Researchers argue that the Russian economy is suffering enormous damage due to Western sanctions, despite the fact that Moscow has reduced their impact.
In response to Russia’s invasion of Ukraine at the end of February 2022, the European Union imposed six packages of sanctions and agreed to a seventh against Russia. Sanctions do not include: gas, oil supplied through pipelines, food, grain and some types of fertilizers.
Half of the reserves of the Central Bank of Russia were frozen, Russian banks were disconnected from the international payment system SWIFT. The export of Western technology, aviation technology, electronics and luxury goods is prohibited. In addition to the EU, the United States, Canada, Japan, Switzerland and the United Kingdom have also imposed sanctions against Russia. In its Sanctions Monitor, the Correctiv research network counted 6,825 individual restrictive measures taken by the international community since the start of Russia’s war of aggression against Ukraine. Under EU sanctions, specifically, 1212 people have fallen, including the President of Russia Vladimir Putin himself, people from his inner circle, oligarchs and 108 companies and businesses. Never in history have there been so many sanctions against one country.
When and how will the sanctions work?
In this regard, the main question is: how do these sanctions work and do they lead to a change in the Kremlin’s aggressive course? EU High Representative for Foreign Affairs and Security Policy Josep Borrell told DW on July 29 that the restrictions have hit the Russian economy hard. “The production of the Russian economy has decreased by 10 percent. They will survive the worst recession since the end of World War II,” the politician was sure.
These words were confirmed, for example, by a study conducted by scientists from the American Yale University. The panel of experts, in particular, used consumer data and indicators of Russia’s international trade and transport partners to gauge economic activity in the country five months after the invasion of Ukraine.
The study says Russian imports have fallen further since the start of the war, and the country faces major challenges in securing critical inputs, components and technology. “Russia’s domestic production has fallen into complete decline, unable to replace the lost businesses, products and professionals who left the country,” the scientists said.
As a result of the departure of nearly 1,000 global companies, Russia lost businesses worth nearly 40 percent of its gross domestic product, according to the study. Russia’s state budget ran a deficit for the first time, and the Kremlin’s finances “are in a more difficult position than commonly believed,” the researchers note.
Meanwhile, according to the authors, the Russian financial markets – taking into account the prospects for the future – show the worst performance in the world, which limits the ability to attract new investment to revive the economy.
The results of a number of studies on the possible consequences of the sanctions and their impact on Russia also suggest a sharp decline in the economic performance of the Russian Federation in 2022. The EU estimates the economic collapse of Russia at 10 percent, and researcher Maria Shagina from the International Institute for Strategic Studies (IISS) in Zurich suggests a drop of six percent, based on the latest International Monetary Fund (IMF) estimates.
Biased statistics
The sanctions are, in fact, causing significant damage to the Russian economy, according to a Yale University study. To prove the opposite to their citizens, the Russian authorities use specially selected statistics. “Since the invasion of Ukraine, the Kremlin has increasingly falsified economic data, selectively discarding unfavorable indicators and releasing only the more favorable ones,” said the Yale University study. reliable but unscrupulous experts making extreme, unrealistic forecasts in favor of the Kremlin.”
“Russia continues to sell oil and gas at record prices, replenishing its military budget, which it already had before the war. Therefore, we have a unique situation where it seems that Russia is not particularly affected by the punishment,” Maria Shagina told DW “However, at the microeconomic level, things look very different, especially in the automotive and aviation industries. You can see decreases of 80 to 90 percent there.” Russia must change its economic model because it no longer has access to Western financial sources and markets, Shagina said.
The Russian economy is suffering more than the Western one
Julian Hinz of the Kiel Institute for World Economics firmly believes that the notion that the West is more affected by its own sanctions than Russia is wrong. Import substitution, promoted in the Russian media, is a very complicated process, because Russian industry needs both Western raw materials and technology, he told DW.
It is also difficult, said the economist, to find new buyers of oil and gas that are no longer supplied to Europe or the US: “To be honest, propaganda is wishful thinking because there are no pipelines, for example. There are several pipelines in China, but this , perhaps ten percent of the capacity used for export to Europe.” According to Hinz, the sanctions will have their full effect in the long run.
What’s next for the Russian economy?
The authors of the Yale study said that Russia has no way out of the “economic abyss” provided that Western allies remain united on sanctions. “The defeatist headlines that the Russian economy is bouncing back are not true – the facts are, at any rate, at any level, the Russian economy has stalled and now is not the time to stall,” said study.
“The effects of the sanctions are only beginning to show: supply chain problems are intensifying and demand is falling rapidly. In the long term, Russia’s economy will become more primitive as it is slightly detached from international trade ,” the German Institute for International Affairs and Security said in a report.
Sanctions rarely lead to different policies
The answer to another question: whether economic sanctions will change the political will of the authoritarian regime in Russia remains open. The damage done to the economy is hardly impressive for Vladimir Putin, Alexander Lipman, head of the Free University of Berlin’s Institute for Eastern European Studies, told Deutschlandfunk. “In any case, the sanctions will not change anything for weeks or months. You also have to be honest: in most cases, the sanctions did not affect the behavior of the states that were subjected to the restrictions ,” Lipman said.
Source: korrespondent
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.