Why is the Russian economy holding up to Western sanctions ?
Despite nine European Union sanctions packages, the Russian economy experienced only a limited decline in its GDP in 2022. A "resilience" of the Russian economy greeted on Tuesday by President Vladimir Putin during his speech on the state of the nation. However, some Western observers and politicians point to blind spots in the official statistics provided by Moscow.
The Russian economy resistance. Far from ’ "collapse" predicted by the French Minister of Economy Bruno Le Maire after the first waves of Western sanctions having followed the triggering of the Russian invasion of Ukraine, Moscow’s GDP fell only 2.1% in 2022, according to the Russian Statistics Service Rosstat. The Russian economy should even resume a few colors this year with growth of around 0.3%, according to the International Monetary Fund ( IMF ).
"We have ensured the stability of the economic situation, protected the citizens", trumped on Tuesday February 21 Russian President Vladimir Putin in his speech on the state of the nation, believing that the West had failed to "destabilize our society".
The explanation for this apparent resilience of the Russian economy is due first to the rise in hydrocarbon prices in 2022 which offset the drop in the volume of exports – a drop of around 25 % for gas.
Formerly Russia’s first customer, the EU has managed to reduce imports of Russian gas by 55% in the hope of diminishing Moscow’s ability to finance its offensive in Ukraine. However, in parallel, Russia has turned to other trading partners, including Turkey, India and especially China, including imports via the "Siberian Force" pipeline" jumped 48%, according to the Russian Deputy Prime Minister in charge of Energy, Alexandre Novak.
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As the Russian invasion war of Ukraine enters its second year, the arms industry has also supported the activity. "There has been a sharp increase in production in the metallurgical industry. This is the fairly obvious sign that certain branches of the military-industrial complex have managed to adapt. We can see today that factories in the Urals, for example, operate 24 hours a day, "explains David Teurtrie, lecturer in political science at the Catholic Institute for Higher Studies.
Another strong point of the Russian economy, according to President Putin: the agricultural sector. "By the end of the agricultural year, that is to say by June 30, 2023, we will be able to bring the total volume of cereal exports to 55-60 million tonnes", said the Russian president.
"We are used to problems"
Gas, oil, finance, trade, technology ... all sectors of the Russian economy have been affected by successive waves of Western sanctions. However, Russian companies are adapting. Excluded from SWIFT system, the essential secure messaging system, banks go through intermediaries to circumvent sanctions.
> > Read also : What could the Swift system from which Russia be excluded ?
Western goods are easily imported via third countries such as Kyrgyzstan, Armenia and even Georgia, from border countries to the heart of parallel trade circuits intended to supply Russian industry.
The food industry has also been able to rebound with the emergence of local players who have come to substitute their products for those sold by Western brands, such as the famous Pepsi or Coca-Cola sodas.
"Since the beginning of capitalism in Russia, we have experienced at least four major crises. We are used to problems and, frankly, they are not the most important we have faced, "said Iouri Sapryguine, an entrepreneur from the city of Kaluga, in central Russia, joined by France 24.
Faced with Western sanctions, the latter was forced to replace components from Europe and Taiwan with Russian and Chinese equipment. "It was not easy but we did not stop the activity", explains the manager of SMEs who sells medical equipment to analysis laboratories.
However, not all sectors suffer in the same way. Very dependent on imports in electronics, the technological sector is suffering the full force of Western sanctions on semiconductors, essential in the military and aeronautical industries, or in the automotive sector.
A truncated economic situation ?
The latter sector is one of the most suffering in Russia today. According to the Association of European Businesses ( AEB ), almost a million fewer cars were sold last year compared to 2021, a decline of 59 %. A figure that says a lot about the impact of sanctions but also about the loss of purchasing power of Russian consumers, who have suffered like all Europeans from high inflation, almost 12% over the past year. However, it should be contained between 5 and 7% in 2023, according to the Central Bank of Russia.
The situation is therefore far from idyllic. Especially since some observers and politicians doubt official statistics provided by Russia. Responding to Russian GDP figures, French President Emmanuel Macron estimated on Tuesday that "the Russian economy is suffering a lot", saying "do not believe" in Moscow's "propaganda.
Some important indicators, such as foreign trade data, are no longer published. "Probably to prevent the West from claiming the effectiveness of sanctions", estimates the director of world forecasts for the Economist Intelligence Unit ( EIU ) Agathe Demarais in the journal Foreign Policy.
In addition, more than 300,000 men have been called upon to fight in Ukraine and hundreds of thousands of Russians are said to have fled the country in the past twelve months. A situation which, in the long term, could weigh on the country's production. "Beyond sanctions, it is probably this aspect that most penalized the Russian economy in the second part of the year because this emigration was mainly due to wealthy Russians and graduates", analyzes David Teurtrie.
The worst is to come ?
If the Russian economy still stands, it seems permanently weakened and the situation could get worse. Certain sanctions have not yet had time to take effect. This is the case with oil sanctions, the main source of income for the federal budget.
Since December, a European embargo has entered into force on exports of Russian crude oil. It is accompanied by a ceiling on the price of barrels transported by sea. Since February 5, the same mechanisms apply to refined products.
These embargoes could considerably penalize the state budget. According to the data of Center for Research on Energy and Clean Air ( Crea ), the EU has paid Russia € 84 billion for its oil since the invasion of Ukraine.
'"This is just the beginning. You have to see the sanctions as a marathon, not a sprint, "said Agathe Demarais, who predicts in the coming months "an impossible equation between the financing of the war in Ukraine and the maintenance of social assistance at a level high enough to avoid unrest "within the population.
"Oil prices are lower and the impact is felt for the Russian budget but the markets will undoubtedly stabilize," says David Teurtrie. According to the researcher, Russia remains far from suffocation and still has serious arguments to make in the face of the pressure of sanctions: huge financial reserves and "low debt offering it significant borrowing capacity".
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