Shares plunged 33 percent that day as the nation was catapulted into economic crisis. Moscow was hit with bruising sanctions by the United States and its allies, and cut off from doing business in dollars, euros, and other reserve currencies. Hundreds of multinational corporations have cut ties with Russia and the ruble has lost more than a quarter of its value.
Thursday’s activity — which was restricted to major firms such as state-owned energy producers Gazprom and Rosneft, and airline Aeroflot — did little to calm global investors or inspire confidence in the Russian market.
Daleep Singh, the White House deputy national security adviser for international economics, said the trading session a “charade; a Potemkin opening.”
“This is not a real market and not a sustainable model — which only underscores Russia’s isolation from the global financial system,” Singh said. “The United States and our allies and partners will continue taking action to further isolate Russia from the international economic order as long it continues its brutal war against Ukraine.”
Ariel Cohen, a seasoned Russia hand at the Atlantic Council think tank, called Thursday’s market gains “a dead-bear bounce.” And the trading exercise — one experts say was carefully choreographed to avoid massive sell-offs and project economic resilience — underscores just how Moscow has shunned its recent decades of economic liberalization.
The Russian market will open under similar conditions Friday, the country’s central bank announced.
Putin rose to power in the late 1990s on the heels of Russia’s 1998 default and financial crisis. Moscow was courting foreign investment after the fall of the Soviet Union, and prioritized maintaining the economic power of what was left of the communist bloc.
He focused on strengthening the ruble, and lowering both income and corporate taxes. Economists pushing privatization became part of his inner circle; his predecessor, Boris Yeltsin, set the tone, prioritizing payments to foreign creditors in 1998 instead of domestic debt obligations.
But the dollar now buys almost four times as many rubles compared to 2014, when Putin’s troops annexed Ukraine’s Crimean Peninsula. Putin in recent weeks threatened to nationalize assets from companies that leave Russia to avoid Western sanctions or out of moral imperatives because of the war.
On Wednesday, he announced that “unfriendly countries” — including all European Union members and the United States — would have to pay for their natural gas supplies in rubles. Leaders of some of those nations bristled at the suggestion. The German government has argued that Russia and its state-run energy companies would be breaching contracts if they demanded payment in rubles.
It comes after Russia narrowly avoided a default by making a $117 million interest payment in dollars to foreign bondholders Wednesday. Sanctions had choked off the Kremlin’s access to foreign reserve currencies, leaving central bankers searching to scrounge up enough greenbacks to pay lenders.
Experts had worried that a Moscow default could trigger investors to spurn other emerging markets, economies that rely on a steady flow of capital. And a default could still be in the offing: Russia is required to make additional interest payments on other bonds before the end of this month.
A sovereign default could trigger a similar approach by Russian corporations to their borrowings, which are about four times what the Russian government owes, according to William Jackson, an economist with Capital Economics in London.
Russian companies so far have continued making debt payments. But with the economy expected to shrink by 30 percent, according to IIF, and most exports blocked by sanctions, Russian businesses will struggle to keep paying, Jackson said.
Putin has responded by walling in the dollars left in Russia’s coffers and trying to force foreign governments to buy rubles with Western currency, transactions that would violate the economic strictures.
“He has single-handedly undone 35 years of economic reforms,” Cohen said. “They had built a market economy.”
Now the very officials who helped create that system are fleeing Russia. Anatoly Chubais, Yeltsin’s finance minister, a booster of privatization and a Putin aide, resigned his government posts and reportedly left the country in recent days.
Arkady Dvorkovich, an economist, former deputy prime minister and president of the International Chess Federation, also left Russia.
An estimated 50,000 to 70,000 high-skill technology workers have left, too, by some estimates, with up to 100,000 more projected to leave in April.
“Those people who created, who built, this market economy physically removed themselves from Russia,” Cohen said. “That’s highly significant.”
At its current trajectory, the Russian gross domestic product is on pace to shrink to less than 1.5 percent of the world’s economy — making Moscow more akin to markets like Indonesia and Turkey rather than China, India and Brazil.
Tyler Pager and David J. Lynch contributed to this report.