Sanctions effect: the Russian economy is chasing those of its rivals

The “Russia system” appears to have held off Western restrictions on its invasion of Ukraine. In the long run, however, expect problems. It will be difficult for the Russians to compensate for the lack of imports. A drop in the standard of living of the population is expected. The Russian Bear also behind the emerging Asian countries.

Moscow (AsiaNews) – Mikhail Zadornov, president of the Otkrytye commercial bank, one of the most important in Russia, commented on the economic consequences of Western sanctions in an interview with Rbk (the authoritative agency RosBisnes Consulting). He warned that “our economy will grow much more slowly than that of our main competitors.”

At the end of 2022, the main Russian economic indicators remain substantially positive, and the official version repeatedly reaffirmed by President Putin himself states that “the sanctions have failed, our economy is holding up and will be increasingly solid”. Zadornov observes that “it is necessary to consider this situation by distinguishing the short-term prospects from the medium- and long-term ones”, even if the situation is actually much better than expected after the “February shock”, with a drop in GDP limited to 3%.

Revenues from oil exports, thanks to price increases, increased by 2%, and this made it possible to maintain the course of the “strong ruble”, even without special interventions by the Central Bank. A stable currency has also made it possible to counteract the growth of inflation, but “the production and sale of oil and gas remains the crucial factor for us, and we cannot predict how next year will go”, after the European embargo in force on December 5th.

As Zadornov explains, it is not clear not only to whom the oil will be sold, but “who will transport and insure it, if it will be possible to reverse the export, from Europe and other countries hostile to Asian markets”. For now, forecasts are for a drop from 525 million tonnes to 475, which will make itself felt throughout the Russian economy.

A “long-term” factor concerns the productive activity of many companies, which is currently developing “by inertia, thanks to the reserves of materials and technologies”, which are destined to run out fairly soon, and no new supplies are expected. This will lead to a “progressive adaptation to new conditions, which will initially have a very significant damping effect” due to the absence of critical components in many sectors. “China will be able to give us something to replace it, but it too will need time and technological updates, not to mention logistical problems”.

Russia has very limited possibilities in the renewal of technologies and it is observed that “most companies put projects on hold, postponing them for one or two years, in the hope that something will happen, and this in almost all productive sectors” . Especially since the preparation of new technological materials in turn requires the machinery to produce them, and they too are increasingly lacking. However “it is unthinkable that a country whose economy does not reach 2% of world GDP, such as Russia, can guarantee all the components necessary for the production system on its own”.

So, concludes Zadornov, “the fact that there hasn’t yet been an economic collapse shouldn’t create illusions, even if we manage to hold on, we will still be very limited in relation to the needs of the international markets, and also for the one inside Russia”. The Russian economy could start growing again in late 2023, but already in the period before the pandemic, from 2012 to 2019, economic growth was two times lower than that of the G7 countries, 1% compared to 2%. not to mention China, India and other rapidly developing economies, and in the next five years will probably be five times slower than the other major world economies.

According to forecasts, the economic delay will also translate into a drop in the standard of living and social conditions of the population. As Zadornov warns, “we won’t have to deal so much with Europe or America, or even with China, but rather with Indonesia, Vietnam and the countries of the Middle East, which are trying to adapt to the new conditions of the world economy much faster than we do”.

Sanctions effect: the Russian economy is chasing those of its rivals