The Bell is a non-establishment news outlet based in Russia. Below is their summary of what has been happening in Russia since the country began its military intervention in Ukraine. – Natylie

Hello! This week, Russia invaded Ukraine. Like most others in Russia, we doubted President Vladimir Putin would actually take such a momentous step — but he did. It will lead to enormous bloodshed, and have far-reaching political and economic consequences. The military situation in Ukraine is fast-moving and, as we do not have any reporters on the ground, we will focus on developments inside Russia, particularly the economic fallout.

Reaction to war

Publicly, there have been almost no dissenting voices raised against the military operation in Ukraine among the Russian political and business elite, which seems to be acting in lockstep with the president. In a televised meeting Monday of the powerful Security Council, several senior members seemed openly fearful; apparently hesitant and nervous in front of Putin.

The few exceptions include billionaires Mikhail Fridman, Russia’s 11th wealthiest person, and Oleg Deripaska, the country’s 38th wealthiest, who both offered criticism of the invasion Sunday. Fridman, who was born in Ukraine and spends much of his time in London, said in a letter to staff that “war can never be the answer”. More ambiguously, Deripaska wrote on his Telegram channel that “peace is very important”. Yelizaveta Peskova, the daughter of presidential press spokesperson Dmitry Peskov who studied at a university in France, posted a ‘no to war’ message on her Instagram on Friday, although it was quickly deleted.

Dissent has been far more widespread in urban, cultural circles, with many expressions of anger on social media. An online petition against the war was signed by almost a million people, and dozens of professional groups released statements in protest: for example, over 5,000 architects signed a statement condemning the war, as did more than 6,000 doctors and medical staff, and over 500 heads of charities and non-governmental organizations.

Tens of thousands of Russians have taken part in rolling anti-war protests in cities and towns across the country. A total of almost 6,000 people were arrested at such demonstrations in four days since the beginning of the invasion, according to protest-monitoring group OVD-Info (which is designated a ‘foreign agent’ by the Russian authorities).

Economic impact

Stock markets felt the brunt of the initial shock. When Putin signed a decree about the formal recognition of the rebel statelets in Eastern Ukraine on Monday, the Moscow Exchange dropped 10.5 percent and the dollar-dominated RTS fell 13.2 percent. And when the Russian invasion began three days later, there was a collapse: the Moscow Exchange crashed 33.3 percent and the RTS fell 38.3 percent. This was the biggest one-day fall on the Russian stock market since their inception, and was similar in scale to some of the biggest falls ever recorded on stock markets worldwide.

The ruble also took a pummeling, reaching almost 90 against the U.S. dollar Thursday, a record low and all the shocking since the price of oil, Russia’s main export, is trending upward and close to $100 a barrel. The currency pared some of its losses the following day, and was trading at about 83 rubles to the U.S. dollar Friday. However, it looked set for more major falls. Expectations grew over the weekend that a run on the ruble was likely when markets opened Monday — and many Russians people spent hours queuing for increasingly hard-to-find foreign currency.

For Russian consumers, it is U.S. sanctions on Russian banks that had the most immediate impact. Those who used sanctioned banks are now no longer able to pay with their bank cards abroad, they cannot access international online platforms, nor use Apple Pay and Google Pay.

Within hours of the invasion, Russia’s Central Bank began taking measures to stabilize stock markets and prop up the currency. And the following day it began helping Russian banks. Gold and currency reserves held by the National Wealth Fund were being used to support the ruble and ensure price stability, Finance Minister Anton Siluanov told an emergency government meeting Friday that was devoted to dealing with the consequences of sanctions.

On Sunday night it became evident that the measures are going to be truly extraordinary. A leaked document revealed that the Central Bank has ordered a block on foreign clients’ bids to sell Russian securities. If confirmed, this move would cut off the Russian stock market from the world indefinitely.

Wartime censorship

Coverage of the military action in Ukraine on Russian state-owned TV channels — how a majority of Russians get their news — has downplayed the scale and intensity of the fighting, stressing instead that the military intervention protecting the rebel-held areas of Eastern Ukraine. There were also claims that Russian soldiers were being welcomed as liberators — and little mention of battles raging outside Kyiv and Ukraine’s second city, Kharkiv.

At the same time, the Russian authorities have been ramping up pressure on independent media outlets and widely-used social media platforms. Media watchdog Roskomnadzor announced Friday that it would slow the operation of Facebook in response to restrictions imposed by the social network on the accounts of state-owned TV station Zvezda, news agency RIA Novosti and websites Lenta.ru and Gazeta.ru. Over the weekend, there were widespread reports of outages for Russian users on Facebook, Twitter and Instagram.

In addition, Roskomnadzor said Thursday that media outlets covering the war should only use information from official Russian sources. This was followed Saturday by a warning to ten media outlets that they would be blocked unless they stopped using the terms “invasion”, “attack”, or “declaration of war” to describe events in Ukraine — instead, Roskomnadzor said, it should be described as a “special military operation”. The outlets that received the warning included Meduza, TV station Dozhd, Mediazona, The New Times and Ekho Moskvy (Mediazona and Dozhd are designated ‘foreign agents’ by the Russian authorities).

Sanctions

A series of sanctions, boycotts and other restrictions against Russia have been announced by nations around the world. Here are some of the most significant:

Joint sanctions

The latest sanctions were unveiled Saturday night in a joint statement from the EU, U.S. and Canada that pledged to remove some Russian banks from international payments system SWIFT, put restrictions on the Russian Central Bank, and ban the practice whereby by wealthy Russians can buy citizenship of European countries (so-called ‘golden passports’). Sanctions against the Central Bank appear to be the most deadly part; they will freeze more than half of Russia’s financial reserves which total at $643 billion.

Other sanctions include:

United States:

*Symbolic sanctions on Putin, Foreign Minister Sergei Lavrov and Defense Minister Sergei Shoigu (similar sanctions were imposed by the European Union and the United Kingdom)
*Russian banks, including state-owned VTB, Otkritie, Sovkombank and Novikombank, were targeted by full-spectrum sanctions: a freeze on their assets, ban on operations, and punishments for U.S. and European organizations that work with them. Russia’s largest bank, state-owned Sberbank, was hit with less comprehensive sanctions: all correspondent accounts with Sberbank in the U.S. will need to be shut within 30 days (this will stop Sberbank from dealing in dollars). At the same time, the U.S. banned Russia’s largest privately-owned bank, Alfa Bank, from issuing shares.
*A ban on the export of high-tech goods to Russia. In short, this means any would-be exporters of high-tech goods — like computers, electronics, communications equipment or equipment for the aerospace industry — will need to obtain an official license. The only exception is communication equipment for the consumer sector: i.e. there will be no ‘iPhone ban’.
*Eleven Russian companies — including state-owned gas giant Gazprom — were banned from U.S. capital markets.

European Union

*All European Union airspace will be closed to Russian aircraft.
*State-owned television channel RT and news agency Sputnik will be banned from operating.
*A €100,000 limit on the size of bank deposits that can be held by Russian individuals and organizations.
*Bans on the export to Russia of equipment for the oil and gas industry, the aerospace sector, and defense companies.
*EU-produced aircraft will no longer be leased to Russian airlines. This restriction may affect existing contracts — meaning planes must be returned within 30 days, according to Russian newspaper Kommersant. Two-thirds of the fleet of national carrier Aeroflot is made up of leased aircraft, as well as two-thirds of the fleet of top airline S7 and the entire fleet of Urals Airline.
*Finally, the Council of Europe has suspended all representatives of Russia from participation in the pan-European rights body’s Committee of Ministers and its parliament. However, Russia remains a formal member of the body.

United Kingdom

*On the day of the invasion, the U.K. announced sanctions on major Russian companies including state-owned bank VTB, national carrier Aeroflot and defense conglomeration Rostec.
*Like the EU, the U.K. announced a limit on the amount of money that Russian citizens can deposit with U.K. banks — in this case, £50,000 ($66,800).
*A moratorium on the export of high-tech equipment to Russia, sanctioned the children of high-ranking officials (including those of oil executive and Putin confidante Igor Sechin), as well as banning a series of major Russian companies from raising debt on U.K. markets.
*A ban on Russian aircraft from entering U.K. airspace.

How far will Western sanctions go?

The nature of future rounds of sanctions will depend on the length and intensity of the fighting in Ukraine, and whether Ukraine survives as a functioning state, according Ivan Timofeev, an expert on sanctions at the Russian International Affairs Council. Either way, more sanctions are all-but inevitable. “There are two mutually-exclusive scenarios: either the war drags on, or it ends quickly and leads to regime change in Ukraine. Either scenario will lead to new sanctions,” Timofeev said. 

There is plenty of scope for new restrictions, according to Timofeev. They could include: increasing the number of targeted banks; reducing the ability of financial institutions to open correspondent accounts in the U.S.; increasing the number of countries who will not issue visas to Russians; ramping up sanctions on oil and gas companies working in Russia; and imposing new sanctions on the infrastructure, transport or telecommunications sectors.

What will happen to the Russian economy?

GDP. The Russian economy’s long-term potential for annual growth is now less than 1.5 percent, according to Sofiya Donets, the chief economist at investment bank Renaissance Capital. She added that the economy will shrink this year — despite high oil prices. 

Ruble. “80 rubles to the U.S. dollar and higher is our new reality,” said Donets. According to her forecast, a U.S. dollar will be worth about 85 rubles this year. However, Donets spoke prior to the announcement of Western restrictions on SWIFT and the Russian Central Bank, which could put even greater, short-term pressure on the ruble.  

Income. “Russian incomes will be eaten up by inflation, uncertainty, and a lack of investment,” said Donets. In the medium-term, real incomes will stagnate or fall.

Inflation. An inflation shock triggered by a falling ruble is inevitable. For the moment, Donets said inflation this year could reach 7 percent. But she admitted that “the situation is worse than even our most pessimistic worst-case scenarios.”

I apologize for the multiple posts today but things are escalating quickly and possibly in a very dangerous direction. Below is an excerpt from an article by ZeroHedge:

Update (1750ET): There’s now an EU-wide consensus on supplying Ukraine with arms amid reports that large columns of ground and armored forces are moving closer to Kiev, and as fighting rages across other parts of Ukraine. “European Union member states on Sunday agreed to unblock 450 millions euros ($500 million) for members states to buy arms for Ukraine, the bloc’s foreign policy chief Josep Borrell said,” the AFP reports.

“The measure is part of a wide-ranging package of support and sanctions agreed by the 27 EU states. Borrell said they also formally approved a move to ban any transactions with the Russian Central Bank.” It comes as unconfirmed reports suggest Putin may be frustrated at the slower than expected progress of the Russian forces.

Borrell also reportedly said that package will include fighter jets:

“We’re going to provide even fighting jets,” Borrell said at a Sunday press conference. “We’re not talking about just ammunition. We are providing more important arms to go to a war.”

I don’t know the time and logistics required to get fighter jets or even the other items to Ukraine and if it would make a difference by the time they got to soldiers in Ukraine. This could ultimately amount to a lot of posturing. Anybody who knows more about military logistics can feel free to chime in on the comments.

Analyst Clint Ehrlich (who I recommend following on Twitter) commented on the sending of fighter jets to Ukraine:

The EU providing fighter jets to Ukraine is another *massive* escalation. Russia will undoubtedly allege (correctly?) that the fighters are actually flown by European pilots. If you wanted to suck Europe into the war, this is what you would do.

Back to the ZeroHedge report, citing the Wall Street Journal, Turkey has announced it will execute the articles of the Montreux Agreement:

Also on Sunday for the first time Turkey signaled it is ready to block Russian naval access to the Black Sea…

“Turkey’s foreign minister said Sunday that the situation in Ukraine had become a war, a legal distinction that paves the way for Ankara to potentially ban Russian warships from entering the Black Sea through a strategic chokepoint,” The Wall Street Journal reports. The terms of the 1936 Montreux Convention is now expected to be triggered. Speaking to CNN Turk Foreign Minister Mevlüt Çavuşoğlu said:

“We came to the conclusion that the situation in Ukraine has transformed into a war,” and this means “We will implement all articles of Montreux transparently.”

Last Thursday – which was the first day of the all-out Russian invasion, Ukraine’s government urged Turkey to close the Bosphorus and Dardanelles Straits for all Russian warship passage.

This move paves the way for Turkey to close the Black Sea to any more Russian ships entering. However, it cannot kick ships out that are already there. Russia might normally consider such a move an act of war, but Turkey is a NATO member.

Interfax has reported that Belgium will be supplying 3,000 automatic weapons and 200 anti-tank weapons to Ukraine.

Meanwhile, TASS news has reported that negotiations between Ukrainian and Russian delegations will start on Monday morning on the border of Belarus (they are 10 hours ahead of us). Apparently the delay is due to logistics issues with the Ukrainian delegation. According to Interfax, the Russian delegation is looking to establish a road map for further talks:

The talks with the Ukrainian delegation are an opportunity to develop a road map to achieve agreements, but it should be short-term, Leonid Slutsky, State Duma Foreign Affairs Committee head and a member of the Russian delegation, said.

“Frankly speaker, we’re quite hard-edged about our stance. But, at the same time, the negotiating process is truly an opportunity for both making some concessions and developing a road map, but it must be very short-term,” Slutsky told journalists on Sunday.

The EU has announced that it will ban RT and Sputnik. According to Politico EU:

European Commission President Ursula von der Leyen announced Sunday that Kremlin-backed RT, formerly known as Russia Today, and Sputnik, would be banned in the EU.

“We will ban the Kremlin’s media machine in the EU. The state-owned Russia Today and Sputnik, and their subsidiaries, will no longer be able to spread their lies to justify Putin’s war,” she said.

“We are developing tools to ban their toxic and harmful disinformation in Europe,” von der Leyen added, without providing more details.

I would have quoted from RT’s article about this but I’m now having trouble accessing RT’s website.

The OSCE is reporting that in Russia, media outlets that don’t toe the official narrative are being threatened with censorship as well:

On 26 February the Russian media regulatory agency Roskomnadzor (Federal Service for Supervision of Communications, Information Technology and Mass Media), under the threat of hefty fines and blocking, demanded that at least 10 media outlets, including Ekho Moskvy, InoSMI, Mediazona, The New Times, Dozhd, Svobodnaya Pressa, Krym.Realii, Novaya Gazeta, Jurnalist and Lenizdat, remove materials about the war in Ukraine. Roskomnadzor reportedly said that these media outlets published “false information” about the shelling of Ukrainian cities by the Russian armed forces and the death of Ukrainian civilians, as well as materials in which the Russia’s ongoing military operation is called an attack, an invasion, or refers to a declaration of war.

Putin doesn’t bluff.  I’ve noted this to people in the past.  Other really smart and experienced Russia experts – far more experienced and knowledgeable than me – have pointed this out.  Did we really forget this?  Did we really think he was bluffing?

I don’t think I thought he was bluffing.  I thought that there were a host of other “military-technical measures” that Russia could take to pressure the west and increasingly show that it meant business about its interests.  I also thought that if Russia took military action in Ukraine, it would be limited to securing the entire Donbas area decisively and likely in response to a significant provocation.  But as we all now know, that’s not what happened.

On Monday, February 14^th, Putin had a televised meeting with his foreign minister, Sergei Lavrov, in which Lavrov stated that he didn’t think diplomacy had been exhausted and advised to continue. Putin agreed.  A week later, Putin signed the Duma decree recognizing the DPR and LPR which also allowed the use of military force.  Three days later, he ordered the invasion of Ukraine.

Between the week of 2/14 and 2/21, it appears that something tipped Putin’s thinking into this decision.  Something during that time served as the straw that broke the camel’s back.  Some have suggested that it was Zelensky’s implicit threat of developing nuclear weapons during his Munich Security Conference speech on February 19^th.  The threat of nuclear acquisition was indeed mentioned by Putin in his address announcing the invasion of Ukraine:

“I would like to additionally emphasise the following. Focused on their own goals, the leading NATO countries are supporting the far-right nationalists and neo-Nazis in Ukraine, those who will never forgive the people of Crimea and Sevastopol for freely making a choice to reunite with Russia.

They will undoubtedly try to bring war to Crimea just as they have done in Donbass, to kill innocent people just as members of the punitive units of Ukrainian nationalists and Hitler’s accomplices did during the Great Patriotic War. They have also openly laid claim to several other Russian regions.

If we look at the sequence of events and the incoming reports, the showdown between Russia and these forces cannot be avoided. It is only a matter of time. They are getting ready and waiting for the right moment. Moreover, they went as far as aspire to acquire nuclear weapons. We will not let this happen.” [Emphasis mine]

Dmitry Rogozin, the head of Roscosmos, Russia’s state space corporation, also discussed this threat on a Russian news talk show this past Saturday, asserting that Ukraine has the scientific and technical resources for creating ballistic missiles:

“[T]hey are seeking to create their own ballistic systems which are really capable of delivering a strike on our territory…Ukraine has been developing combat missile systems lately…These are Grom systems, and in general it is not a big problem for any design bureau to increase the distance from 300 kilometers and beyond. There are other systems which actually are intermediate-range systems [with a distance] of up to 2,000 kilometers. In fact, this is a real threat to Russia, up to the Ural Mountains.”

At this point, we can’t know for sure what it was that finally precipitated Putin’s fateful decision.  For now, we can only speculate.  But we can observe the fact that this is a departure from Putin’s previous actions when it comes to the use of military force over the past 15 years.  The operations in Georgia, Crimea, the Donbas (prior to 2022) and Syria were all relatively measured and on behalf of a limited objective.  They were operations that did not see massive casualties or a protracted presence that would lead to a potential quagmire.  That’s why me and many other analysts were caught on the back foot with this move by Putin.  The cost/benefit analysis for this just didn’t seem to make sense at this time. 

The economic costs are already looking to be significant and a previously fractured west is now seemingly rallying around the US/NATO flag far more than before – consequences that are not in Russia’s interests. 

It also doesn’t seem to fit very well with Putin’s legalistic nature and his past finger-wagging at US/NATO for its flouting of the UN charter and international law.  A lawyer by training, Putin has always been very adept at finding legalisms to justify his actions both domestically and internationally.  He once spoke of the tyranny of the law as his governing style.  I suppose he could bring up the Kosovo precedent or humanitarian intervention doctrine that the west has tried to use to justify its bogus military actions.  But it seems rather unconvincing.

Perhaps this will end soon and the costs in blood will not have been too much.  But the scale of this operation leaves far more potential for nasty unintended consequences than many of the other military-technical, diplomatic or economic measures that could have been taken to pressure the west, including taking control of the entire Donbas region.   

Ukrainian president Volodymyr Zelensky, for his part, is literally out of central casting as a relatable underdog trying to defend himself against a bigger foe after being suckered into the fight by his fair-weather friends who have their own agenda.  So far, he’s playing the role much better than anyone imagined and many on the sidelines are rooting for him, while Putin is losing any benefit of the doubt that some wanted to give him.

An experienced fellow Russia watcher once commented to me years ago that Putin seems to have a knack for pulling a rabbit out of his hat when confronted with certain geopolitical problems.  Let’s hope for everyone’s sake that he has another rabbit left to pull out.

Earlier today, Russian media reported that Ukrainian president Zelensky ultimately declined talks with Russia due to what he called terms of “capitulation” from Moscow. According to RT:

Russia’s military operation in Ukraine is continuing after the country’s leadership declined to negotiate, Kremlin spokesman Dmitry Peskov said on Saturday.

President Vladimir Putin previously ordered the Russian troops to halt their advance on Friday, awaiting a response from Kiev, Moscow said. It added that the offensive continued on Saturday.

Alexey Arestovich, an adviser at Zelensky’s office, confirmed to Ukrainian media that Kiev has declined the talks with Russia, citing the “terms” put forward by Moscow through intermediaries. “It was an attempt to force us into capitulation,” he said, without elaborating.

Zelensky may have publicly shown interest in peace talks with Russia as a ploy to get the west to provide more substantive support. Germany has announced that it has reversed its long time position and is now getting ready to send weapons to Ukraine. Der Spiegel reported:

The federal government wants to deliver 1,000 anti-tank weapons and 500 “Stinger” surface-to-air missiles from Bundeswehr stocks to Ukraine “as soon as possible” . This was announced by Chancellor Olaf Scholz (SPD).

Even more concerning, it is just now being reported that Germany has finally agreed to remove Russia from the SWIFT banking system. According to BBC News, the cutoff from SWIFT will initially only involve some Russian banks but no further details on which banks were provided:

The measures agreed by the US, UK, Europe and Canada also include restricting the Russian central bank’s international reserves, the nations said in a joint statement.

This comes after an emotional speech given earlier by Zelensky calling for immediate EU membership for Ukraine and Russia’s removal from SWIFT. Germany had reportedly been one of the holdouts on this decision, along with Hungary. According to Euronews:

On his Twitter account, Zelenskyy shared he was receiving “support calls” from several European leaders, including French President Emmanuel Macron, Swiss President Ignazio Cassis and Greek Prime Minister Kyriakos Mitsotakis, who he said offered “concrete assistance to Ukraine”.

An earlier misunderstanding regarding a missed call from Italian PM Mario Draghi was also cleared up. Zelenskyy claimed that Draghi “in a phone conversation supported Russia’s disconnection from SWIFT” and promised defence assistance.

Bloomberg reports that Wall Street interests had advised the Biden administration not to cut Russia from SWIFT, arguing that the blowback on the U.S. could be dangerous:

Opponents of the idea passed along a warning: Booting Russia from the critical global system — which handles 42 million messages a day and serves as a lifeline to some of the world’s biggest financial institutions — could backfire, sending inflation higher, pushing Russia closer to China and shielding financial transactions from scrutiny by the West. It might also encourage the development of a SWIFT alternative that could eventually damage the supremacy of the U.S. dollar.