Despite nine sets of sanctions from the European Union, the Russian economy has only experienced a limited decline in its GDP in 2022. A “resilience” of the Russian economy hailed on Tuesday by President Vladimir Putin during his speech on the state of the nation. However, some Western observers and politicians point to blind spots in the official statistics provided by Moscow.
The Russian economy is resisting. Far from the “collapse” predicted by French Economy Minister Bruno Le Maire following the first waves of Western sanctions following the outbreak of the Russian invasion of Ukraine, Moscow’s GDP fell only 2.1% in 2022, according to the Russian statistics service Rosstat. The Russian economy should even pick up some color this year with growth of around 0.3%, according to the International Monetary Fund (IMF).
“We have ensured the stability of the economic situation, protected the citizens”, trumpeted Russian President Vladimir Putin on Tuesday February 21 in his address on the state of the nation, believing that the West had failed to “destabilize our society”. .
The explanation for this apparent resilience of the Russian economy is primarily due to the rise in hydrocarbon prices in 2022, which offset the drop in the volume of exports – a drop of around 25% for gas.
Formerly Russia’s largest customer, the EU has succeeded in reducing its imports of Russian gas by 55% in the hope of reducing Moscow’s ability to finance its offensive in Ukraine. However, at the same time, Russia has turned to other trading partners, including Turkey, India and especially China, whose imports via the “Force of Siberia” gas pipeline have jumped by 48%, according to the vice -Russian Prime Minister in charge of Energy, Alexander Novak.
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As Russia’s war of invasion of Ukraine enters its second year, the arms industry has also buoyed activity. “There has been a sharp increase in the production of the metallurgical industry. This is a fairly obvious sign that certain branches of the military-industrial complex have managed to adapt. Today we see that factories in the Urals, for example, operate 24 hours a day,” says David Teurtrie, senior lecturer in political science at the Catholic Institute of Higher Studies.
Another strong point of the Russian economy, according to President Putin: the agricultural sector. “By the end of the agricultural year, i.e. by June 30, 2023, we will be able to increase the total volume of grain exports to 55-60 million tonnes,” he said. said the Russian president.
“We are used to problems”
Gas, oil, finance, trade, technology… all sectors of the Russian economy have been affected by successive waves of Western sanctions. However, Russian companies are adapting. Excluded from the SWIFT system, the essential secure messaging system, the banks go through intermediaries to circumvent the sanctions.
>> Read also : What is the Swift system from which Russia might be excluded?
Western goods are easily imported via third countries such as Kyrgyzstan, Armenia or Georgia, border countries at the heart of parallel trade circuits intended to supply Russian industry.
The food industry has also been able to rebound with the emergence of local players who have come to substitute their products for those sold by Western brands, such as the famous sodas Pepsi or Coca-Cola.
“Since the beginning of capitalism in Russia, we have experienced at least four major crises. We are used to problems and, to tell the truth, these are not the biggest ones we have faced,” said Yuri Saprygin, a entrepreneur from the city of Kaluga, in central Russia, joined by France 24.
Faced with Western sanctions, the latter was forced to replace components from Europe and Taiwan with Russian and Chinese equipment. “It was not easy but we did not stop the activity”, explains the manager of an SME who sells medical equipment to analysis laboratories.
However, not all sectors are suffering in the same way. Highly dependent on electronics imports, the technology sector is bearing the brunt of Western sanctions on semiconductors, which are essential in the military and aeronautical industries, or even in the automotive sector.
A truncated economic situation ?
This last sector is moreover one of those which currently suffer the most in Russia. According to the Association of European Businesses (AEB), almost a million fewer cars were sold last year compared to 2021, a drop of 59%. A figure that says a lot regarding the impact of the sanctions but also regarding the loss of purchasing power of Russian consumers, who have suffered like all Europeans from high inflation, nearly 12% over the past year. However, it should be contained between 5 and 7% in 2023, according to the Central Bank of Russia.
The situation is therefore far from idyllic. Especially since some observers and politicians doubt the official statistics provided by Russia. Reacting to Russian GDP figures, French President Emmanuel Macron said on Tuesday that “the Russian economy is suffering a lot”, saying he “does not believe” in Moscow’s “propaganda”.
Some important indicators, such as foreign trade data, are no longer published. “Probably to prevent the West from claiming the effectiveness of sanctions,” said the director of global forecasts of the Economist Intelligence Unit (EIU) Agathe Demarais in the journal Foreign Policy.
In addition, more than 300,000 men have been called up to fight in Ukraine and hundreds of thousands of Russians have reportedly fled the country over the past twelve months. A situation which, in the long term, might weigh on the production of the country. “Beyond the sanctions, it is probably this aspect which penalized the Russian economy the most in the second part of the year because this emigration was mainly due to well-to-do and qualified Russians”, analyzes David Teurtrie.
The worst is yet to come ?
If the Russian economy is still standing, it seems to be permanently weakened and the situation might get worse. Certain sanctions have not yet had time to produce their effects. This is the case of sanctions affecting oil, the primary source of revenue for the federal budget.
Since December, a European embargo has come into force on exports of Russian crude. It is accompanied by a cap on the price of a barrel transported by sea. Since February 5, the same mechanisms apply to refined products.
These embargoes might considerably penalize the State budget. According to data from the Center for Research on Energy and Clean Air (Crea), the EU has paid 84 billion euros to Russia for its oil since the invasion of Ukraine.
“This is only the beginning. We must see the sanctions as a marathon, not a sprint”, assures Agathe Demarais, who predicts in the coming months “an impossible equation between the financing of the war in Ukraine and the maintenance of social assistance at a level high enough to avoid unrest” among the population.
“Oil prices are lower and the impact is felt for the Russian budget but the markets will undoubtedly stabilize”, assures David Teurtrie. According to the researcher, Russia remains far from suffocation and still has serious arguments to put forward in the face of the pressure of the sanctions: enormous financial reserves and “low indebtedness offering it a significant borrowing capacity”.