The Russians are still running military drills and moving troops and equipment around:
On the financial side, Russia is facing more troubles:
In addition, the Moscow Mayor’s office announced layoffs scheduled for summer.
What does this mean?
One Russian blogger alleged that this move meant that capital controls were coming, and this means that the Kremlin is getting ready to shut the country down.
According to the blogger:
1. A return to black market currency trade will take place;
2. dollars and euros will automatically be changed into rubles at a “patriotic” rate, which will be two times lower than the black market rate;
3. Quotas to buy currency for companies that import products;
4. Companies that export raw materials will be forced to sell currency at the “patriotic” rate;
5. As for currency for travel abroad, the author suggests that “Intourist” will be brought back;
6. A call for “patriotic citizens” to give up their foreign currency for the cause of the Russian state.
Woven through all of this is, of course, the idea that these problems can all be got around through bribery, and corruption. He also suggests the “return” of a protection racket by security forces.
I still suspect that Russia will end up cutting itself off from SWIFT [Society for Worldwide Interbank Financial Telecommunication] before the West does it for them. In reality, the West’s recourse against rogue regimes through banking sanctions is limited. Recall that in 2013 an EU court “ruled against the EU banking sanctions imposed on one of Iran’s largest banks” [h/t Paul Pemberton for both of those links]. So if SWIFT is cut off, the Russians would most likely have to do it themselves. And some steps are being taken to create a Russian electronic payment system.
Another consideration is what happens when Russia’s much vaunted reserves are gone. Recall that while economist-in-exile Sergei Guriev says that Russia has enough reserves to last 2 years, opposition economist Milov says that Russia has less than half of what their public records show.
Obviously, nothing is certain, but it does appear that something is going on. Russia looks like it is preparing for a spring offensive of some sort in Ukraine. The West’s patience will end eventually, and the Russian government must be prepared to deal with that reality.