Western countries’ sanctions following the invasion of Ukraine have made it impossible for Russia to import the things it needs. Foreign investors are staying away from Moscow, the country’s elite have emigrated in their thousands, and the price of the country’s main export commodity, oil, has plummeted. What President Vladimir Putin’s war has achieved at the moment is isolating his country. The great decoupling of its economy will accelerate in 2023 as Moscow converges with North Korea’s economic model.
The invasion of Ukraine has hurt Russia, which is heavily dependent on oil and gas exports. Though high prices helped the country in early 2022, the rest of the world adjusted quickly, adjusting supplies and in some cases, like the United States, increasing exports. The price of Russia’s Ural crude has already fallen 40% since peaking in March 2022, and Russia may now lack the resources to cushion the blow that the recession has dealt its population.
Consequently, the Russian economy will suffer. In October 2021, the International Monetary Fund (IMF) forecast growth of 2% in 2023. Now the panel sees GDP falling by 2.4% after losing 3% in 2022. Based on the ruble exchange rate in 2021, this corresponds to a GDP loss of about 200,000 million.
This will further aggravate the already deteriorating financial situation. Spending increased by more than 20% in 2022, largely due to increased funds for the war, estimated at around $53 billion by economists at the Bank of Finland. And the Russian government has been forced to intervene in a reserve fund to cover its first budget deficit in years. With each passing month it becomes more difficult to maintain the ruble’s convertibility against other international currencies.
greater control
Putin has already tightened his and the government’s grip on the economy, calling for the sale of Western companies’ assets in the banking and energy sectors. State-owned companies or banks, but also pro-Kremlin oligarchs like the nickel magnate Vladimir Potanin have already bought up bank and industrial facilities at greatly reduced prices, and the trend is rising.
Far from the scrutiny of foreign investors, Russian companies are free to take the widespread corruption that has held back the economy for years to new heights. And Putin will be able to do the job of shaping a regime where no one can replace him, with oil he can’t sell and rubles he can’t spend.
MORE INFORMATION: BREAKINGVIEWS.Portal.COM. The authors are columnists for Portal Breakingviews. opinions are yours. The translation is the responsibility of EL PAÍS
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