Oorlog in Oekraīne #414 16 Gezellig liedjes zingen aan het front

foreignpolicy.com
Actually, the Russian Economy Is Imploding
Jeffrey Sonnenfeld, Steven Tian
14-18 minuten

Five months into the Russian invasion of Ukraine, there remains a startling lack of understanding by many Western policymakers and commentators of the economic dimensions of President Vladimir Putin’s invasion and what it has meant for Russia’s economic positioning both domestically and globally.

Far from being ineffective or disappointing, as many have argued, international sanctions and voluntary business retreats have exerted a devastating effect over Russia’s economy. The deteriorating economy has served as a powerful if underappreciated complement to the deteriorating political landscape facing Putin.

That these misunderstandings persist is not entirely surprising given the lack of available economic data. In fact, many of the excessively sanguine Russian economic analyses, forecasts, and projections that have proliferated in recent months share a crucial methodological flaw: These analyses draw most, if not all, of their underlying evidence from periodic economic releases by the Russian government itself. Numbers released by the Kremlin have long been held to be largely if not always credible, but there are certain problems.

First, the Kremlin’s economic releases are becoming increasingly cherry-picked—partial and incomplete, selectively tossing out unfavorable metrics. The Russian government has progressively withheld an increasing number of key statistics that, prior to the war, were updated on a monthly basis, including all foreign trade data. Among these are statistics relating to exports and imports, particularly with Europe; oil and gas monthly output data; commodity export quantities; capital inflows and outflows; financial statements of major companies, which used to be released on a mandatory basis by companies themselves; central bank monetary base data; foreign direct investment data; lending and loan origination data; and other data related to the availability of credit. Even Rosaviatsiya, the federal air transport agency, abruptly ceased publishing data on airline and airport passenger volumes.

Since the Kremlin stopped releasing updated numbers, constraining the availability of economic data for researchers to draw upon, many excessively rosy economic forecasts have irrationally extrapolated economic releases from the early days of the invasion, when sanctions and the business retreat had not taken full effect. Even those favorable statistics that have been released are dubious, given the political pressure the Kremlin has exerted to corrupt statistical integrity.

Mindful of the dangers of accepting Kremlin statistics at face value, our team of experts, using private Russian-language and direct data sources including high-frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data, have released one of the first comprehensive economic analyses measuring Russian current economic activity five months into the invasion, with contributions from Franek Sokolowski, Michal Wyrebkowski, Mateusz Kasprowicz, Michal Boron, Yash Bhansali, and Ryan Vakil. From our analysis, it becomes clear: Business retreats and sanctions are crushing the Russian economy in the short term and the long term. Based on our research, we are able to challenge nine widely held but misleading myths about Russia’s supposed economic resilience.
Myth 1: Russia can redirect its gas exports and sell to Asia in lieu of Europe.

This is one of Putin’s favorite and most misleading talking points, doubling down on a much-hyped pivot to the east. But natural gas is not a fungible export for Russia. Less than 10 percent of Russia’s gas capacity is liquefied natural gas, so Russian gas exports remain reliant on a system of fixed pipelines carrying piped gas. The vast majority of Russia’s pipelines flow toward Europe; those pipelines, which originate in western Russia, are not connectable to a separate nascent network of pipelines that link Eastern Siberia to Asia, which contains only 10 percent of the capacity of the European pipeline network. Indeed, the 16.5 billion cubic meters of gas exported by Russia to China last year represented less than 10 percent of the 170 billion cubic meters of natural gas sent by Russia to Europe.

Long-planned Asian pipeline projects currently under construction are still years away from becoming operational, much less hastily initiated new projects, and financing of these costly gas pipeline projects also now puts Russia at a significant disadvantage.

Overall, Russia needs world markets far more than the world needs Russian supplies; Europe received 83 percent of Russian gas exports but drew only 46 percent of its own supply from Russia in 2021. With limited pipeline connectivity to Asia, more Russian gas stays in the ground; indeed, the Russian state energy company Gazprom’s published data shows production is already down more than 35 percent year-on-year this month. For all Putin’s energy blackmail of Europe, he is doing so at significant financial cost to his own coffers.

Read More
A currency exchange office in Moscow
A currency exchange office in Moscow
Why Russia’s Economy Is Holding On

With oil exports strong in April, Putin avoids economic ruin while hammering Ukraine.
A woman walks past a currency exchange office in central Moscow.
A woman walks past a currency exchange office in central Moscow.
The Fall and Rise of the Russian Ruble

Western sanctions ravaged the ruble after Putin’s invasion of Ukraine. How did the currency bounce back?
Myth 2: Since oil is more fungible than gas, Putin can just sell more to Asia.

Russian oil exports now also reflect Putin’s diminished economic and geopolitical clout. Recognizing that Russia has nowhere else to turn, and mindful that they have more purchasing options than Russia has buyers, China and India are driving an unprecedented approximately $35 discount on Russian Urals oil purchases, even though the historical spread has never ranged beyond $5—not even during the 2014 Crimean crisis—and at times Russian oil has actually sold at a premium to Brent and WTI oil. Furthermore, it takes Russian oil tankers an average of 35 days to reach East Asia, versus two to seven days to reach Europe, which is why historically only 39 percent of Russian oil has gone to Asia versus the 53 percent destined for Europe.

This margin pressure is felt keenly by Russia, as it remains a relatively high-cost producer relative to the other major oil producers, with some of the highest break-evens of any producing country. The Russian upstream industry has also long been reliant on Western technology, which combined with the loss of both Russia’s erstwhile primary market and Russia’s diminished economic clout leads to even the Russian energy ministry revising its projections of long-term oil output downward. There is no doubt that, as many energy experts predicted, Russia is losing its status as an energy superpower, with an irrevocable deterioration in its strategic economic positioning as an erstwhile reliable supplier of commodities.
Myth 3: Russia is making up for lost Western businesses and imports by replacing them with imports from Asia.

Imports play an important role within Russia’s domestic economy, consisting of about 20 percent of Russian GDP, and, despite Putin’s bellicose delusions of total self-sufficiency, the country needs crucial inputs, parts, and technology from hesitant trade partners. Despite some lingering supply chain leakiness, Russian imports have collapsed by over 50 percent in recent months.

China has not moved into the Russian market to the extent that many feared; in fact, according to the most recent monthly releases from the Chinese General Administration of Customs, Chinese exports to Russia plummeted by more than 50 percent from the start of the year to April, falling from over $8.1 billion monthly to $3.8 billion. Considering China exports seven times as much to the United States than Russia, it appears that even Chinese companies are more concerned about running afoul of U.S. sanctions than of losing marginal positions in the Russian market, reflecting Russia’s weak economic hand with its global trade partners.
Myth 4: Russian domestic consumption and consumer health remain strong.

Some of the sectors most dependent on international supply chains have been hit with debilitating inflation around 40-60 percent—on extremely low sales volumes. For example, foreign car sales in Russia fell by an average of 95 percent across major car companies, with sales ground to a complete halt.

Amid supply shortages, soaring prices, and fading consumer sentiment, it is hardly surprising that Russian Purchasing Managers’ Index readings—which capture how purchasing managers are viewing the economy—have plunged, particularly for new orders, alongside plunges in consumer spending and retail sales data by around 20 percent year-over-year. Other readings of high-frequency data such as e-commerce sales within Yandex and same-store traffic at retail sites across Moscow reinforce steep declines in consumer spending and sales, no matter what the Kremlin says.
Myth 5: Global businesses have not really pulled out of Russia, and business, capital, and talent flight from Russia are overstated.

Global businesses represent around 12 percent of Russia’s workforce (5 million workers), and, as a result of the business retreat, over 1,000 companies representing around 40 percent of Russia’s GDP have curtailed operations in the country, reversing three decades’ worth of foreign investment and buttressing unprecedented simultaneous capital and talent flight in a mass exodus of 500,000 individuals, many of whom are exactly the highly educated, technically skilled workers Russia cannot afford to lose. Even the mayor of Moscow has acknowledged an expected massive loss of jobs as businesses go through the process of fully exiting.
Myth 6: Putin is running a budget surplus thanks to high energy prices.

Russia is actually on pace to run a budget deficit this year equivalent to 2 percent of GDP, according to its own finance minister—one of the only times the budget has been in deficit in years, despite high energy prices—thanks to Putin’s unsustainable spending spree; on top of dramatic increases in military spending, Putin is resorting to patently unsustainable, dramatic fiscal and monetary intervention, including a laundry list of Kremlin pet projects, all of which have contributed to the money supply nearly doubling in Russia since the invasion began. Putin’s reckless spending is clearly putting Kremlin finances under strain.
Myth 7: Putin has hundreds of billions of dollars in rainy day funds, so the Kremlin’s finances are unlikely to be strained anytime soon.

The most obvious challenge facing Putin’s rainy day funds is the fact that of his around $600 billion in foreign exchange reserves, accumulated from years’ worth of oil and gas revenues, $300 billion is frozen and out of reach with allied countries across the United States, Europe, and Japan restricting access. There have been some calls to seize this $300 billion to finance the reconstruction of Ukraine.

Putin’s remaining foreign exchange reserves are decreasing at an alarming rate, by around $75 billion since the start of the war. Critics point out that official foreign exchange reserves of the central bank technically can only decrease due to international sanctions placed on the central bank, and they suggest that nonsanctioned financial institutions such as Gazprombank could still accumulate such reserves in place of the central bank. While this may be technically true, there is simultaneously no evidence to suggest that Gazprombank is actually accumulating any reserves given sizable strain on its own loan book.

Furthermore, although the finance ministry had planned to reinstate a long-standing Russian budgetary rule that surplus revenue from oil and gas sales should be channeled into the sovereign wealth fund, Putin axed this proposal as well as accompanying guidelines directing how and where the National Wealth Fund can be spent—as Finance Minister Anton Siluanov floated the idea of withdrawing funds from the National Wealth Fund equivalent to a third of the entire fund to pay for this deficit this year. If Russia is running a budget deficit requiring the drawdown of a third of its sovereign wealth fund when oil and gas revenues are still relatively strong, all signs indicate a Kremlin that may be running out of money much faster than conventionally appreciated.
Myth 8: The ruble is the world’s strongest-performing currency this year.

One of Putin’s favorite propaganda talking points, the appreciation of the ruble is an artificial reflection of unprecedented, draconian capital control—which rank among the most restrictive of any in the world. The restrictions make it effectively impossible for any Russian to legally purchase dollars or even access a majority of their dollar deposits, while artificially inflating demand through forced purchases by major exporters—all of which remain largely in place today.

The official exchange rate is misleading, anyhow, as the ruble is, unsurprisingly, trading at dramatically diminished volumes compared to before the invasion on low liquidity. By many reports, much of this erstwhile trading has migrated to unofficial ruble black markets. Even the Bank of Russia has admitted that the exchange rate is a reflection more of government policies and a blunt expression of the country’s trade balance rather than freely tradeable liquid foreign exchange markets.
Myth 9: The implementation of sanctions and business retreats are now largely done, and no more economic pressure is needed.

Russia’s economy has been severely damaged, but the business retreats and sanctions applied against Russia are incomplete. Even with the deterioration in Russia’s exports positioning, it continues to draw too much oil and gas revenue from the sanctions carveout, which sustains Putin’s extravagant domestic spending and obfuscates structural economic weaknesses. The Kyiv School of Economics and Yermak-McFaul International Working Group have led the way in proposing additional sanctions measures across individual sanctions, energy sanctions, and financial sanctions, led by former U.S. Ambassador to Russia Michael McFaul and the experts Tymofiy Mylovanov, Nataliia Shapoval, and Andriy Boytsun. Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia.

Defeatist headlines arguing that Russia’s economy has bounced back are simply not factual—the facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.

TweedeKlum	zaterdag 23 juli 2022 @ 11:54
	Twitter: Latest updates \| Volodymyr Zelensky \| Ukraine gov \| Ministry of Defence UK \| Illia Ponomarenko \| Kamil Galeev \| Christo Grozev \| Ukraine Weapons Tracker \| KyivPost \| NEXTA \| BNO News \| WorldOnAlert \| Shaun Walker \| Michael Kofman \| Michael A. Horowitz \| Nathan Ruser \| Rob Lee \| TpyxaNews \| Dmitri \| UkrInform Newssites: Geenstijl \| Nu.nl \| Al Jazeera \| BBC News \| Washington Post \| NY Times \| Guardian \| Pravda \| Oryxspioenkop Wikipedia: 2022 Russian invasion of Ukraine \| Russo-Ukrainian War \| Current Events Daily Summary: MilitaryLand Maps: Deepstate \| ScribbleMaps \| Liveuamap \| FlightRadar24 Reddit: Ukraine \| UkraineConflict \| Worldnews \| WorldNews Live \| UkraineWarReports \| CombatFootage \| CredibleDefense \| LessCredibleDefence Quora: Ukraine \| Battle for Ukraine \| Truth About Russia \| Russian Bear \| Roland Bartetzko Youtube: Crux \| Zolkin Volodymyr \|1420 \| Perun \| Caspian Report \| Task and Purpose Filmpjes: Tiktok \| Funker530 \| Russoldat \| Fok memes en spotprenten SPOILER
Joppiez	zaterdag 23 juli 2022 @ 11:56
	Rusland bombardeert weer de haven van Odessa. Afspraken van gisteren zijn dus niks waard, maar dit wist iedereen stiekem toch al
over_hedge	zaterdag 23 juli 2022 @ 11:59
	quote: Op zaterdag 23 juli 2022 11:56 schreef Joppiez het volgende: Rusland bombardeert weer de haven van Odessa. Afspraken van gisteren zijn dus niks waard, maar dit wist iedereen stiekem toch al bron?
ExTec	zaterdag 23 juli 2022 @ 12:00
	quote: Op zaterdag 23 juli 2022 11:54 schreef sp3c het volgende: [..] Laten we het in het midden houden Het is de (False) Balance fallacy. https://rationalwiki.org/wiki/Balance_fallacy Zal ongetwijfeld enige kern van waarheid inzitten, als je het hebt over de body count ofzo, Maar aan de ene kant heb je een agressieve imperialist, en aan de andere kant heb je een land wat gewoon om niks aangevallen werd. En die waarheid ligt nu eenmaal niet in het midden.
ExTec	zaterdag 23 juli 2022 @ 12:02
	quote: Op zaterdag 23 juli 2022 11:59 schreef over_hedge het volgende: [..] bron? Welke bron is acceptabel voor je?
over_hedge	zaterdag 23 juli 2022 @ 12:03
	quote: Op zaterdag 23 juli 2022 12:02 schreef ExTec het volgende: [..] Welke bron is acceptabel voor je? Facebook. Zou zeggen plaats de bron waar je het vandaan hebt. En dan kan ik altijd besluiten of ik die bron wel of niet vertrouw
polderturk	zaterdag 23 juli 2022 @ 12:03
	quote: Op zaterdag 23 juli 2022 11:56 schreef Joppiez het volgende: Rusland bombardeert weer de haven van Odessa. Afspraken van gisteren zijn dus niks waard, maar dit wist iedereen stiekem toch al Wat een teringlijers zijn het ook.
sp3c	zaterdag 23 juli 2022 @ 12:05
	quote: Op zaterdag 23 juli 2022 12:00 schreef ExTec het volgende: [..] Het is de (False) Balance fallacy. https://rationalwiki.org/wiki/Balance_fallacy Zal ongetwijfeld enige kern van waarheid inzitten, als je het hebt over de body count ofzo, Het is wat subtieler dan wat de Russen doen maar bayraktar drones die een kruiser afleiden geloof ik ook niets van bv quote: Maar aan de ene kant heb je een agressieve imperialist, en aan de andere kant heb je een land wat gewoon om niks aangevallen werd. En die waarheid ligt nu eenmaal niet in het midden. Nee dat is gewoon feitelijk lijkt me maar dat heeft dan weer niets met propaganda te maken Het is niet alsof je ineens geloofwaardig bent omdat een of andere schurkenstaat raketten op je loopt te schieten
Joppiez	zaterdag 23 juli 2022 @ 12:05
	quote: Op zaterdag 23 juli 2022 11:59 schreef over_hedge het volgende: [..] bron? liveuamap.com
ExTec	zaterdag 23 juli 2022 @ 12:05
	quote: Op zaterdag 23 juli 2022 12:03 schreef over_hedge het volgende: [..] Facebook. Zou zeggen plaats de bron waar je het vandaan hebt. En dan kan ik altijd besluiten of ik die bron wel of niet vertrouw Op twitter melden UA media het. Op https://liveuamap.com/ kun je het ook zien.
ipa84	zaterdag 23 juli 2022 @ 12:08
	Mood over dit topic af en toe. Hoe sommige hier denken.
miss_sly	zaterdag 23 juli 2022 @ 12:08
	quote: Op zaterdag 23 juli 2022 12:03 schreef over_hedge het volgende: [..] Facebook. Zou zeggen plaats de bron waar je het vandaan hebt. En dan kan ik altijd besluiten of ik die bron wel of niet vertrouw En gewoon de NOS ook: https://nos.nl/artikel/24(...)-over-graantransport
polderturk	zaterdag 23 juli 2022 @ 12:10
	4 kinderen gedood bij Russische luchtaanval op Idlib. Dit is wat Rusland het beste doet. Klik op de link voor de video. twitter
Candymannetje	zaterdag 23 juli 2022 @ 12:13
	quote: Op zaterdag 23 juli 2022 12:08 schreef miss_sly het volgende: [..] En gewoon de NOS ook: https://nos.nl/artikel/24(...)-over-graantransport Ik dacht gisteren gelezen te hebben dat Rusland zou hebben beloofd om niet vanuit de zee op Odessa te gaan schieten. Om het dan vanuit de lucht alsnog te doen lijkt me typisch iets voor Rusland.
ExTec	zaterdag 23 juli 2022 @ 12:17
	Over Visokopillia: https://deepstatemap.live/en#11.25/47.4899/33.5407 Omcirkeling is niet compleet, maar het schijnt wel dat het kwart dat niet omcirkelt is, ruim in bereik van artillerie is. Dus er uit proberen te komen, granaten op je hoofd. Dan is het feitelijk zo goed als een omcirkeling.
EinarBoe	zaterdag 23 juli 2022 @ 12:19
	quote: Op zaterdag 23 juli 2022 11:56 schreef Joppiez het volgende: Rusland bombardeert weer de haven van Odessa. Afspraken van gisteren zijn dus niks waard, maar dit wist iedereen stiekem toch al Gelukkig zijn er hier genoeg mensen die zeggen dat het de schuld van het Westen is en dat er juist met Rusland onderhandeld moet worden!
ExTec	zaterdag 23 juli 2022 @ 12:23
	quote: Op zaterdag 23 juli 2022 12:19 schreef EinarBoe het volgende: [..] Gelukkig zijn er hier genoeg mensen die zeggen dat het de schuld van het Westen is en dat er juist met Rusland onderhandeld moet worden! De categorie: mensen die zich niet informeren, compleet arbitrair hun vinger in de lucht steken, en pontificeren: "Het is niet waar", is de laatste dagen ook in opkomst
RamboDirk	zaterdag 23 juli 2022 @ 12:24
	quote: Op zaterdag 23 juli 2022 12:19 schreef EinarBoe het volgende: [..] Gelukkig zijn er hier genoeg mensen die zeggen dat het de schuld van het Westen is en dat er juist met Rusland onderhandeld moet worden! Van die zelfhaat, zelfde soort mensen die met een vlag op de kop staan te zwaaien of zo'n zakdoek hebben maar helemaal 0 met de agrarische sector van doen hebben. wappies
Joppiez	zaterdag 23 juli 2022 @ 12:27
	quote: Op zaterdag 23 juli 2022 12:19 schreef EinarBoe het volgende: [..] Gelukkig zijn er hier genoeg mensen die zeggen dat het de schuld van het Westen is en dat er juist met Rusland onderhandeld moet worden! Zonder capitulatie van Oekraine is haar enige kans een bloedige uitputtingsslag met miljoenen doden aan beide zeiden en Rusland zo veel als mogelijk in de miserie als gevolg van deze oorlog mee te slepen. Zo lang Rusland ook maar een kans ruikt meer grondgebied te veroveren heeft praten toch geen zin.
miss_sly	zaterdag 23 juli 2022 @ 12:28
	quote: Op zaterdag 23 juli 2022 12:13 schreef Candymannetje het volgende: [..] Ik dacht gisteren gelezen te hebben dat Rusland zou hebben beloofd om niet vanuit de zee op Odessa te gaan schieten. Om het dan vanuit de lucht alsnog te doen lijkt me typisch iets voor Rusland. Dan houden ze zich in ieder geval aan de afspraak.