One year of sanctions: how is Russia's economy holding up for now?
Since President Putin launched his so-called "special military operation" in Ukraine, Russia has been one of the most sanctioned countries in the world. Just yesterday, EU member states agreed on a tenth sanctions package. Many economists predicted a complete collapse of the Russian economy. Manufacturing would grind to a halt because of the ban on buying Russian goods. There would be a major banking crisis, and oil and gas revenues would evaporate. People in the West also expected large-scale protests and unrest among the Russian people. Many of these predictions have not come true now, a year later, as yet. Natalya Zubievich, a 68-year-old professor of economics at Moscow State University, explains how this is possible.
"We were all wrong," says Zubievich. She, too, predicted the demise of the Russian economy. "It was the first time Russia had had such large-scale sanctions imposed, and nobody knew how the economy and business would adjust. We were not optimistic." But on reflection, she calls it an illusion to think that sanctions could devastate the entire Russian economy. "Russia is a big country, with a huge amount of resources. The world is big, and there are always alternatives." She also says sanctions can never change a political regime. Zubarevich explained that Russia's economy has been trying to disengage from the West since 2014. Back then, the country had sanctions imposed on it following its annexation of Crimea. To counter this, Russia replaced many Western products with domestic ones, or had goods imported from other, non-Western countries. Russia has also been unable to access its foreign assets since 2014. "So Russia already had experience, and was prepared for tougher sanctions," he said.
According to Zubarevich, it is naive of the West to expect major consequences because the sanctions were introduced so gradually. According to her, the sanctions that hit Russia hardest were imposed far too late to have their intended effect. "Only in December did you start the oil boycott. That gave Russian business a lot of time to prepare properly, factor in all the risks and focus on other markets." Things did change in the street scene. Western shops are still largely closed, with signs reading "due to technical circumstances, we are temporarily closed". Some chains have now been replaced by Russian variants. For instance, McDonald's has become 'Tasty, full stop' and Starbucks has been replaced by Stars Coffee. Many products and goods are still available, contrary to expectations. Most sanctions are now circumvented by parallel imports. Almost everything now enters the country through China, Turkey, Dubai, Armenia and Kazakhstan. "That's called business. If people want to make money, and with this they can make lol, they always find ways," Zubievich said.
Although most economists expect that it could be another three to four years before Russia's treasury is so empty that it has major consequences, the next few years will also be tough, according to Zoebarevich. Either way, years of stagnation and slow decline are coming, she says. "Since the mobilization, half a million people have left. That is a huge loss of human capital. Some of them are returning, but how many?" She foresees the biggest problems for the federal budget. "The loss of oil and gas revenues will definitely hurt. The budget deficit will widen. The state is spending much more on the military and defense, and that will be at the expense of education or healthcare, for example." Asked why Russians are not, as was expected in the West, protesting en masse against the sanctions, she responded with irritation. "I get so tired of that question. Take to the streets yourself. Will you in the West also be immediately arrested or bludgeoned by the police if you protest? I don't think so."
Not only state repression plays a major role, but also the fatalism of Russian residents, and their ability to adapt. Russian incomes are expected to fall by 3 per cent in the coming years. "That's not much. And it won't kill anyone. Russians are used to their incomes falling during crises. They resign themselves to it, they will do so until the end." We should not forget that almost a quarter of Russia's population is poor, or living near the poverty line, she says. And many Russians are also weighed down by heavy pressure from their high loans. But Zubievich does not see a moment when they have had enough: "Most of Russia is simply trying to survive. We remember well what a repressive state can do. That fear is passed on from generation to generation. In a country where repression is only increasing, there are no more red lines."
https://nos.nl/collectie/13924/artik...nog-standhoudt