The impact of Western sanctions on the Russian economy is far greater than official figures show, according to a Yale University study, which also highlights that a “pivot to China” seems unrealistic.
“A common narrative has emerged,” say the authors of this study: the economic sanctions imposed by Western countries against Russia since the invasion of Ukraine, have created “a ‘war of economic attrition that is wreaking havoc in the West,’ given the alleged ‘resilience’ and even ‘prosperity’ of the Russian economy”. “It’s just untrue,” say these Yale School of Management experts, decrying “selected statistics” by Russian President Vladimir Putin.
However, according to his analysis, “company exits and sanctions cripple the Russian economy, in the short and long term.” Economic sanctions therefore deter many companies and countries from continuing to trade with Russia. And the country struggles to obtain spare parts and raw materials, or to obtain certain essential technologies. The outlook is bleak: “Despite illusions of self-sufficiency and import substitution (…), Russian domestic production has come to a complete standstill and does not have the capacity to replace lost companies, products and talents.”
“Unsustainable budgetary and monetary intervention”
The companies that have left the country “represent around 40% of its GDP, nullifying almost all of the three decades of foreign investment,” the authors of this survey also argue. To overcome these weaknesses, Vladimir Putin “is resorting to unsustainable budgetary and monetary intervention,” and the Kremlin’s finances “are in a much more dire straits than admitted.” As for the “pivot to China” desired by Vladimir Putin, it could be based on “unrealistically optimistic assumptions.”
“Russia represents a minor trading partner for China, (…) and most Chinese companies cannot risk violating US sanctions,” describe the authors of the study. They also point out that Chinese companies “lack many upstream technologies necessary to maintain and maintain Russian oil and gas supplies,” they detail.
According to the International Monetary Fund, Russia is doing better than expected this year, with an expected 6.0% GDP recession in 2022, according to its latest forecast published on Tuesday, well below the 8.5% slump that the organization expected in April. . But the recession in 2023 should be stronger than expected (3.5% instead of 4.7%).
Source: BFM TV
