August 13, 2022

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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?

Released at 6:00 p.m.

In the name of Helen

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. ⁇

  • Many Western brands were shut down in Russia after the Ukraine invasion.

    Photo by Dmitry Lovetsky, Associated Press Archives

    Many Western brands were shut down in Russia after the Ukraine invasion.

  • Many Western brands were shut down in Russia after the Ukraine invasion.

    Photo by Dmitry Lovetsky, Associated Press Archives

    Many Western brands were shut down in Russia after the Ukraine invasion.

  • Here, in a shopping center in St. Petersburg, on June 1st

    Photo by Dmitry Lovetsky, Associated Press Archives

    Here, a shopping center in St. Petersburg, The1Er Last June

  • Some visitors wander around the GUM center near the Kremlin, where there are plenty of closed western shops.

    Photo Archives Associated Press

    Some visitors wander around the GUM center near the Kremlin, where there are plenty of closed western shops.

  • Pedestrians in front of a shopping center in Moscow last May

    Photo Archive Agency France-Press

    Pedestrians in front of a shopping center in Moscow last May

  • Muscovites in the center of the Russian capital last May passed by a souvenir shop selling sweaters where President Putin is cuddling a puppy.

    Photo by Alexander Nemenov, Agency France-Press Archives

    Muscovites in the center of the Russian capital last May passed by a souvenir shop selling sweaters where President Putin is cuddling a puppy.

  • Those who were frolicking in a cafe in St. Petersburg last Tuesday

    Photo by Dmitry Lovetsky, Associated Press Archives

    Those who were frolicking in a cafe in St. Petersburg last Tuesday

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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.

Photo Gallery Reuters

Refinery of the Russian oil company Lukoil in Volgograd

“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.

  • Wagons carrying oil on May 24 in Omsk, Russia.

    Photo by Alexei Malkovko, Reuters Archives

    Wagons carrying oil on May 24 in Omsk, Russia.

  • Oil terminal near Vladivostok in the Far East of Russia

    Photo by Yuri Maltsev, Reuters Archives

    Oil terminal near Vladivostok in the Far East of Russia

  • Celebration of the commencement of the construction of the oil pipeline connecting Russia with China in 2015.

    Photo Archives Associated Press

    Celebration of the commencement of the construction of the oil pipeline connecting Russia with China in 2015.

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

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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.

This explains why the restrictions did not have the desired effect.

Angelo Cattores, Geopolitical Analyst at the National Bank

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.

Photo by Olivier Mathews, Associated Press Archives

Demonstration in Brussels on May 30 in support of Russia’s embargo on oil and gas

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.

Photo Gallery Reuters

Russian Foreign Minister Sergei Lavrov met with Saudi Arabia’s Prince Faisal bin Farhan al-Soud in Riyadh on May 31.

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.

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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

Photo by Dado Ruvik, Reuters Archives

The ruble not only retained its value, but was strengthened by the strict exchange control measures imposed by the Russian government.

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

Photo by Thilo Schmulzen, Reuters Archives

Germany continues to depend on Russian gas imports, especially as fuel for its steel industry.

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.

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  • 10,279
    This is the number of sanctions imposed on Russia since the invasion of Crimea in 2014. Half imposed after the invasion of Ukraine.

    Source: Correctiv.org