It was six months ago. Gathered in Versailles (Yvelines), on March 10 and 11, 2022, several European leaders said they were “ready to adopt other sanctions” against Russia, after two sets of measures adopted in retaliation for the invasion of Ukraine by the troops of Vladimir Putin. Several far-right parties are protesting vigorously against the proliferation of sanctions since: for the Italian Matteo Salvini (League) or the French Marine Le Pen (RN)we must reconsider these measures inflicted on Russia.
According to them, they would weaken the wallets of the Europeans, collateral victims of the reprisals, but they would also have only a very weak impact on the Russian economy, which was to “collapse”, to use the words of the Minister of the Economy Bruno Le Maire, at the beginning of March. This was, in any case, the claimed objective of the limitations on access to the various European markets, the exclusion of many banks from the Swift banking system and other restrictions adopted in seven parts.
“We see today that the energy sanctions taken against Russia are much more painful for the French people than for Russia, which is now drowned in cash”, thus criticized Jordan Bardella, acting president of the RN, Monday, September 5. But has the Kremlin really won its economic showdown with the EU by limiting the impact of these sanctions on Russian finances, industries and households?
The Russian government continues to put forward a handful of good indicators. Backed by the increasingly interventionist state, the local currency, the rouble, has risen sharply since April, after a trough in March, to stabilize at a higher level than before the war. This is the consequence of strong external demand for this currency to pay much higher energy bills than last winter, despite hydrocarbon deliveries which are fading. “Higher prices partially offset declines in export volumes.”, explains Catherine Locatelli, researcher at the CNRS and specialist in energy industries and Russia. According to a report (in English) from the Center for research on energy and clear air (Crea), a think tank, taxes on hydrocarbons have brought in 43 billion euros to the Russian state over the last six months.
At the end of July, the IMF adjusted its growth forecast for Russia in 2022 upwards, from -8.5% forecast in April to -6%. In terms of employment, the unemployment rate was only 3.9% in July, the lowest rate ever measured by Rosstat, the Russian statistics institute. “We believe that the peak of the situation has passed”rejoiced the Russian president, Wednesday, September 7, from Vladivostok.
“The situation is normalizing.”
Vladimir Poutineat the Eastern Economic Forum
On the form, several Western analyzes and reports call into question the veracity of the elements encrypted by Moscow. “Economic statistics are one of the elements of the information war that Russia is waging”recalls Julien Vercueil, professor of economics at Inalco, in Paris. “Don’t believe them”sweeps Agathe Demarais, director of global forecasts at the Economist Intelligence Unit. “We could rely on it until recently, but now the statistics are released in dribs and drabs, when they are not too bad.”
The economist takes the example of the unemployment rate, close to full employment. “It is not surprising to have an unemployment rate of 3.9%, because companies do not lay off their employees but simply stop paying them. There is a real impoverishment of the Russians”she assures. “Given its demographic evolution, Russia can destroy jobs while reducing unemployment. As always, Rosstat data must be confronted with field surveys by research organizations to try to circumvent the biases”supports Julien Vercueil.
“Statistics selected by Vladimir Putin are recklessly used by negligent experts to make predictions that are unrealistically favorable to the Kremlin”extend researchers from the American University of Yale, authors of an alarming study (in English), at the end of July, on the state of the Russian economy. According to them, the approximately 1,000 multinationals that have left Russian soil represent “about 40% of Russian GDP”. Their departure will lead to a lasting decline in the wealth produced in the country, even if Moscow tries to offer alternatives to Western products.
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Other figures qualify, even contradict, the public declarations of Russian officials. According to official statistics from the Rosstat Institute, the inflation rate is already 15% over one year and reaches more than 40% for products such as pasta and rice. “The economy is resisting, but it is deeply destabilized”summarizes Julien Vercueil.
In addition, some whole sections of the economy have collapsed, such as car production, which fell 96.7% last May compared to May 2021. “Of course, we are seeing problems in several sectors and regions, in individual companies, in particular those which were linked to supplies from Europe or which supplied their products to Europeans”shyly conceded Vladimir Putin, Wednesday, September 7.
The blow is particularly hard for the hydrocarbons sector, “crucial for Russia”recalls Catherine Locatelli. “It now represents a third of GDP and 50% of tax revenue”supports Agathe Demarais, who believes that these proportions “will surely change in 2022”. “A possible drop in oil and gas revenues is a sword of Damocles for Russia”insists Julien Vercueil.
So much for the picture painted so far by the experts. In the longer term, the impact of the measures taken against Russia should even worsen, as suggested by Catherine Colonna on Monday 5 September. “The sanctions are working and will have more and more effect as we reduce our dependence on Russian hydrocarbons, [au] gas, after having done it for coal”, defended the Minister of Foreign Affairs on RTL. An observation shared by Agathe Demarais.
“The outlook for the Russian economy is not good for 2023.”
Agathe Demarais, economistat franceinfo
The Russian administration itself foresees a deterioration of the economy in the years to come. This is what emerges from the report of Russian experts revealed, Monday, September 5, by the American media Bloomberg (in English). Produced at the end of August at the request of the Kremlin, this confidential document describes an economy in a much more worrying state than the official discourse suggests.
According to this report, the consequences of the European sanctions are vast: weak growth, sluggish imports due to sluggish domestic demand, difficulty in supplying semiconductors for the missiles used in Ukraine, brain drain with up to 200 000 computer specialists emigrated from Russia by 2025… “Access to technology will be much more complicated”anticipates Agathe Demarais. In addition, the gas cut from Russia to Europe could cause Russian finances to lose up to 6.7 billion euros per year in tax revenue.
Can a rapprochement of Russia with other Eastern powers, such as China and India, mitigate the impact of sanctions? “The pivot to Asia is very complicated, especially for what are called non-fungible exports, i.e. which depend on very heavy infrastructure such as piped gas”explains to franceinfo Christine Dugoin-Clément, analyst at the Paris-Sorbonne Business School. “China certainly takes Russian gas via pipelines and in liquefied natural gas (LNG), but these are not quantities capable of compensating what Russia was delivering to Europe”abounds Catherine Locatelli.
For Russia, “the future will be difficult in the medium and long term”, insists the specialist. With a staggering cost of around 100 billion euros for the first six months of the war, according to the Crea, the conflict risks accentuating the tension on the Russian economy, which is increasingly isolated from the Western world and solicited by the war effort.“The fact that Russia is going to get supplies in equipment, according to certain Western intelligence services, from countries under sanctions, such as North Korea, is a sign of a growing difficulty in producing locally, which is however the traditional trademark of the Russian military-industrial complex”assures Julien Vercueil.
In this context, Vladimir Putin may be playing all out by stopping gas deliveries to Europeans, who are turning away from Russian hydrocarbons in pain. “The Russians know that it is now or never that they must act to penalize the EUanalyzes Agathe Demarais. It’s a scorched earth strategy.”