Kremlin says Russia’s economic reality has changed, stands by central bank

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FILE PHOTO: People walk past the headquarters of Russia's Central Bank in Moscow

MOSCOW – The Kremlin on Monday said Russia’s economic reality had changed but saw no reason to doubt the effectiveness and reliability of the central bank, which hiked interest rates to 20% as it sought to shield the economy from unprecedented Western sanctions.

The bank has also introduced some capital controls as the West seeks to restrict its ability to deploy $640 billion of forex and gold reserves and cut Russia’s major banks out of the SWIFT financial network, making it hard for lenders and companies to make and receive payments. Those moves have sent the rouble tumbling to record lows.

“The economic reality has considerably changed,” Kremlin spokesperson Dmitry Peskov told reporters. “These are heavy sanctions, they are problematic, but Russia has the potential to offset the harm.”

“Russia has been making plans for quite a long time for possible sanctions, including the most severe ones. There are response plans, they were developed and are being implemented as problems appear.”

Peskov said sanctions introduced against President Vladimir Putin himself were pointless.

“(Putin) is quite indifferent. The sanctions contain absurd claims about some assets,” Peskov said. “The president has no assets other than those he has declared.”

The West is seeking to punish Russia for its invasion of Ukraine. Russia calls it a “special military operation” aimed at protecting civilians.

Putin will work on economic issues today, Peskov said, meeting with officials including Central Bank Governor Elvira Nabiullina, Finance Minister Anton Siluanov, and German Gref, CEO of dominant lender Sberbank.

Asked about the central bank’s handling of the crisis, Peskov said: “We have had no reason to doubt the effectiveness and reliability of our central bank. There is no reason to doubt it now.”

(Reporting by Reuters in Moscow)