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Why Putin is on his way to turning Russia into North Korea


The invasion of Ukraine has isolated the country and its inhabitants will pay dearly for the economic disconnection

The sanctions from Western countries that followed the invasion of Ukraine have made it impossible for Russia to import the things it needs.

Foreign investors are staying away from Moscow, thousands of the country's elite have emigrated and the price of its main export, oil, has plunged.

President Vladimir Putin's war, what he has achieved for the moment is to isolate the country from him.

The great disconnection of its economy will accelerate in 2023, as Moscow moves closer to the North Korean economic model.

The invasion of Ukraine has hurt Russia, which is heavily dependent on oil and gas exports.

Although high prices in early 2022 helped the country, the rest of the world quickly adapted, adjusting supplies and in some cases, like the United States, increasing exports.

The price of Russian Ural crude has already fallen 40% from the March 2022 peak, and Russia may now lack the resources to cushion the blow the recession has dealt to the population.

Consequently, the Russian economy will suffer.

In October 2021, the International Monetary Fund (IMF) forecast growth of 2% in 2023. Now, the body sees a drop in GDP of 2.4%, after losing 3% in 2022. Based on the rate of ruble exchange rate in 2021, this represents a loss of GDP of about 200,000 million.

This will further aggravate an already deteriorating financial situation.

Spending increased by more than 20% in 2022, mainly due to increased funds for the war, which Bank of Finland economists put at around $53 billion.

And the Russian government has been forced to dip into a reserve fund to make up the first budget deficit in years.

With each passing month, it will become more difficult to maintain the ruble's convertibility with respect to other international currencies.

greater control

Putin has already tightened his and the government's grip on the economy, demanding the sale of assets held by Western companies in the banking and energy sectors.

State-owned companies or banks, as well as Kremlin-friendly oligarchs such as nickel magnate Vladimir Potanin, have already bought up banking and industrial assets at heavily discounted prices, and the trend will continue to grow.

Far from the scrutiny of foreign investors, Russian companies will have a free hand to take to new heights the widespread corruption that has held the economy back for years.

And Putin will be able to complete the task of shaping a regime in which no one can replace him, with oil he cannot sell and rubles he cannot spend.


The authors are columnists for Reuters Breakingviews.

Opinions are yours.

The translation is the responsibility of EL PAÍS

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Source: elparis

All business articles on 2023-01-01

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