Russia suffered some military defeats in Ukraine. But the war also has severe consequences in the country – especially economically.
Moscow – The Ukraine conflict has escalated for almost ten months. While European states such as Germany struggled to supply arms to Ukraine, it quickly became a consensus that sanctions against the Kremlin had to be introduced. Even Russian President Vladimir Putin had to admit the severity of the sanctions. In a speech, the head of the Kremlin said: “We must decide more quickly on the issues of supplying the special operation and measures against sanctions, which are undoubtedly stronger than ever.”
Ukraine war: “All the facts” point to a recession in Russia
Current indicators point to a deep recession in Russia. According to the Washington Post Tax revenues outside of the oil and gas sector fell by 20 percent compared to the previous year. According to Russian data, retail sales fell by ten percent, while goods handling shrank by seven percent.
“All the facts show that there is a very big decline in the Russian economy,” says Vladimir Milov. He was once Russia’s deputy energy minister and now an exiled opposition politician: “The spiral is escalating and now there is no way out.”
Russia’s Economy: The war in Ukraine is hitting the Russian economy hard
Against the background that Putin has probably sent around 300,000 soldiers to Ukraine, the workforce in Russia has of course fallen. Also joining the soldiers in Ukraine is an unknown number of Russians who have fled the country. In addition, Russia is hit by sanctions from the EU and other countries such as the USA. These include, for example, the ban on technology imports. In addition, resource exports from Russia are also declining. The EU is expected to impose an embargo on Russian oil from December 5th. Exports are also declining, not least because of several unexplained turbulences surrounding Russian pipelines.
Ukraine war: “GDP no longer matters”
The Russian side is sticking to the narrative of an economy that is not influenced beyond measure. Although the gross domestic product will decline, it is not a threatening decline. Milow classifies Russia’s position and explains why the situation is actually much more dangerous for Moscow than the Kremlin is portraying:
“GDP doesn’t matter anymore because we don’t really know what the ruble is worth anymore. In addition, GDP also understands a tank that is sent to the front and destroyed immediately as valuable.”
Ukraine war: Putin’s partial mobilization
Another blow for companies in Russia was the announcement of partial mobilization: “For many Russian companies, the war became more important at this point,” Janis Kluge from the German Institute for Security and International Affairs analyzes how the Washington Post reported. “It became clear that the war could go on for a long time. For this reason, expectations deteriorated enormously.”
At present, it also seems to be the case in Russia that companies are being forced to focus their production on the war in Ukraine. They then have to sell some of the products to the Russian government at spot prices. This will further limit the productivity of the Russian economy. (LP)
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