When the war started it was seizure-this and sanction-that. I’ve read that $350B in Russian assets were seized and held, while major companies exited the Russian market, the ruble crashed, and inflation rocketed.
Meanwhile the cost of the Russian war must be astronomical to maintain, imports/exports have halted with Europe, there’s no financial aid to Russia (that I’m aware of) and multi-billion dollar resource supplies were cancelled.
All this, and Russia seems to still be having a good old time. Russians are on holidays en mass, the country is buying up arms and fossil fuels like its church Sunday, and their war machine still powers away and is prepared to keep fighting for a decade it has to.
How? How does a country take that much of a financial beating and still be thriving? Where is the point of being broke and not being able to find a war anymore?
An economics student from Russia here, here’s my perspective.
First, is that a country’s economy is a lot less volatile than we expected. There is also another factor that played into it. During covid, Russian companies amassed a sizable amount of inventory that was already inflated compared to European companies due to how volatile our economy is. This has given them enough time to reroute supply chains once sanctions hit.
Basically, the so-called “grey import” plays a major role in assuring the stability of our economy. Companies either route their import/export through neighboring countries or through affiliated companies.
Second is the competency of our central bank. After most of the major banks were cut off from SWIFT (used for international transactions), they raised the key rate, limited the amount of money you can cash out at one time, and did some other stuff. Higher key rate = higher deposit interest rate, but at the same time, credit became more expensive. All of this was needed for preventing banks from defaulting. Once panic died down, the changes were reverted. Now, they’re dealing with inflation.
Lastly, the majority of our budget comes from oil and gas. Since Europe didn’t want to buy it, Russia started selling it to Asia at discounted prices. Quantity of oil/gas sold drastically increased, which mitigated reduced prices and led to a surplus budget. Not to mention that they started pushing on large companies to reduce the amount of dividends and instead re-invest the money.
I wouldn’t call it “thriving,” however. All of this has definitely led to a slowdown in growth, which, as time goes by, will only get worse. But for now it’s fine.
The central bank has been surprisingly competent. But it seems like they’re often trading short term problems for long term ones, so we’ll see how they deal with them.
What do you think of this assessment? You agree, or is William Spaniel missing some stuff? https://youtu.be/ecdxs8Al424
Why Russia isn’t actually collapsing (RealLifeLore on YT)
It’s a bit long and I don’t remember everything, but a good part is that Saudi Arabia reduced their oil production so that the price goes up, and Russia is still selling a lot of oil to China and others
They have a decent source of their own fossil fuels, and certain deals go through non-sanctioned countries to countries that sanctioned Russia.
They have control of their rouble so they can promise soldiers a big payday and stiff the payment when they went “missing”. In particular their ex-con division.
I’m pretty sure their overall stocks of military equipment are dwindling, as you heard a few high-value targets were downed in the last month that are irreplaceable in the medium term. They still have their own production of tanks and ammunition, and China, NK and Iran trade various equipment to them such as drones, missiles, artillery. They are happy to get whatever Russia has left to offer.
Rich Russians will stay rich for the most part but poor Russians will be stuck in their miserable situation.
Yup, 9 just more destroyed A-50’s & Russia is blinded on the battlefield & out $3.3B in materiel
Long term is where things can fall apart. Yeah, currently stuff goes well to Putin, but the moment the Russians realize their emperor is naked, Russia will have a very bad time, with the worst thing that can happen to them is a Balkanization with all of its nastiness.
And that’s why there will be civil wars in RuSSia…
They are still selling literal boat loads of Oil, just not as much to Europe.
They’re still selling it to europe, but because of the sanctions, Russia sells it to India and then India sells it to Europe.
Basically all these sanctions did was add a middle man for Europe making it more expensive but still financially supporting Russia.
they are selling it to countries which then sell it to europe so we just pay more for the same thing but can be happy we do definitely not fund the russian invasion :D :D :D
I mean I’m no expert but the US has only had 17 years of peacetime in its 247 ish years of existence and it’s still going. War can often be profitable though I couldn’t tell you if that’s the case here.
I do know, however, that Russia is a huge oil and gas provider and despite the hand wringing that politicians do over human rights they almost always ignore them when it comes to fossil fuels.
well yeah, but the US had barely any sanctions against it. (unlike russia.) everyone was just like “they helped us in this war. they must be the good guys. let’s import more Fords and Boeings”
I don’t think sanctions really work that well if I’m honest. Cuba has been sanctioned for what 60? 70? years now and while it isn’t exactly a world superpower it’s still here and doing pretty well given the circumstances
This is exactly right - and Russia and the Russian people experienced this lifestyle in the Soviet Union. They are fully prepared to endure it once again…
After all, the elites & sub-elites will still get everything that they want, and the Russian people thesmelves are not doing any worse than folks in third world countries (that’s for sure!) which manage to putter along under their own corrupt oligarchs, rain or shine.
half their economy is oil. the other half’s bleeding out
There are a lot of actions they can take to prop themselves up in the short term.
Nothing they can do about their dying demographics though.
Steal children from the countries you invade. They are doing that.
India has used it as an opportunity to get a lot of cheap oil from them
All of this, plus Putin’s billionaire friends had to either pitch in our suddenly felt out of windows.
Adding to all the reasons already listed, Russia isn’t striving. For example, right now there is a number of towns and cities experiencing outages in central heating (with houses designed around central heating so basically no other option to heat their appartments) while the weather dips to -20°C (around -4°F). All because the centralized boiler facilities weren’t properly maintained due to the lack of money (or, to be more precise, due to money being diverted towards the war).
There are other signs, like plains malfunctioning and flights getting delayed because some component broke and cannot be replaced due to sanctions, and they happen more and more often. Also the less noticeable stuff like prices of common goods increasing by a factor of two in the last couple of years while salaries barely increased at all.
So yeah, Russia is keeping itself afloat, but it isn’t striving at all
Also the less noticeable stuff like prices of common goods increasing
I mean Putin had to apologize for high prices of eggs, that was very noticeable (of course a show to make him seem to care for the common people, which he doesn’t give a f*ck about). https://www.reuters.com/world/europe/putin-rare-apology-over-price-eggs-2023-12-14/
I meant that these things aren’t as noticeable from outside of the country. Like, foreign news outlets probably won’t report on it much. Plus, eggs are more of an exception because of sudden shortage and prices rising rapidly. For most of the other goods the price grows more gradually and isn’t as obvious. Like in that metaphor about slowly boiling a frog.
Another problem that is noticeable from inside the country (at least by those affected by it) is that certain medications are vanishing from the pharmacies because they are no longer imported and they were never produced locally, or the local production is insufficient to meet the needs. I don’t know the full list, but the stock of ADHD meds is definitely low, and I’ve heard from friends that they had to switch to a different antidepressant due to shortages.
By the way, the RuSSians thought that if they could no longer fly to vacation in Europe or the USA, they would be able to vacation in Dubai, but after they bought tickets for the return trip, they could not even (there was news recently) return to RuSSia by plane, because the plane (RuSSian plane) broke down and they, as always, were “stuck” at the airport for several hours, ha-ha
… The way which you wrote this made me think there was a far more dramatic ending than being stuck at an airport for several hours due to mechanical failure.
My brother in Christ, I experienced that in Cleveland…
But I am not sure what you mean at the end - are these guys STILL in Dubai?! You said they were stuk at the airport for several hours… Like… What, they had to stay at the airport to wait for their boat because, as you said, they couldn’t return by plane? … Or they waited several hours at the airport to catch another flight…? What are you saying?
They are technically still on the way, on day 117 of an epic, unplanned, and wholly uncontrolled kite-surfing misadventure.
The neo-Nazi Pootin believed in RuSSian power so much that he ordered the mafia from the Central Bank of the country to once again artificially “freeze” the ruble from falling so that the RuSSian economy would not collapse, HA. Unfortunately, it was a joke.
I can only say from the point of view of sanctions why.
Yes, many normal companies have left RuSSia (unlike, for example, Nestle, Kellogg’s, Mondelez, German Storck, Perfetti Van Melle, Ferrero, P&G and Colgate, which make their products in China, lol), yes, sanctions will put more and more pressure on the RuSSian “economy” over time…
BUT, the sanctions, in my opinion, are “soft” compared to those that the United States, Europe and their partners have imposed on North Korea, Syria and Iran.
I am sure that no one (if we talk about consumer goods at least) from European or American companies can EVEN trade in such third world countries as Iran (with their terrorist government), Syria or North Korea (the last two are also terrorist states). That is, I think, even Nestle, which is hated throughout Reddit, cannot legally trade there, but if you look, every “dirty” and unethical transnational corporation trades with/sells their goods in RuSSia.
Some possible reasons:
- One of their sources is Sudanese gold. Basically, they’re helping to exacerbate the genocide in Sudan, so they can fund their genocide in Ukraine.
- Russia has arguably won the sanctions war. They’ve shifted trade to China and India. Or they’re exporting raw materials through third countries to Europe, or transfering oil at sea, bypassing sanctions at a relatively low cost.
- Made deals with other oil producing countries to not increase production, so that prices remain stable.
- War isn’t that expensive, unless you’re the US (and care about casualty rates). North Korea. Dirt poor country, almost entirely cut off from the world, still manages to maintain a sizeable military and even develop nuclear weapons. Russia? Old soviet stock that was rusting in a barn, North Korean shells that occasionally kill your own troops, troops you only pay if they survive if at all. Send prisoners to the front, saves money on prisons. Send people from the poorest regions, so you don’t have to pay them much, and it doesn’t negatively affect GDP that much.
- Do like the Russians did during and after WW2. Rape and pillage. Russia is actively stealing Ukrainian resources, equipment and grain from the occupied territories.
- Sell (or barter with) pariah states like North Korea or Iran military technology they would otherwise not have access too, like nuclear or ballistic tech.
- War time economy means you can cut lots of stuff. Education, pensions, healthcare, drugs… all very expensive. Not as if the kids dying at the front will need an education anyway. Hell, apparently they’re sending disabled soldiers back to the front. Great way to get healthcare spending down.
I like your explanation, and it’s true
It would be funny if, for example, Iran did not fulfill/deceived its obligations, as RuSSia did with the West and, in my opinion, one day even with Iran itself.
But these countries may also be terrorist states, like RuSSia, but they probably still have a “credit of trust”, unlike unreliable RuSSia
oil and gas
Russia lived with sanctions for 70 some years as the Soviet Union, and has always been prepared to endure more. They are an economy built around raw, natural resources and can be largely self-sustaining…
And it has been pointed out, that Iran has been fighting off sanctions very successfully over the last twenty, thirty yeas…
Their secret then is Russia’ secret now, more or less:
India will trade with anybody and be neutral, and it isn’t a large task to create a shell company in India that peddles your wares throughout the whole of the world, repackaged and rebranded. At the height of Trump’s reintroduced sanctions on Iran, I was able to eat Iranian dates in South Korea - a country that followed US protcols and actually made it impossible for Iranians to start new private bank accounts unless in specific circumstances and did everything they could to place barriers on trade.
Heed you, these shell companies used to exist in places like Macao, Hong Kong, Singapore, etc., but US sanctions shut this down. It all moved to India…
Which is likely where a lot of Russian exports head when they aren’t just being imported completely independent of the Western world to places like Iran and China… China, of course, is another factor, as trade between RU and CN have increased exponentially over the last few years since the war started…
I could go on but, already, I am rambling… Suffice it to say, there’s a mssive block of countries that hate Western imperialism and/or are neutral and/or already face sanctions, and this network continues to trade with one another, and they also have begun to help facilitate one another trading with the West, either knowingly or just because they lack the will or robust enough resources to police it up.
Globalization is its own enemy when it comes to the West trying to impose sanctions, IMO.
