Putin reminds the world he still wields a powerful economic weapon

In the five weeks since Russia invaded Ukraine, the United States, the European Union and their allies began an economic counteroffensive that has cut off Russia's access to hundreds of billions of dollars of its own money and halted a large chunk of its international commerce. More than 1,000 companies, organizations and individuals, including members of President Vladimir Putin's inner circle, have been sanctioned.

But Putin reminded the world this past week that he has economic weapons of his own that he could use to inflict some pain or fend off attacks.

Through a series of aggressive measures taken by the Russian government and its central bank, the ruble, which had lost nearly half of its value, clawed its way back to near where it was before the invasion.


And then there was the threat to stop the flow of gas from Russia to Europe - which was set off by Putin's demand that 48 "unfriendly countries, violate their own sanctions and pay for natural gas in rubles. It sent leaders in the capitals of Germany, Italy and other allied nations scrambling and showcased in the most visible way since the war began how much they need Russian energy to power their economies.

As he has tried to wield his energy clout externally, Putin has taken steps to insulate Russia's economy from the effect of sanctions and to prop up the ruble.

When the allies froze the assets of the Russian central bank and sent the ruble into a downward spiral, the bank increased the interest rate to 20%, while the government mandated that companies convert 80% of the dollars, euros and other foreign currencies they earn into rubles to increase demand and drive up the price.

Aside from currency woes, Russia is struggling economically in other ways.

The country is already facing a deep recession, and several analysts estimate that the economy could shrink by as much as 20% this year.

By one estimate, some 500 foreign companies have pulled up stakes in Russia, scaled back operations and investment, or pledged to do so.

The result is that however the war in Ukraine ends, Russia will be more economically isolated than it has been in decades, diminishing whatever leverage it now has over the global economy as well as its own economic prospects.