“But residents of this country are used to difficulties. I have my summer house, with potatoes and cucumbers. After the 1990s, nothing can scare me.” Sergei Guriev, economics professor at France’s Sciences Po, expected the impact to be felt more sharply in the next few months. The finance minister said Moscow had earmarked 8 trillion roubles ($123 billion) of stimulus for “the current circumstances”, although it was not clear how much of that was new money and over what period.

• Russia’s brainwashed citizens are starting to suspect that the war is eating away at their well-being.
• For example, in September 2022, nonpayment on car loans increased by 19 percent over a month; 13 percent of such loans are now overdue.
• When the buy and sell prices matched, this “fixed” or “settled” the official MICEX exchange rate, which would then be published by Reuters.
• Federal Reserve Bank of Dallas research earlier this year explained how this trade diversion helped ease the embargo’s impact on Russia.

Russia’s current account surplus—which measures a country’s exports against its imports—reached nearly $139 billion in the first six months of 2022, helped by its profits from energy and commodity exports, coupled with a collapse in imports due to sanctions. Alexei Kudrin, a former finance linux for network engineers: practical linux with gns3 video minister, and Evsey Gurvich, an economist, argue that Russia’s economy cannot be repaired by monetary or fiscal measures. At the heart of Russia’s malaise is the weakening of market forces and suppression of competition, which means there is no longer much of a market economy.

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Maybe the sanctions will work, by driving Putin to the negotiating table. Or maybe they will make him feel cornered and cause him to lash out in a catastrophic way—committing suicide for fear of death, as Otto von Bismarck put it. But it falls to the West to convince Russia’s leader that he has the most to gain by bargaining rather than bombing. Sanctions have restricted western companies from supplying the country with chips, electrical equipment and other critical hardware needed to produce everything from kitchen appliances, cars, computers, data servers and military equipment. Entire supply routes for “[data] servers to computers to iPhones—everything—is gone,” one western chip executive told the FT. Although inflation is currently rising less rapidly than it was, double-digit inflation is set to continue in a country where 21 million people—nearly 15% of the national population—live below the poverty line, a number that has surged since the war began.

Beginning in 1928, the course of the Soviet Union’s economy was guided by a series of five-year plans. By the 1950s, the Soviet Union had rapidly evolved from a mainly agrarian society into a major industrial power.[53]
By the 1970s the Soviet Union was in an Era of Stagnation. The complex demands of the modern economy and inflexible administration overwhelmed and constrained the central planners. The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. Having largely lost its European market next door, and with other Western investors pulling out, Moscow is becoming ever more reliant on China, threatening to realize long-simmering fears in Moscow of becoming an economic colony of its dominant southern neighbor. Russian billionaire Oleg Deripaska warned this month that Russia is running out of cash.

The Russian Economy: Modest Growth Ahead

With “great power status” tied closely to economic power, Putin’s back-door source of legitimacy from stirring up nationalist pride now seems closed as well. Robert F. Kennedy famously observed that GDP failed to account for many things that we care about — like health and education. The fall in Russia’s market-rate GDP cannot begin to describe the human tragedy playing out in both Ukraine and Russia.

Weaker Global Outlook Sharpens Focus on Domestic Reforms

Western sanctions, imposed after President Vladimir Putin’s took Russia into neighbouring Ukraine, “continue to weigh on the economy” but the plunging oil price is causing just as much, if not more, damage to one of the world’s energy giants. Russia recorded a trade surplus of US$15.8 billion in 2013.[258] Balance of trade in Russia is reported by the Central Bank of Russia. Historically, from etoro 1997 until 2013, Russia balance of trade averaged US$8.338billion reaching an all-time high of US$20.647 billion in December 2011 and a record low of −185 US$ million in February 1998. Russia runs regular trade surpluses primarily due to exports of commodities. In addition, the labor force has shrunk as young people are sent to the front or flee the country over fears of being drafted.

North Korea Shipped Arms to Russia for Use in Ukraine, U.S. Says

And despite becoming the world’s most sanctioned nation in the world, Russia’s economy hasn’t tanked. Russian President Vladimir Putin had began preparing the country years ago to endure western financial pressure by shoring up its currency reserves and befriending China. And in a stroke of luck, the Kremlin’s coffers are bursting because oil prices have skyrocketed, stabilizing the ruble. In May 2022, we concluded that the combination of Western financial sanctions and Russian capital controls stabilized the currency by effectively shutting down a large portion of the capital and financial account. In balance-of-payments accounting, a country’s net receipts of capital can be divided into a current account (the trade balance plus net income from overseas investment) and the capital and financial account (net receipts due to purchase and sale of foreign assets). The Group of Seven and its allies imposed harsh financial and economic sanctions on Russia beginning in late February 2022, following the invasion.

President Vladimir Putin, who has welcomed the departure of foreign firms which have sold up or just dumped Russian assets, said Russia could not be isolated from global trade. Still, Russian industry as a whole will finish 2022 without a recession. At the same time, private investments are gradually being replaced by state investments and peaceful investments by military ones. Russia was locked out of around $360 billion it had in foreign reserves last year when it first began its invasion of Ukraine. Some experts say that Russia has likely been selling oil above the $60 price cap, partly due to a loophole where oil suppliers inflate shipping costs but are technically selling crude below the $60 threshold.

The fallout from Moscow’s invasion of Ukraine in February 2022 sent the Russian economy into a 2.1% decline last year and although it has recovered so far this year, economists expect economic prosperity to suffer in the longer term. The Bank of Russia jacked up rates to 13% on Friday and renewed its hawkish guidance, warning of high rates “for quite a long time” as authorities grapple with a weak rouble and persistently accelerating inflation. All the while, its massive propaganda machine offers an all-is-well fairy tale, which Russian voters see as false. The finance ministry continues to release administrative notices of successively draconian sequesters, budget cuts, and anticrisis measures, with customs revenues sinking one-third and an overall loss of 2015 revenues of  2.5 trillion rubles ($500 billion). The Kremlin’s estimate of two years of no growth is nothing to brag about, but it looks good compared to the alternatives shown in the above table. The Russian central bank forecast -4.6 percent GDP growth in December 2014.

The ruble is trading like a junk cryptocurrency, collapsing more than 30 percent on Monday, and as it weakens, the price of certain imports will rise sharply. Unemployment will soar unless the central bank steps in to print money in order to keep companies afloat, but this will almost certainly cause even worse inflation. To throttle the worst inflationary effects, the Russian central bank doubled its key interest rate to 20 percent; for perspective, that’s higher than the U.S. federal-funds rate has ever been.

Following the collapse of the Soviet Union, Russia underwent a radical transformation, moving from a centrally planned economy to a globally integrated market economy. Corrupt and haphazard privatization processes turned over major state-owned firms to politically connected “oligarchs”, which has left equity ownership highly concentrated. Yet the West’s unrelenting financial and economic sanctions have only accelerated Russia’s economic downfall. In the next few weeks, the world is going to get a chaotic lesson in economic interdependence. As The Wall Street Journal reports, Russia and Ukraine together account for about 20 percent of the world’s corn exports and 80 percent of its sunflower oil.

The move is reminiscent of Russia’s 1,150 basis-point (11.5 percentage-point) policy rate increase in response to Western financial sanctions after its Ukraine invasion. This time, the ruble’s decline is attributable to trade sanctions and plunging export earnings rather than sanctions affecting the central bank and individual financial institutions. Notably, Medvedev comingled collapsing oil and gas prices and sanctions, apparently assigning all the blame for economic hardship to the evil NATO, CIA, and the United States, trade99 review all of whom are aiming for regime change in Russia. The accompanying chart plots the actual GDP, oil prices, foreign borrowing, and central bank reserves from the first quarter of 2007 through the first quarter of 2015. The baseline figures (such as $60 a barrel of oil and negative borrowing) are plotted from the second quarter of 2015 through the last quarter of 2016. GDP growth is projected from the statistical relationship between GDP growth and the explanatory variables (see notes to the accompanying table).

That estimate has received little attention from the Kremlin and media, although it is worse than the International Monetary Fund’s estimate (-3.8 percent). Anders Aslund’s estimate of Russian growth for 2015 is his ballpark figure for  the growth of  each of the expenditure categories of GDP. While a much remains uncertain about the global green transition, the pace of change is likely to gain momentum as more countries announce plans to become carbon neutral.