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How sanctions made it difficult for Russians to conduct daily banking

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How much do financial sanctions against Russia matter to the average Russian one year after Moscow sent its troops into Ukraine? They have slashed the profits of Russian banks and destroyed the international operations of many lenders.

The majority of people who bank in roubles with sizable retail lenders like Sberbank (SBER.MM) will tell you: not much.

In the Urals city of Yekaterinburg, a taxi driver named Vyacheslav Fatikhovich declared, “Nothing has changed at all for me.”

The only difference is that customers are using cash more frequently and cards less frequently, he claimed.

With the help of capital controls, Russia’s monetary authorities were able to prevent a full-scale bank run, and the supply of the rouble has since remained high, making the early-spring ATM rush for cash a thing of the past.

However, since Russia’s major banks were essentially expelled from the SWIFT global payments network, life has become more difficult for those who travel abroad, want to move money there, or own foreign currencies or securities.

EXCHANGE RATE DIES UP

If the funds entered their account prior to the March 9 restrictions, those with foreign currency accounts were only permitted to withdraw $10,000. Hard currency deposits made after the deadline can only be withdrawn as roubles.

Who knows how much hard currency got stuck outside of the banking system as some rushed to withdraw their hard currency deposits and dump their rouble holdings out of fear that impending curbs would completely cut them off.

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The memory of the chaotic chase for cash, according to a retail employee who asked to remain anonymous, still makes her make sure she has plenty of cash on hand.

The woman claimed, “I spent hours in my car driving between banks where people were withdrawing not just dollars but also roubles.”

CHINESE AND RUSSIAN LIFELINES

Due to the fact that Visa (V.N) and Mastercard (MA.N) stopped operating in Russia, cards issued there also ceased to function abroad, which caused a rush to Russia’s alternate Mir cards.

Entrepreneur Danil Usikov, 45, who is based in Belarus and was present when Russian cards ceased to function, claimed he had enough cash to maintain his calm.

The issue needed to be resolved, so I took a flight to Moscow, opened a Mir card, and then flew back to Belarus where I was able to pay for everything.

Mir, which in Russian means “world” or “peace,” is nevertheless encountering difficulties abroad because some “friendly” nations, or those that have not imposed sanctions on Russia, such as Turkey, are limiting access.

China’s UnionPay, according to former journalist Andrey, was his lifeline.

Andrey, who now works outside of Russia, stated that he “quickly opened three UnionPay cards at various Russian banks.” Additionally, I traveled to Kazakhstan to get a MasterCard there, which has been extremely useful over the past year.

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Many Russians who left the country out of fear of political retaliation or of being drafted into the war also had to figure out how to get money out of Russia.

Even though some banks can still use SWIFT and handle international transfers, commissions and other costs have increased, which has led some customers to look for alternatives like cryptocurrencies.

For instance, users of Binance, the biggest cryptocurrency exchange in the world, can transfer roubles using the “stablecoin” Tether, which is pegged to the dollar.

There are other, riskier ways to obtain money from Russia.

An anonymous financial services professional asked a friend to withdraw millions of roubles from his Russian accounts and meet a man in Moscow. The financial services professional left Moscow shortly after the conflict started and asked for anonymity.

Three hours later, a woman carrying about $50,000 in a paper KFC bag arrived at his hotel room in Dubai, completing the transaction, which was entirely based on trust.

“FRIENDLY,” BUT DIFFICULT

Even though Dubai is a “friendly” location, opening a bank account there was anything but simple, especially without an Emirati ID, as thousands of Russians who traveled there discovered.

Opening an account without local ID is possible, but the verification process takes one to three months, and the outcome is not always predictable, according to Telegram user Inna on the Russian-language channel “Hi Dubai.”

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Individuals were impacted by restrictions as the West prohibited transactions with Russia’s central bank and limited its ability to defend the rouble by freezing $300 billion in overseas assets. The central bank estimates that as a result, over 5 million retail investors in Russia had their holdings in foreign stocks frozen at over 320 billion roubles ($4.28 billion).

Investor Svetlana Mavrinskaya stated, “We lost our assets after February 24, 2022, and still to this day – assets are frozen and they remain so.

“Neither the central bank nor brokers are acting in the interests of Russian investors,” claimed another investor, Yulia Zykova.

The Bank of Russia claims to be working to unlock the assets of small-scale investors. However, for the majority of Russians, including the taxi driver Fatikhovich, these issues are alien.

I don’t go on vacation abroad, I go to my mother’s house in the country,” he said. I have, of course, seen dollars, but I have never physically held any.

(1 USD = 74.7000 RUB)

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