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Financial preparedness lessons from Russia’s economy

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In 2021, Russia was the eleventh largest economy in the world.

But, in 2022 that will change.

As you know, when Russia invaded Ukraine, the U.S. and other nations hit Russia with economic sanctions.

According to Deputy Treasury Secretary Wally Adeyemo, “The economic crisis Russia faces will leave the Kremlin with fewer resources to prop up the Russian economy, pursue its invasion in Ukraine, and project power in the future.”

But Russia has been preparing for sanctions for years.

When they annexed Crimea in 2014, they knew it would be the start of sanctions, including trade restrictions.

And after months of the war in Ukraine, Russia’s economy has been holding up.

President Putin announced that inflation has slowed, and unemployment was holding steady.

With Russia being a major energy supplier, they have been able to increase sales thanks to high oil prices.

One economic expert said Putin has “refashioned the Russian economy into a fortress” to weather external shocks.

The truth is, Russia is surviving sanctions better than most experts predicted.

Here are a few ways they’re doing it, which if you’re savvy, can provide survival and self-reliance lessons to you as an individual and family.

Building up money stockpiles:

For years, Russia has been building up reserves of cash and gold.

Before the Ukraine invasion, Russia had the world’s fifth-largest currency and gold reserves, estimated to be worth about $630 billion.

The stockpile of gold is enough to cover the government’s expenses and to support the Russian currency.

There is a lot of physical gold stored in Russia. Plus, the country is the world’s second-largest producer of precious metals.

Russia’s gold stockpile has tripled since 2014, and sanctions won’t stop other countries from doing business with Russia if it involves gold.

Eliminate debt:

For years, Russia has been paying off foreign debt and becoming less reliant on foreign money.

Putin is not going to depend on banking systems or foreign investments.

In fact, Russian expert Andrew Weiss said, “Vladimir Putin is allergic to borrowing money.”

The reality is Russia’s foreign debt is low. In 2021, the Russian government owed about $39 billion in foreign currency bonds.

Further, Russia’s overall national debt is 17% of GDP, which is much lower compared to other countries. For example, the U.S. debt is 130% of GDP.

The point is, Russia doesn’t need to borrow money.

Self-sufficiency:

Russia is becoming economically self-sufficient.

You see, not only is Russia less dependent on foreign countries for money, they also don’t need their commodities.

Russia is a major producer of commodities like metals, oil, natural gas, and wheat, so its economy won’t fall apart because of sanctions.

Plus, with many foreign companies leaving Russia, the country has created entities to take over for the foreign countries.

So far, about 800 foreign corporations have left Russia.

But this has led to Russia offering homemade products to replace the loss of foreign companies.

For example, when McDonald’s left Russia, its locations were reopened by a Russian entity.

But Russia’s economy is holding steady for now. Experts believe it will eventually stall, and sanctions will have an effect. The only question is how long it will take for it to truly crumble.

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