So far, the Russian economy has been much more resilient than expected. After seven packages of sanctions from the EU, sanctions from the USA and other western countries, it has not collapsed – a result after six months of war.
The Central Bank of Russia expects gross domestic product to fall by 4.2 percent this year. You can’t trust these numbers. However, in its most recent forecast, the International Monetary Fund also assumes a slump of “only” six percent for 2022.
Inflation rose significantly after the outbreak of war, but will remain below fears for 2022 at around 15 percent. The ruble, which initially collapsed massively, has also recovered. It is an artificial course achieved through rigorous capital controls.
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However, many Western companies have abandoned the Russian market. IKEA, H
The fact that many Western products are now missing from the shelves affects the urban middle classes in particular. The socially disadvantaged had not bought these products even before the war. But cracks are also appearing outside of the shopping industry.
So far, the sanctions have primarily affected the automotive and aviation industries. These industries lack important Western components, especially in electronics. This goes back to the Western export bans on high technology.
Cars are hardly ever produced. In July 2022, car production fell by 80.6 percent compared to July 2021. Spare parts for airplanes are cannibalized from other airplanes.
And export bans will also affect other industrial sectors in the medium term – for example the Russian armaments industry. If the spare parts stores that have been set up are empty, entire production chains will have to be shut down. Replacements for Western components from other countries are limited and not of the same quality.
The state budget has also slipped into the red. Declining income from the export of energy sources, lower customs revenues due to lower imports, but also the money distributed to the population by Putin to calm the situation are affecting the budget.
This will continue to intensify. Although the Russian state still has considerable funds in the “welfare fund”, they are not intended to stabilize the state budget. The Western states will therefore have to remain patient until the full impact of the sanctions hits the Russian economy.
Gerhard Mangott is a professor of political science with a special focus on international relations and security in the post-Soviet space. He teaches at the Institute for Political Science in Innsbruck and is a lecturer at the Diplomatic Academy in Vienna
Russia is not economically isolated. The volume of trade with many non-Western countries has actually expanded. However, this does not apply to the very relevant high-tech areas.
Despite the political proximity between Russia and China, China cannot and will not (!) mitigate the consequences of Western sanctions for the Russian economy or entirely offset them. Chinese companies fear being punished by western secondary sanctions. For them, the European and US markets are much more important than the Russian market.
Ultimately, the question is: what has been achieved with the sanctions? With the economic, trade and financial sanctions, Russia has been punished for an act that is rightly condemned. In the long term, the Russian economy will be thrown back significantly in terms of technology.
All Russian citizens will feel the consequences. If the sanctions are primarily aimed at punishment, then they are already working and are becoming more effective.
The most important goal behind it, however, is that the sanctioned state changes its unpopular behavior – specifically, that Russia ends its attack on Ukraine. In this regard, the sanctions have been, and are likely to remain, unsuccessful.
The EU can still pass an eighth, ninth or tenth package of sanctions, but this will not end the war. For the Russian leadership, their geopolitical goals in Ukraine are more important than Russia’s economic, financial and social well-being.
