Vladimir Putin says that Russia has surpassed the economy. Have the sanctions failed?
As the world’s elite celebrate in Davos, Switzerland, there is one country whose absence is notable, even surprising. Russian officials are virtually persona non grata at the World Economic Forum in this Swiss mountain town, while prominent Ukrainians like first lady Olena Zelenska speak to packed houses.
The symbolism is clear. Russia’s intervention in Ukraine nearly 11 months ago has made President Vladimir Putin and his allies toxic to this global elite. Russia has been bombarded with sanctions and export controls designed to cut it off from the global economy, using a kind of systemic force to hinder the Kremlin’s war effort and punish Putin’s allies.
But did it actually work in the real world? Away from the Davos celebrations, Putin used new government data on Tuesday to paint a surprisingly rosy picture of the Russian economy. “The actual dynamics of the economy turned out to be better than many experts predicted,” he said, looking at the screen during a virtual economic meeting.
Citing data from the Ministry of Economic Development, Mr. Putin said Russia’s gross domestic product fell by just 2.1% between January and November 2022. He noted that “some of our experts, not to mention foreign experts, predicted a decrease of 10%, 15% and even 20%. »
Preliminary estimates showed Russia’s economy shrinking by 2.5% through 2022, the Russian president said, which was significantly better than the 33% contraction in Russia’s economy and Ukraine last year. “Our task is to support and strengthen this positive trend,” Putin added.
Unaccustomed to losing, Putin is increasingly isolated as the war winds down.
For many outside Russia, these numbers are confusing. The scale of economic firepower directed at Russia since February 24 is unprecedented for a major country, with the country’s banks banned from using the Belgium-based SWIFT messaging system used for international transactions and sanctions imposed on its central bank.
But the Russian data suggests that the scale of the impact was less severe than many expected. Although Putin is not in Davos, Russia is not completely cut off from the world. The country’s current account balance – effectively considered the balance of trade with the rest of the world – has jumped over the past year in what would normally be a year of prosperity.
It is possible that the Russian data is wrong, of course. But many people living in or visiting Russia noted that despite the replacement of the defunct McDonald’s by a local burger chain (“Tasty – that’s it”), life continued more or less as normal and Western luxury goods were demanding. . network of foreign buyers.
“If this is a crisis for Russia – which it is – it has nothing to do with the turmoil of the early 1990s, when the state, society and economy collapsed. It all fell apart at once,” Alexander Titov, a Russian expatriate and senior lecturer at Queen’s University Belfast, told The Conversation after returning home. wrote for
Mr. Titov writes that there have been interruptions, but they have been mild compared to those observed even at the beginning of the pandemic. “There is no shortage, even of western products like whiskey – the supermarket shelves are well stocked,” he writes.
Ukraine sees a “year of victory”, but Russia has other plans.
Does this mean that sanctions are not working? The short answer is no, but it’s more complicated than that.
Most importantly, it’s important to remember that Western sanctions and export controls aren’t primarily designed to keep bottles of Johnnie Walker off the shelves of St. Petersburg (although that may have a welcome effect): They’re designed to hinder Russia’s war effort in Ukraine. .
As the Post’s Catherine Belton and Robin Dixon reported late last year, if you scratch the surface of the Russian economy, sanctions and other measures are hitting Russia where it matters most. It hinders its ability to launch any new land attacks or develop new missiles, according to Russian economists and business leaders.
It is true that a large part of the sanctions was offset by Russia’s still large energy exports, hence the positive balance in the accounts. But as Putin tried to use these exports to pressure and punish Europe, their power waned. The soon-to-be-implemented new price ceiling will further complicate Russian exports.
“Russia is still an energy power, but its role has changed dramatically,” Vladimir Milov, a former Russian deputy energy minister who now lives abroad, recently told the Wall Street Journal. “Russia will have a smaller share of the oil and gas market, earn less and lose some of its geopolitical influence. »
This means less income for the Russian state in the future, even if the costs related to the occupation of Ukraine jump. According to the report of the European Commission, Moscow announced a budget deficit of about 47.3 billion dollars in 2022.