Rouble trouble

Sanctions are causing Russia pain – but can the west keep its resolve?

- Larry Elliott

It must have looked so simple to Vladimir Putin ; a lightning strike by superior Russian forces would quickly topple the Ukrainian regime.

The Kremlin would have bargained for the invasion being met with sanctions, but assumed these would be a minor inconvenience given the divisions in the west. Russia had a huge $6 50bn war chest of gold and foreign exchange reserves to support the economy.

The 19th- century German military strategist Helmuth von Moltke said no plan survives contact with the enemy and that was certainly true in this case. An increase in interest rates from 9.5% to 20%, the introduction of tough capital controls, the closure of the stock market and the clamp down on dissent all tell the same story: the campaign has not been the pushover Putin envisaged. And Russia’s economy is under siege.

By far the most significant sanction has been to limit Moscow’s access to its foreign exchange reserves, there to provide a defence against an attack on the rouble.