Since the beginning of the war, Russia’s economic situation has deteriorated. picture alliance/dpa/TASS | Mikhail Klimentyev
Russia’s financial situation has deteriorated since the Russian invasion of Ukraine.
The current account has collapsed, the ruble is weakening, and its status as an energy superpower has faltered.
At the same time, domestic consumption and production in Russia are small.
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Russia’s economy is only a shadow of what it was 16 months ago.
Before Kremlin chief Vladimir Putin ordered the invasion of Ukraine in February 2022 and before historic sanctions came into effect, Moscow was the world‘s 11th largest economy and played a key role as a reliable, large-scale energy exporter.
Now, however, all signs – from a weakening currency to tepid trading – point to a sharp deterioration with no end in sight.
“Russia could fall into pieces like the Soviet Union, and that might not be so bad for the world,” said Volodymyr Lugovskyy, an economics professor at Indiana University. “Right now it’s like an empire with a central power. Extreme events are entirely possible.”
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These five statistics illustrate how the war has changed the Russian economy for the worse.
1. A flagging ruble
The ruble has been one of the worst-performing currencies this year and geopolitical uncertainty in Russia has made it volatile.
During the failed Wagner Group mutiny in June, the currency plummeted to a 15-month low against the dollar as citizens panicked to switch to alternative currencies.
Over the past month, the ruble has weakened by more than 6.8 percent, and over the past year it has fallen by more than 35 percent.
2. Current account falls 93 percent
For the April-June quarter, the country posted a current account surplus of $5.4 billion, down 93 percent from a record $76.7 billion, according to the Central Bank of Russia billion euros) in the same period of the previous year.
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The dwindling current account surplus shows that Moscow is unable to secure its imports and that profits from energy exports are no longer able to support the economy as they used to.
The dwindling Russian trade surplus shows that Moscow is unable to secure imports and that profits from energy exports are falling. Yale Chief Executive Leadership Institute
“The decrease in the surplus of the foreign trade balance of goods in the period January-June 2023 compared to the same period in 2022 was caused by a decrease in both the physical volume of export supplies and the deterioration in the price situation of basic Russian export goods, with energy commodities being the main contributor to the decrease in the export value,” the Bank of Russia said in a statement.
3. Plunge in energy revenues
Russia’s Treasury Ministry said in June that revenue from oil and gas taxes fell 36 percent year-on-year, while profits from crude oil and petroleum products fell 31 percent.
Before the war, Russia provided nearly 40 percent of the European Union’s natural gas imports and a quarter of the Union’s crude oil.
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Those numbers have since fallen to almost zero, and although Putin has turned to China and India as alternative buyers, Moscow has had to sell energy at deep discounts.
Today, Russia’s energy exports mainly go to China and India. Yale Chief Executive Leadership Institute
4. Russian car sales have plummeted
Before the invasion of Ukraine, around 100,000 vehicles were being sold across Russia each month, according to Yale research data obtained by Business Insider.
Those sales have plummeted to about a quarter of that level, reflecting not only rising prices and declining consumer sentiment, but also a lack of supply.
In Russia, car sales have collapsed completely in the last year and a half. Yale Chief Executive Leadership Institute
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5. Brain drain and emigration
According to Yale, millions of Russians have emigrated since the start of the war in Ukraine, with Uzbekistan alone taking in more than 400,000 fleeing citizens.
The flight of capital and talent from Russia is reflected in the increase in remittances to neighboring countries not typically considered financial centers, such as Armenia, Georgia and Kyrgyzstan, according to Yale.
“While there is no concrete measure of the extent of capital flight, back-up measures such as the explosion of non-resident deposits in UAE bank accounts suggest that wealthy Russians are pulling productive capital out of Russia at a dramatic rate,” says Jeffrey Sonnenfeld , researcher at Yale.
Read the original article in English here.