Putin is doomed, but he can still do terrible damage
This would make Russia the sixth highest inflation country in the world, after Venezuela, Lebanon, Zimbabwe, Turkey and Argentina.
But it’s not yet hyperinflation, which is generally considered a rate above 50% per month. In January 1994, for example, the Serbian inflation rate under Slobodan Milošević reached the astonishing figure of 313 million pc per month.
“Russia obviously has a big problem with inflation,” Prof Hanke says, “but I think we can take hyperinflation off the table. It’s possible, but only by a long way.”
War is a costly business, but appalled as she must be at this turn of events, Ms Nabiullina is under no apparent pressure to ramp up the central bank’s printing press to pay for her.
It is true that Western sanctions will have neutralized a very considerable proportion of Russia’s $661 billion in reserves, but according to analysis by Charlie Robertson, chief economist at Renaissance Capital, an emerging markets investment bank based in London, the central bank likely retains access to reserves located either in Russia, China or gold worth around $200 billion. That’s enough to pay for nine months of imports, even assuming Russia doesn’t export anything in the meantime to make up for them.
As it stands, these reserves are growing at the rate of about $1 billion a day, thanks to still buoyant oil and gas exports and high energy prices. What is the point of denying Russia access to Swift, the international banking messaging system, if there are notable exclusions for banks that facilitate Russian oil and gas exports to Europe and the rest of the world ? Unfortunately, the sanctions are not as comprehensive as claimed.
In almost all cases, the countries that suffer from hyperinflation will suffer under the yoke of huge current account and budget deficits. Denied access to international bond markets, governments then turn to the central bank’s printing press to pay their bills. Such an imperative does not exist in Russia, which, thanks to buoyant oil and gas revenues, enjoys substantial and growing current account and fiscal surpluses.
To be clear, in the medium and long term, Putin’s hubris will undoubtedly condemn him and his country to oblivion. But don’t expect that to happen quickly. He has enough economic resilience to do a lot of damage in the meantime.