2022.11.26 03:09
The Russian economy during the war
Budrigantrade.com – The 11th-largest economy in the world has sustained significant damage nine months into Russian President Vladimir Putin’s war in Ukraine.Leading Russian banks have been excluded from the global financial system, central bank reserves totaling $300 billion have been frozen, and hundreds of foreign businesses have left.
The auto industry has been hampered by a lack of parts, and commercial aviation is in jeopardy. Tens of thousands of young workers have fled the country following Putin’s order to mobilize.Russia’s economy is expected to shrink by 5.6% in 2023, according to an OECD forecast released this week.
The crushing of Ukraine has not been halted by Russia’s economic sanctions.However, sanctions have weakened Russia’s position as a global power, dissuaded supposedly neutral nations from supporting its government, and raised questions about Putin’s leadership abilities among elites in Russia. The United States and Europe will need to tighten their grip even more in order to persuade them to demand an end to the war.
Since February, sanctions have made the market dangerous for outsiders and raised the war’s costs by making it harder for Moscow to buy what it needs. China, India, and Turkey purchase Russian crude at a significant discount, and Russia has struggled to reroute its gas exports that were originally intended for Europe.
Since a few months ago, Russia hasn’t been able to import any of the technology it needs to keep its war machine running and even less to spark innovation in the future.It doesn’t matter that the electronics components it can buy are now frequently defective.Moscow will adjust, but it will take time.
However, the direct impact on the war is still limited for the time being.Targeting those exports is required to squeeze the world’s largest hydrocarbon exporter, one with a significant current account surplus, a process that is only just beginning in earnest.Furthermore, Russians had already endured a difficult decade, with real household disposable incomes reaching their highest point around 2012.
Even though the economy is expected to shrink by 3.9% this year, there is less room for decline.There is also the unavoidable fact that Putin is able to easily silence dissent and is willing to sacrifice future economic growth for his own purposes.
It is rare for sanctions to result in immediate political change or conflict resolution.The West must intensify its pressure now that Russia’s forces are retreating.It goes without saying that the United States and its allies should keep arming and providing financial support for Ukraine.Additionally, they should support Russia’s worsening brain drain.
Consumer confidence has plummeted as at least 350,000 people have fled Putin’s ill-advised mobilization order. By providing more humanitarian visas, providing additional assistance to Russian students, and offering incentives to scientists and technologists to relocate abroad, Western governments can speed up the process.
Russia’s labor and skill shortages would worsen, but Western economies would also gain.
Europe should continue its efforts to close loopholes in sanctions.For instance, there is evidence that the Russian military imports home appliances from neighboring nations and uses the microchips in those appliances to compensate for the absence of Western semiconductors.
In the first eight months of 2022, Armenia purchased more washing machines from the European Union than in the previous two years.) EU crude sanctions and a US-led price cap on Russian oil, which would extend a prohibition on selling insurance and other services to ships that do not comply, will also require stringent action.
The most important thing is for Western governments and their partners to stick together.The war is not going Moscow’s way, and Russia’s economy is sinking.Putin still believes that supporters of Ukraine will break first. He must be discredited by the West.
