WASHINGTON — Vladimir Putin’s unprovoked war on Ukraine and the resulting global response will set Russia’s economy back by at least 30 years — close to old Soviet Union times — and lower its standard of living for at least the next five years, according to economists, investors and diplomats.

These broad Western sanctions were designed to cause maximum damage to Russia’s economy, by removing it from the global markets and freezing its assets. Three weeks ago, sanctions were in effect. They have marked a turning point in Russia’s history.

Russia’s currency and financial systems are in crisis. The Kremlin was forced to shut down the stock exchange and artificially support the ruble within its borders.

The country’s forty-year-old effort to create a market-based, prosperous economy, which began under the former leader Mikhail Gorbachev, collapsed almost instantly. Putin’sUkraine invaded brutally

The Soviet Union was first to taste American goods after landmark economic and social reforms were made in 1980. The decades-long effort to integrate Russia’s economic system into Europe came to an abrupt halt when blue chip corporations quit Russia and the United States, European Union and other countries began to end trade and tourism relations with Russia.

Particularly, two sanctions have caused havoc to the economy. One of the most severe sanctions was the expulsion from SWIFT, a global payments network that allows for international transactions.

This second measure frozen the hundreds of millions of Euros kept in reserve at Russia’s Central Bank. Without the Russian Ruble being supported by reserve funds, the Kremlin has no way to stop its collapse.

It is also worth noting that the United States of America and Britain have both been halting imports of Russian oil and gasThe U.S. has placed export restrictions on luxury and high-tech equipment, while a growing number of other countries are banning Russian ships from their ports.

Maximillian Hesse, a Central Asia Fellow in the Eurasia program of the non-profit Foreign Policy Research Institute said that “the problem we have right now is that we are basically in a spiral in which we don’t realize how many unrealized loss there are still to recover.”

We can’t rule it out that the ruble might collapse. collapse.” He added.

Meanwhile, sanctions on Russia’s largest banks have added yet another layer of uncertainty to everyday transactions, like buying a metro ticket in Moscow with AppleU.S. sanctioned sanctions forbid payment. Russian authorities have banned exchanging dollars for rubles at banks.

“There is an emerging middle class [in Russia]”That is now going to get knocked down,” Christopher Smart (chief global strategist, Barings Investment Institute), said. It will be isolated. It is going to be a country with a currency that has no value in the outside world. 

According to foreign policy experts, Russia is likely to default on its sovereign loans in the days ahead. This will happen when bond payments of more than $100million are due. 

Hess stated, “Russia defaults. That’s certain.”

Russia’s finance Minister said recently that Russia will repay its sovereign foreign debts in rubles if Western sanctions are not lifted.

Hess claimed that these debts prevent Russia from paying interest, in rubles. A Russian attempt to do this would amount to technical default.

The plummeting ruble combined with the impending defaults makes Russia very risky for lenders. 

Hess said, an expert on sovereign credit: “Russia has destroyed all credibility it had as a borrower in the foreseeable future.” It will never be again able borrow at the same rates it borrowed in recent years.

They include global banks like Goldman SachsAll Big Four Big Four accounting firms, and all consumer brands StarbucksAnd Ford.

Hess said that “a lot of these Russian companies aren’t doing this for their reputational purposes.” According to Hess, “It is because they know that they won’t be able to move money into and out of Russia for the foreseeable future” due to sanctions. 

Russians may be more affected by some departures than others.

For decades, PepsiCo, Levi StraussAnd Coca ColaIt symbolized freedom and hope for the young behind the Iron Curtain. The three companies have each announced that Russia will not be selling their products.

The three big oil companies are another exit with high potential. Shell, BPAnd ExxonRussia’s oil dependent economy was hit hard by the exits of. 

Visa, Mastercard, PayPalAnd American ExpressAlso, Russian services were suspended in Russia. This meant that Russians from outside Russia couldn’t use their debit cards. Russian banks also had to scramble to switch to Chinese card issuers.

The most significant departure was the of McDonalds. In early 1990, the fast-food chain opened its first Moscow restaurant. This was a significant moment in Russia’s openness to Western culture. McDonald’s Russia announced last week that it had closed all of its 850 restaurants. would temporarily close.

Many of the Russian companies who have stopped operations insist that they will return to Russia as soon as possible after the ceasefire in Ukraine. Global investment experts believe that the U.S. sanctions combined with a weakening ruble makes it hard to see these companies coming back this year or next.

“Not next year. Not five years. Smart of Barings said that investors will not return to Russia for a while.

Putin took over the leadership of Russia in 2000 when he was elected for the first time. 38% of the populationAccording to the study, they lived on $5.50 per person each day. World Bank data using 2011 price values. This figure was just 3.7% in 2018, down from more than 90% in 1990.

Many Russians spent that time buying foreign cars, TVs, microwaves, etc. You could see them wearing Benetton and Diesel, as well as taking vacations abroad.

However, experts warn that Putin might have serious problems if Russians begin to experience a drop in their quality of life as a consequence of Putin’s invasion Ukraine.

The problem arises out of a unwritten social agreement that Putin has made with Russian voters.

“The deal was that [Putin]Barry Ickes from Penn State University, heads the department of economics. “It would stop the chaos of 1990s and let people be domestically as well as financially successful,” he said. “In return for this, we would all agree not to challenge Putin’s political power. Since then, that has been Putin’s deal.”

This agreement helps us understand how Putin has been able to retain power in Russia almost twenty years ago and the reasons why many Russian societies have accepted his rise as an autocrat. Experts said that it is also the key to understanding Putin’s vulnerability.

The Kremlin has maintained for years that freedoms to travel and to spend money are more important to Russians than other tangible freedoms like freedom of protest against government policies.

“In the early 1990’s our people were paupers — and it’s ridiculous to say they were free,” Vladislav Surkov, a leading Kremlin ideologist, said in a 2006 Financial Times interview. Interview.

Ickes stated that Putin should not be able to provide economic stability for average Russians. He could risk looking like he doesn’t respect the social contract.

Putin’s Ukraine war is now in its third week. Putin cannot provide stability or economic support.