Feeling the pain

Russia’s economy is feeling the pain [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( Russians are starting to pay the price of President Vladimir Putin’s war with Ukraine. U.S. and European sanctions against the Bank of Russia triggered a slump in the ruble to a record low, losing a third of its value against the dollar in offshore markets at one point. To try to avert collapse, the central bank more than doubled its key interest rate to 20% today and Russia imposed capital controls. Key reading: - [Ruble Plunges 30% as Markets Briefly Freeze on Sanctions Stress]( - [Putin Races the Clock as Fast Military Advance ‘Frustrated’]( - [Oil Soars as More Sanctions on Russia Spur Energy Crisis Fears]( - Follow the latest with our [rolling coverage]( For ordinary citizens, millions of whom have already seen their wages stagnate for a decade, the unprecedented measures translate into more pain as prices of goods jump and the cost of servicing loans soars. Airspace closures mean middle-class Russians can’t travel to favorite European spots any more. This may be the first time the scale of the conflict hits home for many. Russian state TV news has consistently downplayed what it calls a “special operation” in Ukraine, focusing almost entirely on areas in the country’s east that Putin recognized as independent last week and ignoring Russian military attacks on Kyiv and other cities. If Ukraine’s supporters hope that the impact will translate into an outpouring of public anger in Russia that forces Putin to change course, they may be disappointed, though. While the war is unpopular, even shameful, for many Russians, who have deep ties to Ukraine, Putin has unleashed a sweeping crackdown on domestic opponents in the past year that makes the price of protest too high for most. Still, Ukraine’s tough resistance means Putin’s war isn’t going to plan and the clamor may grow as Russian casualties mount. With talks today between Russian and Ukrainian officials, he faces a dilemma. The damage at home and abroad can only grow if Putin presses on. Retreat risks shattering his image with Russians as an omnipotent leader. — [Anthony Halpin]( The town of Vasylkiv just outside Kyiv yesterday. Photographer: Dimitar Dilkoff/AFP/Getty Images Click [here]( to follow Bloomberg Politics on Twitter and share this newsletter with others too. They can sign up [here](. Global Headlines Staying defiant | Residents of Kyiv emerged from shelters today after a weekend curfew eased as Ukrainian officials said they remain in control of the capital. Russia’s military claimed to have encircled the city, adding to fears it plans an assault. Meanwhile, Ukrainian President Volodymyr Zelenskiy has voiced [skepticism]( that the talks with Russia would yield results but said he was willing to try if it meant any chance of peace. Rich targeted | The European Union is discussing sanctioning some of Russia’s wealthiest [tycoons]( and top officials, further ratcheting up its penalties for Moscow’s invasion of Ukraine. The preliminary list seen by Bloomberg, which still needs to be approved by European governments, includes billionaires who haven’t yet been hit by sanctions and executives of state-owned companies and media. - The U.K. accelerated plans to [crack down]( on money laundering with sweeping new laws to register foreign owners of British property and expand government powers to investigate the source of their wealth. The EU action [applies]( to any plane owned, chartered or otherwise controlled by a Russian person, European Commission President Ursula von der Leyen announced yesterday. “Our airspace will be closed to every Russian plane, and that includes the private jets of oligarchs,” she said. Historic shift | Chancellor Olaf Scholz hosted an emergency meeting of his cabinet in Berlin today after overseeing a [momentous]( shift in German foreign policy to allow weapons to be sent to the government in Kyiv. Russia’s invasion of Ukraine marks “a watershed in the history of our continent,” Scholz told a special session of the Bundestag yesterday, as he announced a 100 billion-euro ($112 billion) fund to bolster Germany’s defense budget above the NATO target of 2% of gross domestic product. - Read our Brussels Edition [newsletter]( on how the EU has responded to Russia’s invasion of Ukraine with unprecedented unity and determination. The ‘Together for Peace’ demonstration in Berlin yesterday. Photographer: Liesa Johannssen-Koppitz/Bloomberg Best of Bloomberg Opinion - [Ukraine Sees Bad Omens in Putin’s Assault on Syria: Ruth Pollard]( - [Competing Narratives in Ukraine — Which Will Win?: John Authers]( - [Putin’s Nuclear Threat Shatters a Security Shield: Stephen Mihm]( Rocket test | North Korea conducted an “important” [test]( for a reconnaissance satellite yesterday, launching its first rocket with ballistic missile capability in a month as global attention is focused on Ukraine. State media released photos showing the Korean Peninsula from space it said were taken from the satellite. Explainers you can use - [EU Could Survive Without Russian Gas Next Winter, Study Says]( - [How Kim Jong Un Keeps Advancing His Nuclear Program]( - [Where Are We in Hunting for the Coronavirus’s Origin]( New strategies | Hong Kong’s government is being forced to [move away]( from key pillars of its strict Covid Zero strategy as a surge in new cases overwhelms an under-prepared health-care system. This quick erosion of the policy shows the difficulty of maintaining the approach when faced with more infectious strains like omicron. - Major airlines reported a surge in [bookings]( from Hong Kong last week, underscoring how a deepening Covid-19 crisis is pushing more residents to leave. Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1pm ET, with a second hour on Bloomberg Radio from 1 to 2pm ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - Tehran’s top nuclear negotiator has flown back to Vienna as Iran and world powers look to [revive]( the 2015 accord, potentially as early as this week. - Fencing is being reinstalled around the U.S. Capitol as federal security officials [brace]( for protesting truckers to reach the Washington area, ahead of U.S. President Joe Biden’s State of the Union Address tomorrow. - Former U.S. President Donald Trump was the [clear choice]( in a presidential straw poll of attendees at the Conservative Political Action Conference. - Burkina Faso’s military leadership is considering a 30-month [transition]( period before holding elections following a coup last month. - Brazil President Jair Bolsonaro said he [backed]( an even-handed approach to the Ukraine crisis, breaking from condemnation of the invasion by global leaders and his own country’s diplomats in the United Nations. And finally ... As China refrains from criticizing Putin’s invasion of Ukraine, a rare [debate]( has emerged on Chinese social media over the military action by the Russian leader, a close diplomatic partner of President Xi Jinping. Images of global protests circulated on China’s Twitter-like Weibo over the weekend, as were articles mocking Russia’s limited military gains, with some comparing Putin to a disgraced tai-chi master who was defeated in seconds by an amateur. Matryoshka dolls depicting Putin and Xi. Photographer: Andrey Rudakov/Bloomberg Like Balance of Power? [Get unlimited access to Bloomberg.com](, where you'll find trusted, data-based journalism in 120 countries around the world and expert analysis from exclusive daily newsletters. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022