(TOKYO) — The ruble plunged to a record low of less than 1 U.S. cent in value Monday after Russia was cut off from the global bank payments system in retaliation for Moscow’s invasion of Ukraine.
Russian currency plunged nearly 26%, to 105.27 dollars per dollar. This is down from 84 by Friday.
Over the weekend, the U.S. and Japan imposed additional sanctions on Russia. This included restrictions for access to some Russian banks to SWIFT’s global banking payments system.
The Russian central bank is restricted in its ability to access more than $600billion worth of Kremlin reserves. This hinders its ability to support ruble, which fell to its lowest ever level last week.
A decline in the ruble will likely cause inflation to soar, affecting all Russians as well as the elites of Russia who have been the target of previous sanctions. The resulting economic disruption, if Saturday’s measures are as harsh as described, could leave Putin facing political unrest at home.
Analysts foresaw Russian banks running at an increasing rate of attack by the Russians. Government reserves would plummet as Russia scrambles to sell its currency in order to secure safer assets.
Every day, the SWIFT financial messaging network moves billions of dollars among more than 11,000 financial institutions and banks around the globe.
Allies on both sides of the Atlantic also considered the SWIFT option in 2014, when Russia invaded and annexed Ukraine’s Crimea and backed separatist forces in eastern Ukraine. Russia claimed that SWIFT’s removal would amount to declaring war on the other side. Allies resisted the proposal. Russia has attempted to create its own financial transfer system since, but with little success.
SWIFT disconnection was announced on Saturday, but it was not complete. The United States and Europe have the option to increase their penalties. Officials stated that they were still not sure which banks would be disconnected and that their goal was to place functional, targeted restrictions.