As of: February 20, 2024, 6:01 p.m
By: Lars-Eric Nievelstein
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The West has imposed sanctions on Russia for almost two years.
Figures recently emerged showing that the Russian economy was surprisingly resilient.
London experts still predict a crash.
London – February 24th marks the anniversary of the Russian invasion of Ukraine.
The Western world responded hesitantly at the time, but then used sanctions.
Much of these sanctions were aimed at weakening the Russian economy, but also affected individuals such as Vladimir Putin or various oligarchs.
Their success has so far been the subject of debate.
The London think tank “Official Monetary and Financial Institutions Forum” now claims to have discovered signs of corrosion in Russia’s economy.
Russia growth forecast for 2024 |
2.6 percent (International Monetary Fund) |
|---|---|
Actual start of war in Russia |
March 18, 2014 (invasion of Crimea) |
Russians who have so far fled Russia because of the war |
Up to a million |
Russia's share of global purchasing power |
Less than 2 percent (from 4 percent in 2008) |
Western sanctions trigger “deep-seated” problems
Only recently did news of Russia's economic resilience make the rounds.
The International Monetary Fund had even increased its growth forecast for the country from 1.1 percent to 2.6 percent.
According to the OMFIF, however, this is too short-sighted - the think tank cites two main reasons for this.
Many experts are currently ignoring “deep-seated” problems that will plague Russia’s economy in the long term.
Vladimir Putin at his desk in Moscow.
Figures recently emerged showing that the Russian economy was surprisingly resilient.
London experts still predict a crash.
© IMAGO / ZUMA Wire
“Russia is currently covering up a process of significant economic decline that will continue well into the future,” warned OMFIF’s Mark Sobel in a company statement.
This will lead to “further marginalization” of its global footprint.
The key to current economic growth is the military complex.
Massive spending in the defense industry drives the economy - other sectors, such as the technology sector or education, fall behind.
The OMFIF warns: The economic data on which the growth reports are based comes from Russia and should therefore be viewed with caution.
Russia's purchasing power is weakening - oil and gas are too cheap
A deeper look into the Kremlin's finances paints a murky picture.
Russia's share of global purchasing power has fallen from around four percent (as of 2008) to less than two percent, the OMFIF reported.
At the same time, there is evidence that Russia's energy revenues are also falling.
Ural Crude, Russia's normally best-selling oil, has fallen significantly in price.
The
Reuters
news agency said Russia's oil and gas revenue fell 24 percent last year.
The reason for this is that countries like China and India, which stepped into the breach after Western sanctions, pay significantly less.
Many countries have also shown themselves unwilling to buy Russian oil since the West decided to impose trade restrictions.
More than half of Russian oil tankers are currently bobbing at sea without a destination,
Bloomberg
said.
Investments are not coming and skilled workers are fleeing
There are also various factors that have very long-term effects.
One of them is the Russian central bank, or more specifically, the interest rates it drives up.
The longer interest rates remain at this high level, the more the country will ultimately feel the lack of investments.
The Yale School of Management had published a list of over 1,000 companies that want to withdraw from Russia.
Western countries communicated early on that the sanctions were intended to trigger precisely such long-term effects.
In addition to these companies, Russia will inevitably lack people.
According to military reports, around 300,000 Russians have died or been seriously injured in Ukraine, and up to another million are said to have fled - mostly young and educated people.
The full impact of this brain drain cannot yet be predicted.
Russia is paying for a war machine with its future
And the EU’s technological sanctions are also having an impact.
They manifest themselves in reports of exploding pipes, the loss of basic infrastructure and the problems of Russia's airlines keeping planes in the air.
Former NATO general Anders Fogh Asmussen pushed for sanctions to be tightened, particularly in the oil and gas sector.
Even if these would not end the war immediately, they should significantly weaken Russia.
Together with the heavy concentration on the defense industry without regard to future sectors, this development would ensure that Russia would be left even further behind globally.
Essentially, Russia is paying for its war of aggression against Ukraine by sacrificing innovation, research and education.
What sanctions has the West imposed?
The sanctions used by Western countries vary by nation and industry.
Germany, for example, has imposed a wide range of sanctions against Russia in many areas from transport to industry.
For example, an export ban makes it impossible for Russia to modernize its oil refineries.
Access to important technologies such as semiconductors, dual-use goods and modern software is restricted, and there is a ban on imports of goods from which Russia normally generates high revenues.
These include bitumen, asphalt, carbon and synthetic rubber.
Further information can be found here from the Federal Government.
Russia has currently been able to rely on states such as Iran, North Korea and China to circumvent various sanctions, but whether this partnership will last remains unclear.
China's Zhejiang Chouzhou Commercial Bank now wants to suspend its transactions with Russia, Russian newspaper
Vedomosti
reported.
There are concerns in Russia about “strong consequences for the economy”.
With material from Reuters