Russian economy feels consequences of sanctions despite Kremlin's denial

Nearly two months into the Russian invasion of Ukraine, the Kremlin has taken extraordinary steps to blunt an economic counteroffensive from the West.

While Russia can claim some symbolic victories, the full impact of Western sanctions is starting to be felt in very real ways.

As the West moved to cut off Russia's access to its foreign reserves, limit imports of key technologies and take other restrictive actions, the Kremlin launched drastic measures to protect the economy.

These included hiking interest rates to as high as 20%, instituting capital controls and forcing Russian businesses to convert their profits into rubles.

As a result, the ruble's value has recovered after an initial plunge, and last week the central bank reversed part of its interest rate increase.

Russian President Vladimir Putin felt emboldened and proclaimed — evoking World War II imagery — that the country had withstood the West's "blitz" of sanctions.

"The government wants to paint a picture that things are not as bad as they actually are," said Michael Alexeev, an economics professor at the University of Indiana, who studied Russia's economy in its transition after the collapse of the Soviet Union.

However, a closer look shows that the sanctions are taking a bite out of Russia's economy.

The country is enduring its worst bout of inflation in two decades. Rosstat, the state's economic statistic agency, said inflation last month hit 17.3%, the highest level since 2002.

The International Monetary Fund expects consumer prices in developing countries to rise 8.7% this year, up from 5.9% last year.

Some Russian companies have been forced to shut down. Several reports say a tank manufacturer had to stop production due to the lack of parts.

Lada — a