The sanctions are noticeable, but less than feared, and in any case the problems should be solved by 2023 and the economy should fully restart between 2024 and 2025: this is the point of view expressed by Russian bodies such as the agency Rosstat statistics or the Central Bank of Russia. In stark contrast to various recent reports and analyses, according to which the initial effect of the sanctions could instead be amortized by various economic factors and the tightening kicks in later. There is a common point between these two opposing visions: the nodes will come to a head in late 2023.
Notably, Rosstat says that the Russian economy shrank by 4% in the second quarter of 2022. International sanctions are admitted to have caused sharp falls in sectors such as autos, where production has all but halted after Western groups fled the country. Observers close to the Russian point of view add civil aviation: a little because of the confiscation of many planes by leasing companies, but much more because of the lack of spare parts.
On the first front, Russia is relying on China, but it is recognized that it will take at least 24 months for the new production lines to become operational. On the second, old models will be put back into production and waiting for new ones to be developed, but again it will take time. Meanwhile, Russian airlines have started dismantling the planes to get spare parts.
Due to Western sanctions, about 15% of planes were grounded in July. The state-owned company Aeroflot, whose fleet consists of 80 percent US Boeing and European Airbus aircraft, is causing problems. But even the Sukhoi Superjets manufactured in Russia are heavily dependent on Western components. Western sanctions have blocked not only the purchase of spare parts, but also the ability for Russian airlines to carry out maintenance in Europe or the United States.
Operators have been forced to limit the number of flights and disassemble some aircraft to extract parts in case of breakdown or for regular aircraft maintenance. In particular, Portal reported a newly purchased Airbus A350 and a Sukhoi Superjet 100 stuck on the ground for dismantling, while other parts were said to have been taken from some Boeing 737s and Airbus A320s. Three of the company’s seven Airbus A350s are said to have been out of service for more than three months.
Already in the next few months, the situation will continue to worsen, as the new generations of civil jets will have to be constantly updated, as many parts have a limited lifespan. In short, keeping the Airbuses and Boeings based in Russia operational will be impossible without Western components and expertise. In theory, it would be possible to recover pieces through Asian or Middle Eastern companies. However, in practice each part has its own unique serial number and end buyers must be notified to Boeing and Airbus before parts are received. Therefore, nothing can be sent to Russian companies, otherwise sanctions will be imposed themselves.
But military aviation has the same problem, since maintenance was also carried out abroad for the Q-series bombers. And that connects to the “update” of the British secret service that the sanctions against Russia hit Putin’s arms industry so badly that it can no longer fulfill export orders.
Russia is the world’s second-largest arms exporter after the US, accounting for 20% of global arms sales worth $15 billion in annual revenue. But in March, news broke that Uralvagonzavod, the world’s largest tank factory, was forced to shut down production lines due to the lack of a number of key foreign-made components. In May, the revelation by Ukrainians that they found Russian junk tanks with chip-mounted refrigerators and dishwashers seemed to indicate that a way would be found to replace those components, but it was more approximate.
In addition, according to British intelligence, the factories are under great pressure and facing a credibility crisis “due to their association with the poor performance of the Russian armed forces” in Ukraine. Perhaps in response to these observations, on August 15, Putin opened the Armia-2022 military forum outside Moscow and announced that “Russia is ready to offer its allies and partners the most modern weapons, from firearms to armored vehicles,” from artillery to military aviation and attack drones ». A proposal to “Latin American, Asian and African countries” where Russia has “allies and partners” with “historically strong, friendly and trusting relations”. Countries that “do not submit to the so-called hegemonic power, whose leaders show authentic character and do not submit to anyone, as they are committed to sovereign development”. That would be more or less Zelensky’s identikit to him…
In his speech, Putin stressed that the Russian army was “liberating Donbas step by step”, announced that the First International Anti-Fascist Congress would be held this year, and stated that Russia had already exported arms worth 5.4 billion and the latter intends to sell a similar amount in the second half of 2022. However, British intelligence noted that Belarus has unveiled a new Mbt T-72B tank that has been nationally upgraded. And it would be a clear indication that Lukashenko’s military was forced to develop an alternative to the modification program previously agreed with the aforementioned Uralvagonzavod.
However, Rosstat explains that other sectors have shown signs of stabilization in recent months. The most important would be energy, thanks to demand from a very energy-intensive country like China, but also from India and Turkey. And confirmed by the International Energy Agency. However, the latest report by the Kyiv School of Economics in collaboration with the Yermak-McFaul Expert Group on Russian Sanctions explains that Russia has been forced to support these and other alternatives with cheap pricing policies for which it earns less.
Rosstat also says the fall in budget spending appears to be contained, and pro-Putin observers point out that in order to maintain consensus, Putin has launched at least a major program of shows and major events in Moscow, accompanied by an ambitious program for new building infrastructures. This would be possible for a cash flow made possible by the slump in imports and international energy demand. The report by the Kyiv School of Economics admits both, adding that the slump in imports and drastic energy prices will harm Russia in the medium and long term.
In fact, the number for the third quarter will be crucial to understanding what’s actually happening. But even more so the 2023 data. The International Energy Agency itself notes that if the sanctions struggle to inflict significant damage on the oil sector for now, their impact will increase over time. According to the Russian central bank, the country could see the plus sign in front of the gross domestic product in 2025 at the earliest.