ECONOMYNEXT – Sri Lanka’s rupee badly hit liquidity injections, has sharply appreciated to 2.36 rupees to the Russian ruble from 2.66 earlier in the week, after Vladimir Putin invaded Ukraine, and the EU, UK, US and Canada have announced sanctions against Russia’s central bank.

The natural resource rich nation’s central bank is one of the worst in the world and has a strong record of money printing and currency crisis.

The Russian central bank under Tsar Nicholas II in 1905-06 (around Russo-Japanese War) also pioneered modern style exchange controls, after printing money limiting German marks that could be carried out to 50,000 per person.

The inflation created by the Russian central bank during and in the run up to World War I helped bring the Bolshevik’s to power, analysts say. In March 1915 alone the bank printed a billion rubles. By 2017, it was printing 50 million rubles a day.

The Ruble has been steadily falling against the Sri Lanka rupee from around 2.90 rupees October 2021 as the Russian Federation economy recovered and people and companies started to spend money.

Modern interventionist central banks print money to stop credit from slowing and interest rates from going up, triggering currency depreciation and unsustainable imports. When the currency falls, capital flight is triggered, further hitting the currency.

The European Union said it will intensify sanctions against Putin, by barring some Russian banks from using the SWIFT messaging system to clear cross-border transactions and also sanction the central bank in a rare move.

“First, we commit to ensuring that a certain number of Russian banks are removed from SWIFT. It will stop them from operating worldwide and effectively block Russian exports and imports,” Ursula von der Leyen

“Second, we will paralyse the assets of Russia’s central bank. This will freeze its transactions. And it will make it impossible for the Central Bank to liquidate its assets.”

In coordination with I will now propose new measures to EU leaders to strengthen our response to Russia’s invasion of Ukraine and cripple Putin’s ability to finance his war machine.

— Ursula von der Leyen (@vonderleyen) February 26, 2022

Russia’s central bank has been buying large volumes of gold over the last decade as the US Fed printed money and weakened the dollar, pushing up gold and other commodity prices.

The Russian central bank has 2,298 tonnes of gold as of November 2021 the latest available data, against 641 tonnes in March 2020. It has reduced purchases of US securities.

Gold can potentially be shipped to third countries, provided the ship are not arrested mid sea. Western powers have already detained one ship for busting sanctions.

Russia and Ukraine has been the top sources of tourists after the country re-opened for tourism.


Sri Lanka’s tea, tourism, energy, threatened by Ukraine-Russia conflict – analysts

Sri Lanka tourism sector sees cancellations, extensions as Russia-Ukraine conflict intensifies

Russia is also a top buyer of Sri Lanka tea.

Ceylon tea ban lifted after Sri Lanka allows Russian asbestos

In 2020, Sri Lanka imported 232 million dollars of goods from Russia. Sri Lanka imports among other items, asbestos from Russia.

When Sri Lanka banned asbestos imports suddenly, Russia found a beetle in Sri Lanka tea.

Ceylon tea ban lifted after Sri Lanka allows Russian asbestos

Asbestos was banned partly following pressure from the tile lobby, which controls imports to trap the public and push up their profits. (Colombo/Feb27/2022)