DISINFO: Russian economy thrives despite EU sanctions
SUMMARY
The EU's anti-Russian sanctions, as it turns out, have not achieved the expected effect, and may ultimately cause more harm to the Europeans themselves.
The Russian economy is growing due to increased arms production. Experts hope that sanctions will act as a slow poison in the long term. However, assessing the current situation, we can say that the Western sanctions policy has failed
RESPONSE
Pro-Kremlin narrative against EU sanctions using western voices long-time opposed to the EU sanctions policy.
The article contains an axiom and an observation. The axiom advocated by the author is that sanctions against Russia cannot have any effect in the medium and long term and can only have effect in the short term. The observation is that Russian economic growth proves that that they have no effect in the short term. Both the axiom and the observation are wrong, experience shows that sanctions have effect in the long term if they are correctly enforced; they might have a disorganisation effect in the very short term but soon mechanisms of bypass and subsidized substitutions. In the long term, if the enforcement is correct, the adaptation mechanisms are too costly.
The observation of an alleged strong growth of the Russian economy is also incorrect. The forecast economic figures by the IMF and world bank in countries facing changing environments has proven in the past unable to predict crisis. Moreover, the combination of ruble non-convertible status and strong inflation means for the growth of the economy a “mere stagnation”.
It cannot be said that Russian economy flourishes. The GDP figure might increase in value as the last liquid reserves are injected in the military sector, as valuation of military weapons is higher than consumer goods. But it masks a reality where there are massive shortages. Massive public spending creates a distortion in the economy and postpones the horizon of when the inflation can get contained. The very low level of direct foreign Investment (FDI) is a further indicator of the unattractive form of the Russian economy.
The Russian National Wealth Fund, that was created to help the country in difficult times as of 1 July 2024, the liquid part amounted to 4.603 trillion rubles ($52.53 bln). As of 1 February 2022, As of February 1, the National Wealth Fund amounted to 9.73 trillion rubles ($116.5 bln). It fell by 55% since the beginning of the 2022 invasion of Ukraine.
The total valuation of the fund however was more stable (-18%), because liquid assets were replaced with participations in Russian corporations which valuations are difficult to assess or do not correspond to market prices.
Ministers of 8 EU countries denounced the massive lies about the Russian economy, while a “resovietisation” is occurring.
What could be perceived and mistaken as a “boost” to Russian growth is, in fact, the beginning of a re-Sovietisation of the economy.
Many of the hallmarks are there: far-reaching market controls, heavy public spending financed by expropriation of private assets, and a reorientation of the economy towards the war industry, with a total disregard for the social and economic wellbeing of the population. History clearly shows that this is not a successful long-term strategy. The short-term overheating of the economy, fuelled by heavy investments in the war industry and very limited access to technology, will likely hinder productivity gains and result in stagnation of the private sector, even more rampant inflation and increasing pressure on Russian households.
In July 2024, residents in the southern Russian city of Krasnodar demonstrated against electricity cuts and water supply interruptions due to a power grid failure amid record-high temperatures. Public protests are uncommon in Russia as demonstrators might face heavy political charges. In winter time similar situation occurred with the heating system. The situation results from a combination of lower budgets for maintenance as the priority is the war in Ukraine, lower human resources as technicians lacks, and lower access to foreign technologies.
Read also many similar cases such as: Russia grows despite EU sanctions, or Sanctions against Russia leading to opposite result than intended, or The sanctions policy is inefficient, or Borrell admitted that sanctions against Russia do not work, or Russian economy grows despite sanctions, or Russia’s economy is massively outperforming that of the collective West or Sanctions against Russia hurt Europe and help Russia.