Russia’s economy hasn’t collapsed: is this Putin’s revenge on sanctions?  |  Federico Rampini

Russia’s economy hasn’t collapsed: is this Putin’s revenge on sanctions? | Federico Rampini

For the Washington Post, Vladimir Putin’s recent speech on the state of the Russian economy is an indirect response to the World Economic Forum in Davos.
The summit of the globalist establishment in the Swiss mountains this year banished Russians, political leaders and oligarchs while warmly welcoming Ukraine’s First Lady Olena Zelenska.

However, this umpteenth symbolic demonstration of Russian isolation does not correspond to an equally severe economic isolation.

Almost as if he wanted to provoke the Davos elite, Putin rattled off reassuring data about his economy. He said that Russia’s GDP fell by only 2.1% from January to November, so the reality is much better than many experts’ forecasts. Putin insisted on this point, pointing out that some of our experts, let alone foreign ones, were predicting a 10% or 15% or even 20% drop.

Re-reading certain scenarios from mid-2022 proves him right: there was unfounded triumphalism in some Western circles, based on an underestimation of Russia’s economic capabilities or an overestimation of the impact of our sanctions.

It is right to take Putin’s official data – which projects a 2.5% drop in GDP for the whole of 2022 – with the benefit of stocktaking.

Official Russian statistics may not tell us the whole truth.

For a statistic that is difficult to manipulate, that on foreign trade, because it is easiest to check by comparing it with the data of the countries that import from Russia.

On this front, what has cushioned Russia’s economic crisis is clearly visible: the increase in energy prices on world markets in 2022 compensated for the decline in export volumes.

Moscow sold less gas for much of the past year, but at significantly higher prices. On the other hand, it is important to remember that our sanctions on the energy front – an embargo on Russian oil and a cap on the price of gas – came very late and still have limits.

The Washington Post quotes a Russian professor who teaches at an Irish faculty, Alexander Titov of Queen’s University of Belfast, who on a recent trip to his own country noted the little impact Western sanctions had on the availability of consumer goods.

Other independent observers have confirmed that the Russian economy, impoverished as it is, is showing no signs of the dramatic shortages or chaos seen during the 1990s crisis.

It is true that our sanctions are not aimed at mass consumption, but rather aimed at reducing Putin’s ability to acquire or create new weapons of destruction: on this front, the lack of western technologies should have an impact. But every embargo, including the technological one, can be at least partially circumvented.

The New York Times recently published an investigation from the Russia-Georgia border, where an endless convoy of trucks is transporting western goods to a market where, in theory, they should never arrive. Georgia has no political interest in helping Putin, who invaded in 2008. But the economic interest prevails, the black market is generous with profits. Bitter Western companies are selling products to Georgia that actually end up – at a reasonable price to compensate the middlemen – to Russian customers. The controls are designed to prevent this; Judging by the length of Tirs columns, the controls don’t work.

Even assuming that Putin is glossing over reality and his official data does not accurately reflect the state of the Russian economy, the situation in Moscow must be seen in this context: Ukraine’s economy has collapsed by 33% by 2022, according to most -current estimates.

Russia’s government deficit is 2.3% of its GDP, lower than that of the United States. We are still in the realm of official statistics, but perhaps not very far from reality. This is also a number that should be interpreted cautiously: Russia does not have a huge national deficit, also because it no longer has access to the western financial markets and can therefore no longer get into debt. In the long term, calculations have to be made about the economic damage to Russia. Some energy sanctions will not bear fruit until 2023. There is no doubt that Russia’s role in the world energy market will be reduced and even marginalized, as will its ability to blackmail Europe.

Russia’s dependence on its new markets – China and India – has immediate costs and will cost even more in the years to come.

Putin’s indirect message from the Davos summit is enriched with new details, straight out of Switzerland: the Swiss Confederation appeared to have emerged from its neutrality to join the sanctions concert; The latest news – starting with this one in the Corriere – reveals that his tenacity to beat the oligarchs is more legend than reality.

Jan 18, 2023 2:26pm – edit Jan 18, 2023 | 3:01 p.m