100 days war in Ukraine | Useless, barriers?

Buried under a wave of unprecedented sanctions, the Russian economy is stagnant. Economic activity continues and the ruble against the US dollar and the euro remains higher than it was before the invasion of Ukraine. Did Russia win the economic war?

In the name of Helen
Press

The recession in the Russian economy does not mean that sanctions are ineffective, believes Martin Career, a lecturer in the Department of Political Science at the University of Montreal and an expert in Russia.

“There are things you don’t see,” he said. The impact of sanctions should be considered on a medium and long-term horizon. ⁇

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This time, the professor agrees, Russia was able to control the impact of sanctions on its people.

Martin Carrier estimates that thousands of Russians have lost their jobs due to the exit of foreign companies, and that in the long run, managing the Russian government will be more complicated.

Countries that reacted to the invasion of Ukraine by increasing sanctions sought to tap into the Russian economy. Fast enough. That did not happen. Russia’s expulsion from the international tariff system SWIFT, even though it was proposed as a “nuclear weapon”, did not have the desired effect.

“The revelation is probably exaggerated, Martin Carrier explains. The Russian government was prepared.”

In fact, since the first sanctions imposed on Russia during the Crimean invasion in 2014, the Russians have increased their foreign currency reserves and set up their own tariff system, the MIR, which allows trade with allies.

Until recently, Russia was facing its foreign debt repayment deadline, and sanctions made some of its foreign currency inaccessible.

Holes in the wall

Angelo Katzoros, a geopolitical analyst at the National Bank, explains that there are huge holes, oil and gas in the wall that Western nations have built with sanctions to isolate Russia, which are the country’s main sources of income.

Russia, the world’s third-largest oil producer, has no problem selling its product anywhere else in the world, even in countries that do not impose sanctions. The researcher points out that the oil can travel by boat and by pipeline.

As for natural gas, Russian exports have fallen, but are offset by a sharp rise in price volumes.

EU countries have agreed to reduce Russian oil imports by 90% by the end of the year. “We have to see its impact later this year,” he says, adding that Russia is facing rising inflation and most observers expect the Russian economy to sink into recession.

The International Monetary Fund, among other things, predicts that Russia’s GDP will shrink by 8.5% by 2022.

Angelo Katsorus believes that Ukraine’s allies do not have much ammunition in stock, other than Russia cutting off Europe from natural gas.

That said, this is not a short-term solution. “It will take many years to build the infrastructure needed to change the east-west flow of the gas trade,” he said.

The hard part is what to do, Martin Carrier agrees. “Democratic governments find it difficult to make decisions that have a major impact on the economy. ⁇

Russia supplies 40% of its natural gas to Europe. This dependence is diminishing as countries find other suppliers, but Russian gas remains vital to many economies in the eurozone, including European heavyweight Germany.

According to the German central bank, without Russia gas, the country’s economy would fall by 5%.

A flexible economy

According to official government figures, the Russian economy is still resisting the onslaught of sanctions. According to the Rosstat Institute of Statistics, the country’s GDP grew by 3.5% in the first quarter. Inflation remains at 10%, but the strength of the ruble offsets the rise. The ruble not only retained its value, but also strengthened due to the strict exchange control measures imposed on individuals, companies and business partners who still trade with Russia, who are forced to pay in rubles.

Increase in export earnings

Russia’s oil and gas export earnings have been rising, despite a 27% drop in sales volume since the beginning of this year. Higher oil prices, for example, are more likely to offset lower sales in the European market. India, China and many Asian countries have increased their purchases of Russian oil, and Europe will buy $ 300 million a day by the end of the year.