Reuters: How sanctions have complicated everyday banking for people in Russia

Reuters: How sanctions have complicated everyday banking for people in Russia

Reuters: How sanctions have complicated everyday banking for people in Russia

Illustration photo – People queue in front of an ATM in Saint Petersburg, Russia on February 25, 2022.

Moscow – Financial sanctions against Russia have dampened the profits of banks there and destroyed the foreign activities of many Russian financial institutions. But how did they affect ordinary Russians? A year after Moscow sent its troops into Ukraine, most of them who keep their money in rubles at big banks such as Sberbank say they have hardly been affected by the sanctions. This was reported by Reuters.

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“For me, nothing has changed at all,” says Vyacheslav Fatichovič, a taxi driver in Yekaterinburg. “The only thing that has changed is that customers pay less by card and more often by cash,” he added.

Russian monetary authorities managed to avert a large-scale attack on banks by restricting capital movements. The supply of rubles has remained high and long queues at ATMs are a thing of the past after the initial rush last spring when people scrambled to stock up on cash.

But for those who travel abroad and want to transfer money there, or hold foreign currencies and securities, life became more complicated when the main Russian banks were effectively excluded from the SWIFT global payment network. Holders of accounts in foreign currency could only withdraw USD 10,000 (over CZK 223,000) if the money arrived in their account before the March 9 restrictions were introduced. Those who deposited foreign currencies after this deadline can only withdraw rubles.

But one can only guess how much hard currency remained outside the banking system, as some rushed to get rid of rubles and withdraw hard currency deposits, fearing that further restrictions could cut them off from that money altogether. One retail worker, who did not want to be named, says the memory of the mad scramble for cash still makes her make sure she has enough cash.

“I spent hours driving between banks where people were withdrawing not only dollars, but also rubles,” he says.

The suspension of American companies Visa and Mastercard in Russia also meant that their payment cards issued in Russia stopped working abroad. This sparked interest in Russian alternative Mir cards.

Forty-five-year-old businessman Danil Usikov lives in Belarus and was there when Russian payment cards stopped working. He had enough cash then not to panic. “However, the problem needed to be solved, so I flew to Moscow, set up a Mir card, returned to Belarus, and then I was able to pay for everything.”

However, Mir runs into problems abroad , because some so-called friendly countries, i.e. those that have not imposed sanctions on Russia, such as Turkey, restrict transactions with these cards. Former journalist Andrej said that his lifeline is the Chinese payment company UnionPay.

“I quickly got three UnionPay cards at different Russian banks. In addition, I went to Kazakhstan to get a Mastercard, which has proven invaluable in the past year,” said Andrei, who now works outside of Russia.

Many Russians who moved abroad for fear of reprisals for their views or fear of being called up to fight also had to figure out how to get money out of Russia. While some banks still have access to the SWIFT payment system and can process cross-border transfers, they have increased fees, drawing people to alternatives such as cryptocurrencies. For example, users of the Binance cryptocurrency exchange can transfer rubles via the stablecoin tether, which is pegged to the US dollar.

Other ways are more adventurous. One financial services professional from Moscow, who wished to remain anonymous, asked a friend to withdraw millions of rubles from his Russian accounts and meet with one person in Moscow. The transaction, based entirely on trust, was completed three hours later when a woman arrived at his hotel room in Dubai with approximately US$50,000 (CZK 1.1 million) in a paper bag from KFC chicken.

Thousands of Russians who have gone to Dubai have found that even though it is a friendly destination according to the Russian authorities, opening a bank account there is not easy. Especially if one does not have an ID card issued by the local authorities. “It is possible, but the verification process takes one to three months and the result is not always predictable,” said a Telegram user named Inna. She thus shared advice on the channel about setting up a bank account without a local ID card.

Small investors were also affected by the West's decision to ban transactions with the Russian central bank and freeze its foreign assets worth around USD 300 billion. According to the Central Bank's estimates, over 320 billion rubles (CZK 96.3 billion) in foreign shares have been frozen for more than five million retail investors in Russia.

“We lost our assets after February 24, 2022. These assets are still frozen today, nothing has changed,” said investor Světlana Mavrinská. Another investor, Julia Zykova, says that neither the central bank nor the brokers are doing anything in the interests of Russian investors. However, the Russian Central Bank claims that it is working to unblock the assets of Russian investors.

Most Russians, however, such as taxi driver Fatichovich, are strangers to such worries. “I go on vacation to my mother in the country, not abroad. Of course I saw dollars, but I never had them in my hand,” he says.