A year has passed since the war on the edge of Europe. It has been almost as long since sanctions were imposed on Russia, which have come in several waves. We already know that they have largely been a form of self-harm for Europe, which was already exhausted from pandemic lockdowns and money printing. However, is it different with a year’s distance? Is Russia (economically, above all) finally on its knees? It is difficult to conclude anything, as Russia immediately after the attack on Ukraine, fully aware that sanctions were coming, stopped publishing its (not only trade) statistics.
With the first wave of sanctions, we were assured that in just a few months, the Russian economy would plunge into a deep crisis. Some economists hoped for a banking crisis that would lead them into recession. However, Putin was fortunate to have at the helm of the Russian central bank the ‘steel’ Tatar Elvira Nabiulina, who implemented unprecedented measures, preventing a currency collapse and a run on banks. Moreover, we have all forgotten that sanctions are not new; their experience dates back to 2014-2015, so new sanctions were attempting to destroy what had already been destroyed before.
Large companies and banks lost access to foreign financial markets many years ago. In addition, the ruble and the economy are being saved by export earnings, sufficient to cover all current needs in foreign currency. This was aided by the fact that in the first months of the Russian invasion, sanctions had almost no impact on hydrocarbon exports; at that time, only the USA imposed an embargo on Russian oil, but supplies there were already low, and the EU continued to purchase.
Russia faces high inflation
Although there is currently an embargo in place, it is quite clear that through intermediaries and new ownership ‘labels’, Russian oil and gas are still being purchased. The decline in trade with the USA and the EU has been compensated by a number of countries that have drastically increased exports to Russia, including China, India, Belarus, Turkey, Kazakhstan, Kyrgyzstan, Armenia, and Uzbekistan. What has officially emerged beyond Russian borders is the announcement from Rosstat: in the first nine months of 2022, real incomes decreased by 1.7 percent compared to the same period a year earlier. For the whole of 2022, a decline of a laughable 2.2 percent is expected, considering the sanctions.
On the other hand, the European Commission estimates EU growth at 0.8 percent, so it is clear that sanctions are exhausting both economies. It is also clear that few believe the official figures and announcements, so we used IMF, OECD, and World Bank data/estimates in their processing. Although even Russia itself, more precisely the governor of the Central Bank of Russia, admits that a period of high inflation and ‘business difficulties’ is ahead.
However, what the EU expects, especially since the burden of the consequences of sanctions has largely been borne by itself (along with the staggering cost of support for Ukraine of 64 billion euros), is confirmation that the sanctions have worked. Did they really? Read about it in the new printed and digital edition of Lider.
