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One year of sanctions: Russia's economy faces an uncertain future

2023-04-08T09:22:08.088Z


The sanctions against Russia in the wake of the Ukraine war have been in force for a year. How is the country today?


The sanctions against Russia in the wake of the Ukraine war have been in force for a year.

How is the country today?

MOSCOW - Few observers could have predicted the Russian economy's resilience in the face of massive Western sanctions.

In the past few months, Russian President Vladimir Putin has repeatedly emphasized that the international penalties are ineffective - and would actually put the West at a disadvantage.

At the end of March, however, Putin made a rare confession: "The sanctions against Russia's economy can actually have a negative impact in the medium term," said the president in a televised speech;

a major change in tone.

There are "problems" that need to be "solved".

Sanctions: Critical tones from Putin

Is this a sign of a bad economy?

Or did Putin want to warn companies not to miss out on what he called “development prospects” as a result of the sanctions?

"Putin's observations are actually only realistic," says Arnaud Dubien, director of the Moscow-based think tank "L'Observatoire".

According to the Russia expert, the President's words are a mobilizing message to Russian companies and government officials along the lines of: "The situation is better than expected - but don't let up, keep finding alternatives".

According to Alexandra Prokopenko, a former employee of the Russian central bank, Putin's words are aimed at companies that have been particularly hard hit by the sanctions.

The message: "You and your business are only safe under my supervision.

There is no going back before February 2022.”

Sanctions against Russia: Countless problems

Russia's economy is struggling with a host of problems, including falling gas exports, labor shortages and supply chain bottlenecks.

The ruble slid in value, and the tourism business is also faltering.

Access to Western technology is now de facto closed to Russia: The country has to switch to Asia - but that will take time.

According to Alexandra Prokopenko, companies that are connected to the armaments industry, for example those in the optics, metalworking or pharmaceutical industries, “do better”.

An imbalance arises that the Russian government accepts.

Moscow wants to compensate for losses on the European markets through increased cooperation, particularly with China and India.

According to Dubien, before the sanctions, sectors such as the automotive industry were the ones that were particularly open to foreign investment - and were hit correspondingly hard by the sanctions.

The Russian carmaker Avtowas, for example, reported that some foreign suppliers had stopped their deliveries, "uninterrupted production of vehicles" would therefore be "impossible" from the second half of May.

That's why the company is sending its people on vacation from the end of May.

Financial infrastructure 'a victim of sanctions'

According to Sergei Tsiplakov, economics professor at the Moscow School of Economics, the “financial infrastructure” is also a victim of the sanctions: the country’s second largest bank, VTB, only reported a loss of the equivalent of seven billion euros for 2022 on Wednesday.

The institute was cut off from the international payment system Swift last year as a result of western sanctions.

Against this background, many observers expect that the real challenges for Russia's economy will only come in the coming months.

"There is no evidence that 2023 will see Russia register additional revenue from its oil like last year," Prokopenko said.

Moscow's profits from oil exports rose last year as the price of oil exploded.

Sanctions: How is the oil market developing?

In fact, according to the International Energy Agency, Russian oil revenues already fell by 42 percent in February - and before much more gas can be delivered to Asia, the infrastructure must first be in place.

However, Moscow is heavily dependent on its energy revenues to be able to finance its army: a third of the annual budget is earmarked for the military and security.

“It takes time to adapt, find new partners and build relationships,” Prokopenko concludes.

However, according to Dubien, Russia's economic stability is not in danger "at the moment": "Russia can finance its war effort for another three to four years," he estimates.

However, the country has lost a decade of economic progress since 2014 - "now a second could follow".

(dpa)

Source: merkur

All news articles on 2023-04-08

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