2024-07-14 13:45:55
Russian leader Vladimir Putin’s claims that the Russian economy is stable have long since lost their foundation, and the Kremlin is well aware of this. The country is facing serious economic difficulties and could enter a devastating recession within a year.
This is the opinion of Yuri Gorodnichenko, an economist from the University of California at Berkeley, as he stated in an interview with Business Insider.
He noted that Russia is losing two important elements for its economy: large-scale energy trade and a stable flow of US dollars.
Russia’s economy is heavily dependent on oil revenues. However, sanctions have cut off energy flows, and it is unclear whether sales of resources to allied countries will be able to support the Kremlin’s military budget and provide sufficient access to dollars to import necessary goods and resources. This could lead to a recession within the next 12 months, Gorodnichenko predicts.
“If they have to finance a war without the resources it’s not clear where they’re going to get the money. I predict they’re going to face a serious recession,” he said.
Energy trading is Russia’s main source of income. But Western sanctions have seriously damaged Moscow’s oil and gas business. Sales fell 24% in 2023 to a three-year low, posing a major financial problem for the Kremlin. The war in Ukraine is becoming increasingly expensive, and the government has adopted a record military budget for 2024. The budget deficit will amount to 1.59 trillion rubles, or about $18 billion.
“If you do the math, it becomes obvious that without petrodollars, Russia will face big problems,” Gorodnichenko added.
The drop in oil sales means a loss of access to the US dollar, since oil transactions are conducted in this currency. Less dollars for transactions further isolates Russia from the global economy, since the dollar is the backbone of global trade. According to the Bank for International Settlements, the dollar was used in 88% of all external transactions in April 2022.
“Putin is striving for independence from the US and its currency, moving towards de-dollarization and creating alternative payment systems with allies. But these steps only worsen Russia’s economic situation,” Gorodnichenko emphasized, especially considering that Russia imports almost everything – from cars to food and furniture.
Historical analysis of Russian finances shows that their GDP is closely linked to the amount of petrodollars. Russia fell into recession during the global financial crisis and in 2014, when oil prices fell sharply.
Gorodnichenko recalled that when the Soviet Union lost access to petrodollars, its economy collapsed within five years. He suggested that the current economic decline of the Russian Federation could happen faster, since the USSR was more self-sufficient.
Earlier, “Kursor” wrote that the head of the Main Intelligence Directorate of Ukraine, Kirill Budanov, said that there had been multiple assassination attempts on Russian President Vladimir Putin. However, all of them were unsuccessful. He also said what would happen after the death of the Kremlin dictator.
2024-07-14 13:45:55