Russian Economy Defies Sanctions Despite Predictions of Collapse
By One year after the Russian invasion of Ukraine, the Russian economy has managed to avoid a deep recession, despite the implementation of sanctions from the U.S., U.K., and EU.[0] The success of the Russian economy has been attributed to several factors, such as the export of commodities, state programs that provide concessional lending to small and medium businesses, and the willingness of countries such as Turkey, China, and neighboring countries in Eastern Europe to ignore the sanctions and continue to export needed products to Russia.
The U.S., U.K., and EU have attempted to limit the economic benefits of the invasion by implementing price caps on Russian-origin oil and petroleum products, as well as prohibiting the transportation of Russian seaborne crude oil and petroleum products to third countries. In response, Russia has prohibited the export of raw oil and raw oil products under contracts with price cap compliance provisions.[1]
Despite the sanctions, the Russian economy has been able to maintain a period of stability, with Russia’s Economy Ministry and Central Bank anticipating only a slight decline in output. Bloomberg Economics predicts that fixed-asset investment will shrink by 5%, however, leading to a 1.5% contraction in the economy.[2]
The abundance of cash has allowed for capital to become available in sectors long craving investment, and the state program of concessional lending is targeting to provide about 300 billion rubles ($4.3 billion) to small and medium businesses.[2]
It remains to be seen how the sanctions imposed on Russia will impact the economy in the long-term, but for now, it is clear that the Russian economy has been able to survive the first year of sanctions, despite predictions of collapse.
0. “Putin's War to Lop $190 Billion Off Russia's Economy in Delayed Reckoning” Financial Post, 17 Feb. 2023, https://financialpost.com/pmn/business-pmn/putins-war-to-lop-190-billion-off-russias-economy-in-delayed-reckoning
1. “Russia Sanctions Year in Review: Impact on Energy Sector” Global Trade & Sanctions Law, 14 Feb. 2023, https://www.globaltradeandsanctionslaw.com/russia-sanctions-year-in-review-impact-on-energy-sector/
2. “Russia Survived a Year of Sanctions by Investing as Never Before” Yahoo News, 7 Feb. 2023, https://news.yahoo.com/russia-survived-sanctions-investing-never-050000058.html
