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The Russian Economy

The development of the Russian economy has been the focus of the world’s attention since Russia and Ukraine went to war. The war consumes not only manpower and weapons but is also a severe test for the economies of the warring parties. In the process of this war between the two sides, European and American countries supported Ukraine financially and materially and took a series of measures to impose economic sanctions on Russia. Next, this article will discuss the impact of economic sanctions on Russia, as well as future economic forecasts.


The US Secretary of State proposed as many as 2,000 sanctions against Russia from 2014 to early 2022, but since the outbreak of the war between Russia and Ukraine, the number of sanctions has exceeded 8,000. As an important part of supporting Russian military reserves, the economy has been hit hard by European and American countries. According to the World Bank survey report, the Russian economy in 2022 is very bad, reflected in the gross domestic product (GDP) is expected to decline by more than 11%. Moreover, the Russian foreign trade has also suffered a serious blow, import trade decreased by 35.2%, and export trade declined by 30.9%. At the same time, some economists predict that the fluctuation of inflation in Russia is also extremely violent, and its value may be close to 22%. Then around 1,200 overseas companies have scaled back or even suspended operations in Russia, including Apple, McDonald’s, IKEA, MasterCard, and others, according to data from the Yale University CEO database. In short, in the past 6 months of war between the two sides, the economic structure of Russia and the world has undergone tremendous changes, and Russia is facing an unprecedented test.


Russian economic landscape has shifted somewhat in order to be able to deal with sanctions. First, Russia has natural resources that are vital to the global economy, including natural gas, crude oil, fresh water, etc. The EU said the sanctions would reduce by 90% the amount of oil the bloc buys from Russia, which could supply Asian countries with 1 million barrels a day more than previously supplied. Some economists have suggested that sanctions will not cause Russia to lose all of its oil revenue and may only cause a loss of one-third to half. In terms of natural gas exports, Russia has been hit harder than crude oil, because Russian gas exports rely heavily on a pipeline transportation system, and most of its pipelines go to European countries. It is unrealistic for Russia to increase transportation pipelines to countries such as Asia in the short term. While Russia has been sanctioned by European countries, it has also raised energy prices to put pressure on these countries, but the result is often a lose-lose situation.


The Russian future economic situation is still difficult to judge. Some scholars believe that although the Russian current economy is in recession, it still has good performance in other aspects. For example, the ruble has risen by 20 percent from pre-war prices, oil and gas prices have risen by 78 percent, and natural gas has risen by 45 percent. In addition, the suppression of Russia by foreign companies may also promote the development and rise of some local companies. At the same time, Russia keeps friendships with some Asian countries which may bring some economic turning points. However, the current Russian economy has been severely damaged, and it is very difficult to return to the level before the war recently. In conclusion, the economic situation in Russia is quite unpredictable.

 

Edited and Reviewed by Tanish Bagga.

 

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