domestic product. On Thursday, Mishustin said Russia would spend all it will earn this year on state aid.

The government has so far pledged over 1 trillion rubles in anti-crisis support to businesses, on social payments and to families with children, of which 250 billion rubles are to be spent on state aid for the Russian Railways.

Russia has introduced capital controls in retaliation for the sanctions, making it nearly impossible for foreign investors to sell their assets, both industrial and financial, if they decide to pull out of the country.

“If you have to leave, production should continue working as it provides jobs. Our citizens work there,” Mishustin said.

The Kremlin has suggested that it may nationalize assets held by Western investors who decide to depart.

As some of the companies leaving are transferring their holdings to Russian companies, Mishustin said, the situation offered scope for new business opportunities.

“Our financial system, the lifeblood of the entire economy, has held up,” Mishustin said. “The stock market and the ruble are stabilizing. I doubt that any other country would have withstood this. We did.”

The European Commission proposed on Tuesday new sanctions against Russia over its invasion of Ukraine, including a ban on buying Russian coal and on Russian ships entering EU ports, and said it was working on banning oil imports too.

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