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Russia is on verge of a financial meltdown as sanctions wreak havoc on its economy.

Middle East

01-03-2022 | 03:48

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Russia is on verge of a financial meltdown as sanctions wreak havoc on its economy.

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Russia was scrambling Monday to avoid a financial meltdown as its economy was slammed by a slew of crippling Western sanctions imposed over the weekend in response to the invasion of Ukraine.

President Vladimir Putin held crisis talks with his top economic advisers after the ruble fell to a record low against the US dollar, the Russian central bank more than doubled interest rates to 20%, and the Moscow stock exchange was closed for the day. The central bank announced that it will remain closed on Tuesday.

The European subsidiary of Russia's largest bank was on the verge of failure as depositors rushed to withdraw their funds. Economists predict that the Russian economy will contract by 5%.

The ruble had lost about 25% of its value and was trading at 104 to the dollar at 12:15 p.m. ET, after falling as much as 40% earlier. According to a statement from the country's central bank, the start of trading on the Russian stock exchange has been delayed, and then canceled entirely.

The ruble plummets

The United States, the European Union, the United Kingdom, and Canada announced on Saturday that they would expel some Russian banks from SWIFT, a global financial messaging service, and "paralyze" Russia's central bank's assets.

"The escalation of Western sanctions over the weekend has pushed Russian banks to the brink of collapse," wrote Liam Peach, an emerging market economist at Capital Economics, in a note on Monday.

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