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The sanctions against Russia were to destroy its economy and thus quickly dry up the financing of the war waged in Ukraine. For the moment, their deterrent effects are pending…
What a contrast between the zone which decreed the sanctions with the United States, Europe, today in the midst of an energy crisis, where sobriety has become the watchword for the start of the new school year, and a Russia where the currency, the prices, interest rates are now more or less under control after having exploded!
This oil power is not afraid of winter: the income it receives from hydrocarbons doubled between March and July, while the volumes exported are down. And the profits of Russian companies are rather flattering in the second quarter: +44%. The announced recession will be much less than expected, rather around 6% this year, according to the Russian Central Bank and the IMF. While in the spring, the fund predicted a decline in activity of around 10%, the most pessimistic bet on -15% of GDP.
Ineffective sanctions?
This question is the subject of debate among experts outside Russia and we can see that it is difficult to answer it categorically, among other things because Russian institutions have stopped publishing a number of crucial economic data, but also because the information available is mixed, the figures quoted for oil or profits testify rather to the astonishing resilience of the Russian economy. Just like those of electricity consumption: it is on the rise again, it is a generally reliable sign of the vigor of activity.
Economists from the American University of Yale published a long reasoned study in July showing that this Russian economy was imploding, that this is still not very visible, but that it is durably affected by embargoes on intermediate goods. which today prevent it from building cars or simply maintaining its planes. Evidenced by the dizzying fall of the car market: in June, only 27,000 new vehicles were sold in Russia against a monthly average of 100,000 before the war.
The destruction of the Russian economy is inevitable, experts say
The flight of talent that was triggered by the war contributes to this, but also the very measured support of the Chinese godfather: Beijing buys Russian oil, but the Middle Kingdom has not replaced Western suppliers. Against all expectations, Chinese exports to Russia have fallen sharply since the beginning of the year. The effects of the sanctions will be much more marked in the next two to three years.
Concretely, this means that sanctions work but are not a very effective weapon in the short term. Partly because the Russian authorities quickly put in place aggressive policies to mitigate the effects. The defense of the ruble is the best example of this: after having plunged, the Russian currency has regained its best level against foreign currencies. Vladimir Putin also defends the purchasing power of the most modest: pensions have been increased and companies are firmly urged to maintain employment, a bit like what was done in the West during Covid-19. These accompanying measures guarantee a certain social peace, in a country where the population is in any case experienced in surviving crises, including economic ones. Russia is experiencing its fifth recession in 25 years.
The flaws in the sanctions regime?
There are two main ones: first, the fact that the Europeans have postponed the embargo on Russian oil until December. Its implementation will undoubtedly considerably weaken Russian exports and upset the hydrocarbon situation. Then, we must keep in mind that a hundred countries do not apply the sanctions. Even if they do not have the resources comparable to those of the West, they allow Moscow to supply or export goods by circuitous routes, why not oil, which the Europeans will no longer import.