In meetings between European and American officials, figures and tables circulate on the «medium-term» stability of the Russian economy. We’ve seen a few. In the last year (January ’22—January ’23) the export of gas has almost halved: -46%. In Moscow, the Finance Ministry recently reported that at the beginning of 2023 oil sales revenues had decreased by 60% compared to March 2022. As we know, gas and oil are the vital sources, the material basis of Putin’s power.
The war is eroding them, despite the Kremlin’s effort to replace nearby European markets with Chinese and Indian ones. On 5 December 2022, the European Union banned the import of crude oil by ship and on 5 February 2023 the purchase of petroleum products. Two measures which are evidently starting to produce results, as actually recognized by Vladimir Putin himself yesterday. In February, the price of Russian crude was 52.5 dollars a barrel, 30 dollars less than the global market average. Objectively, the 27 EU countries could not immediately cancel gas supplies; however, they agreed on a ceiling on the price which affected the revenues of the Russians.
Without supplies
A couple more numbers to complete the picture. There has been a lot of discussion about semiconductors in recent monthsa crucial component for assembling a myriad of electronic products for both civilian and military use. Before the aggression against Ukraine, 90% of Russian needs were covered by Western supplies. The sanctions have forced the Moscow government to look elsewhere, especially in China. However, according to data circulating in Washington and Brussels, the import of semiconductors has dropped by 74% in one year.
Gloomy prospects
Last element: monetary reserves, i.e. the state resources to be put in place to deal with economic or financial crises. Before February 24 they amounted to 640 billion dollars. Today they have dropped to 580 billion, but 300 of these have been “frozen” by foreign authorities. Therefore, 280 remain: one third in gold, one third in Chinese currency and only the last part, about 100 billion, easily spendable on world markets.
Summing up, the profile of a country with rather gloomy economic prospects emerges. So far, Putin has managed to mask the difficulties now visible on the horizon. Trade relations with China, India and other states outside the American and European perimeters limited the fall in gross domestic product to 2.1% in 2022, compared to forecasts that went up to -15%. The Wall Street Journal writes that the war industry has supported the GDP, but government spending on weapons has caused a state deficit of 34 billion dollars (1.5% of GDP) only in the first two months of 2023.
Secondary channels
Beware, though: the West has not yet won the war of sanctions. In recent weeks, the accusations against him have multiplied Countries that agree to buy goods from US and EU companies and then turn them over to Moscow. The list includes the “usual suspects”: China, of course, then Turkey, Armenia, Kazakhstan, Kyrgyzstan, United Arab Emirates and others. The governments of these states deny the allegations. But the EU special envoy for sanctions, David O’Sullivan, points out that the Ukrainians have recovered 770 European-made components in Russian military vehicles. It is a political minefield. The leaders of the United States and the EU do not want to offend those countries that are looking at the conflict with growing impatience. And the Ukrainian Volodymyr Zelensky calls for greater controls on Western companies that do everything in order not to give up on Russian customers.