Western nations have responded to Russia's invasion of Ukraine with a raft of sanctions intended to cripple the country's economy.
The G-7 major economies have imposed unprecedented sanctions against the Central Bank of Russia, along with other measures against the country, including Russian President Vladimir Putin.
Russian banks have been barred from the global financial system because of their exclusion from the international payments system.
The National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation were targeted by the U.S. over the weekend.
The central bank's overseas assets are frozen and western investors are barred from doing business with it.
The EU and Canada have also banned Russian flights from their airspace.
French Finance Minister Bruno Le Maire told a French radio station that the aim of the latest round of sanctions was to cause the collapse of the Russian economy.
The Russian ruble has plummeted since Russia invaded its neighbor last week. Russian stocks have seen huge sell-offs. Moscow stock markets were closed for a third day in a row on Wednesday as authorities looked to stem the bleeding in local asset prices.
The country's largest lender, Sberbank, left its European operations and saw its London-listed shares plummet. The shares of the other major players on the London Stock Exchange collapsed.
The country's key interest rate was doubled to 20% on Monday, but analysts believe the move to freeze its foreign exchange reserves is the key to stabilizing the Russian economy.
The western sanctions took down Russian finances in one day, according to Swedish economist and former Atlantic Council senior fellow.
The situation is likely to get worse because there is no end in sight. All Russia's capital markets seem to have been wiped out and are unlikely to return with anything less than profound reforms.
The CBR is no longer able to rely on its reserves to smooth out Ruble fluctuations. It will need to adjust rates and other non-market measures to fix the Ruble.
It is more difficult to limit Ruble volatility without adequate reserves because the Ruble has already sold off.
Goldman has raised its end-of-year forecast for Russian inflation to 18% year-on-year from a previous projection of 5%, with risks skewed to the upside given that the ruble could sell off further, or the CBR may be forced to hike rates further to maintain stability.
The Wall Street giant cut its GDP forecast from 2% expansion to a 7% contraction, though it acknowledged uncertainty surrounding these figures.
Financial conditions have tightened to a similar level to the year before, and we think domestic demand will contract by 10% or more.
While exports are not completely restricted by the sanctions so far, we expect them to contract by 5% because of the physical disruption of exports through the Black Sea ports, which are instrumental for dry bulk exports.
This decline is similar to the fall of 7.5% during the 2008/09 financial crisis and the contraction of 6.8% during Russia's financial crisis in 1998.
Russia's economy is likely to experience a sharp contraction this year as a result of the tightening of financial conditions and the prospect of a banking crisis.
The baseline forecast from Capital Economics is for a 5% contraction in Russian GDP in 2022, compared to its previous forecast for 2.5% growth, and for annual inflation to reach 15% this summer.
A worst-case scenario for Russia would involve restrictions on the flow of oil and gas, which would affect half of all goods exports and a third of government revenues.
He said that if these were restricted, it would choke off a key source of dollar incomes for energy companies that have foreign currency debts and cause a much more significant financial crisis in Russia.
Russia is facing a serious financial crisis with China becoming more important to Moscow due to its demand for raw materials and energy, according to Steven Bell.
Russia has moved a large portion of their foreign exchange reserves into the Chinese currency and switched their payment systems to Chinese banks. Bell said that China may hold the key to Russia's ability to sustain the conflict.
There are no sanctions on Russian exports yet, and the exclusion of specific banks from the SWIFT system allows export payments to continue. This might not be the case much longer.
The willingness of the G7 to incur costs is rising and it might eventually imply that restricting Russian exports and accepting higher commodity prices could become politically feasible.
Russia's inability to use its foreign exchange reserves to support the ruble is a major constraint, and one that could be solved by changing the ruble's reference currency.
The excess fiscal savings due to higher oil prices will be channeled into foreign assets by the Ministry of Finance.
The risk of China helping Russia sidestep western sanctions makes it unlikely that a cross-currency market will be created.
China will not join financial sanctions against Russia. China's Ministry of Foreign Affairs has so far refused to call the attack on Ukraine an invasion, instead promoting diplomacy and negotiations.
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