The severe sanctions issued in response to the Ukraine invasion last February were meant to break out Russia‘s economy. However, with only half of the countries following through, reality has become more complicated. Benefactors such as Türkiye, Kazakhstan, India, and China are now providing an exchange for restricted goods that Russia desperately needs – all at a low cost.
Last September, Russia saw an unprecedented rise in dollar imports compared to what was observed in 2019. Not only that, friendly countries worldwide have been purchasing a vast amount of raw materials from Russia – at remarkably discounted rates – previously sent to Europe.
This Is How Russia Manages to Get Out of an Economic Catastrophe
Through this action, the Kremlin managed to dodge an economic catastrophe. Contrary to what many economists had predicted in the spring, Russia‘s GDP dropped by merely 2.2 percent last year—clearly not enough for Putin’s war activities to be put on hold. Surprisingly, unemployment has stayed low despite people taking pay cuts and real estate prices remaining level, but no crash is visible as of yet, either.
Although consumer spending may be slowing the economy, it is not having a huge effect. In 2023, the IMF predicts 0.3 percent growth of Russia – slightly less than that of Great Britain and Germany but better economic performance than in comparison to the EU as a whole.
Predatory Capitalism Continues at Full Speed
The seclusion of the Russian economy presents a rare chance for individuals to amass wealth rapidly. Before the war, American and European businesses possessed around $350 billion in direct investments there. The government has now released an edict requiring Western companies wanting to pull away their financial interests from Russia to get approval first.
Due to corrupt practices, companies are forced to sell their assets at artificially low prices determined by the government. This has created an unsavory system that allows opportunistic Russians and Westerners with strong political connections to acquire businesses for a fraction of what they’re worth. An industrialist from the West who is aiding multiple European firms in exiting Russia says this phenomenon is rampant.
Russia Is Trying To Find New Markets
Without any doubt, the Kremlin is hell-bent on militarizing their economy. In October, they formed a collaborative council that facilitates cooperation between state and industry leaders. Nevertheless, it has become increasingly difficult to source money for such projects as Europe has stepped away from Russian hydrocarbons – this void left in its wake makes it necessary to sell discounted products at other markets like Türkiye, India, and China (although reports suggest discounts are much smaller than previously stated).
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