[Analyse] How will sanctions affect Russia’s economy?

Russia, which is rich in raw materials, must manage to overcome the new economic disaster caused by its own negligence. However, this is not done without harming its population or further impeding its potential for future prosperity.

The Russian president promised a series of financial assistance to Russian households and businesses on Wednesday to deal with the avalanche of economic sanctions he has faced since launching the invasion of Ukraine. In particular, he promised to increase pensions with “minimum self-sufficiency, salaries for civil servants,” and Agence France-Presse even reported “reducing poverty and inequality.” “Of course, the new reality will require significant structural changes in our economy,” he admitted. “It will be difficult,” but it will allow us to be more independent of Western countries.

The Peterson Institute for International Economics reminded us again this week that the economic and fiscal sanctions imposed on Russia since the onset of the crisis are the heaviest imposed on the great powers since World War II. We will talk about at least 5,500 measures to impose a commercial ban on the sale or purchase of certain commodities (fossil fuels, weapons, technology, etc.), to freeze Russian assets abroad, or to separate the country from important financial channels.

It is still difficult to predict the impact of all these measures this week. The Wall Street JournalFirst, it’s too early to get official statistics, but also because the Kremlin isn’t interested in publishing them. Experts estimate that this year’s economic contraction will be 6.2% according to Standard & Poor’s, 13.4% to 24% according to Moody’s, and 33% according to the Institute of International Finance, and more shocks are expected. Percentage of the dreaded Russian financial crisis in the late 1990s (-10%). “It’s a tremendous act of self-destruction,” said one of these experts.

April summer

The ruble has already lost at least half of its value, and there is a risk that import prices will skyrocket and inflation will peak. Finally, more than 400 foreign companies have left Russia at least temporarily, either because they were directly exposed to sanctions or because they were afraid of being indirectly attacked, or to protect their brand image. For everyone else, the times will be tough, with domestic demand collapsing and supply chain disruptions. Employees of AvtoVAZ, one of the country’s leading automakers, will eventually move to the beginning of next month due to a shortage of assembly parts during the summer vacation, usually scheduled for July 25-August 14. I knew what to do.

Experts warn that Russia, a major producer of fossil fuels, grains and minerals that the global economy is hungry for, however, will continue to look for takers abroad. Europe, in particular, cannot be achieved without that energy so far. But also because other countries, including China and India, are not paying much attention to Ukraine’s fate, especially knowing that they are in a position to demand generous rebates.

Everything depends on what Europe and China do. But Russia can hold up for a long time.

However, due to the lack of sufficient pipeline observed on Thursday, there are limits to the fuel that can be redirected elsewhere. economist.. And even China cannot always offer the same level of products and technology as Westerners. Moreover, Chinese companies do not want to be exposed to sanctions.

Long-term cost

Anyway, the lesson learned from the sanctions imposed on Vladimir Putin when he annexed Crimean in 2014 is that he should be as independent as possible and instead go for security and peace. world.. We are actually approaching not only in terms of finances, but also in terms of basic necessities. This, in addition to causing relative poverty in the population, was far less decisive in terms of technology.

“Everything depends on what Europe and China do, but Russia can hold on for a long time,” said Sergei Guriev, a former adviser to President Putin and now a professor at Science Po Paris. Guriev explained in an interview last week at the Brugel Institute, the European Center for Economic Research.

In any case, it will bring about a huge economic recession, experts said. Especially for the poorest people their president found attractive in his military operations. But in the long run, especially for investors whose all these brains are fleeing and leaving the country, as well as technologies that Russia cannot access. “As you know, the dictatorship is already expensive in terms of military, means of oppression and corruption. But here Putin can bring the Russian economy back 30 years ago.» »

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