The aggressor’s economy continues to stagnate, which in the long term will not just become an everyday occurrence for russians, but will lead to the complete collapse of the economic system. This is reported by analysts at The Wall Street Journal. Previously, we have also repeatedly assessed the risks to the russian economy.
The publication cites the views of russian functionaries who have stepped down from their positions in financial agencies and have already left the country. The authors also provide statements by some oligarchs who have abandoned the russian political regime. They all agree on one thing – the russian economy is doomed, and the “elites inside the Kremlin” are aware of this. Their actions are the main indicator.
“Despite russia’s resilience in the short term, the long-term picture is bleak: Moscow will be much more inward-looking and overly dependent on China,” said Maria Shagina, a senior fellow at the International Institute for Strategic Studies think tank in London.
The basis of the russian economy – export commodities in the form of oil and gas, have lost their main buyers and their value on the market. The ruble has fallen by more than 20% against the dollar, according to experts since the beginning of November 2022. The main labor force has shrunk as young men either join the aggressor’s army or leave the country. International sanctions and a huge death rate are all affecting the market as well as the investment climate. To give an example, car production alone has collapsed by 45% because there is not enough factory workers, and most of the parts and technology are under sanctions, and their production is impossible in russia.
Despite the Kremlin’s blatant trumpeting about a “stable situation” and “economic growth,” all of this is impossible, even if the aggressor were to abruptly stop its military aggression against Ukraine now. The publication cites an analysis by the International Monetary Fund: “The International Monetary Fund has estimated that russia’s potential growth rate—the rate at which it could grow without courting inflation—was around 3.5% before 2014, the year it seized Crimea from Ukraine. That has now fallen to around 1%, some economists say, as productivity declines and the economy becomes technologically backward and more isolated”. Moreover, russia’s exports to the EU fell back in 2022, which, combined with the energy sanctions, came as a kind of shock to the russian economy. At the beginning of this year, their exports fell by 46%.
Moreover, the ceiling on russian oil will soon be around $49 a barrel. Rystad Energy, an international consulting firm, expects investment in oil and gas production in russia to fall to $33 billion in 2023 from the $57 billion expected before the invasion. That means future oil production will decline, as we’ve written about before. Against this backdrop, government spending has jumped by more than 50%, while revenues continue to fall to zero, which affects subsidies for the maintenance of “pocket” collaborators in the occupied territories, including Crimea. We have also covered this fact in detail.
Note that in the current situation, russia is trying to somehow “save” its budget. These attempts include “rapprochement” with the Chinese and Iranian financial systems. This is happening against the background of a disappointing situation with the aggressor’s banking system, which is systematically going to the bottom. We wrote earlier about how russia tried to illegally infiltrate the banking sector in occupied Crimea, as well as about the situation with the “main” russian bank.
