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here is the impact of the sanctions on the Russian economy

A study by Yale University has established that the Russian economy is much more affected than it appears by the sanctions.

A Russian ruble coin, with Saint Basil the Blessed Cathedral in Moscow in the background, April 28, 2022 @BelgaImage

This is one of the big topics of debate: is the effect of economic sanctions against Russia as great as expected? Vladimir Putin admits that his country has to face “colossal difficulties“but several European personalities, particularly on the far right, have called for them to be abandoned. This is the case of Hungarian Prime Minister Viktor Orbán who considered that Russia suffered less from the sanctions than the European Union. Since then, others have followed suit, such as Marine Le Pen in France, and former German Chancellor Gerhard Schröder, reputedly close to the Kremlin, has done the same.

This week, a new study from Yale University sets the record straight. Yes, the impact of sanctions on Russia is very heavy. After a statistical analysis, it turns out that it is much more important than what the official figures suggest. As for the assertion that the Russian economy would be more resilient than the Western one in the face of sanctions, even prosperous, “it’s just plain wrong“, say the authors.

A country weakened on all sides

To reach this conclusion, the Yale academics scrutinized the consumption data, carried out multiple checks from different sources, took into account the press releases from Russia’s trading partners and obviously all the statistics available. Results: “corporate exits and sanctions are catastrophically crippling the Russian economy, both in the short and long term“. First point brought to light: Russia has seen its status as an exporter of raw materials “irrevocably deteriorated”. It has lost its former outlets and is unable to effectively carry out its “pivot to Asia” wanted by Vladimir Putin. This last option would be based on “unrealistic optimistic assumptions“.”Russia is a minor trading partner for China, […] and most Chinese companies cannot risk violating US sanctions“. Questioned by RFI, Thierry Bros, professor of energy and climate at Sciences-Po, adds in this regard that “Asian buyers, China and India, argue that today they are the only ones who can buy it. And so, ask for a count. This is the great novelty“.

Logically, Russian imports “have largely collapsed“, finds Yale University, and the Kremlin is struggling to get the spare parts and raw materials needed to keep its economy running.”For example, car sales for individuals have collapsed by 99%. There are elements like that, which suggest that the Russian economy is not doing well“, adds economist Agathe Demarais. The Kremlin’s trading partners remain hesitant in such an unstable context and many companies are giving up trade with Moscow. This “results in widespread shortages of supply within its national economy” And that’s not all. “Despite illusions of self-sufficiency and import substitution […]Russian domestic production has completely stopped and does not have the capacity to replace lost companies, products and talents“hence huge inflation that is sure to trickle down to Russian consumers. Companies that have left the country”account for around 40% of its GDP, canceling out almost all of the three decades of foreign investment“.

The Russian economy in crisis “as long as the allied countries remain united”

Obviously, Moscow is not content to submit and is trying to react. “Putin resorts to manifestly unsustainable fiscal and monetary intervention […] which has already sent its government budget into deficit for the first time in years and depleted its foreign exchange reserves even with high energy prices“. Moreover, the finances of the Kremlin “are in a much more desperate situation than is admitted“.”Russian domestic financial markets […] are the worst performing markets worldwide this year despite strict capital controls“, say the authors of the study.

The latter conclude by adding that Russia will not be able to have an option to end the crisis “as long as the allied countries remain united in maintaining and increasing the pressure of sanctions against Russia“.”The defeatist headlines claiming that the Russian economy has rebounded are simply not factual – the facts are that, in every way and on every level, the Russian economy is in shock, and now is not the time to brake“, they add.

For this year, the IMF currently predicts a fall in Russian GDP of 6%. This represents a big recession but it says less strong than imagined in April, when the forecasts were 8.5%. A relative optimism since for 2023, the organization has revised downwards its growth forecasts for Moscow. Next year, instead of a recession of

The IMF says 6%, we, with our models, say 10%. It is difficult to make a forecast, but to say, under these conditions, that the Russian economy is doing well, it seems a little difficult to me “

According to the International Monetary Fund, Russia is doing better than expected this year, with an expected GDP recession of 6.0% in 2022, according to its latest forecast published on Tuesday, much less than the 8.5% plunge on which the organization expected in April. In 2023, this same recession should still be 3.5% according to current figures.

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