Sanctions would weigh heavily on the Russian economy - Economic Policy

Sanctions would weigh heavily on the Russian economy – Economic Policy

The impact of Western sanctions on the Russian economy is far greater than official figures show, according to a study by Yale University, also stressing that a “pivot to China” seems unrealistic.

“A common narrative has emerged”indicate the authors of this study: the economic sanctions imposed by Western countries against Russia since the invasion of Ukraine, would have created “a + war of economic attrition that is wreaking havoc in the West +, given the supposed + resilience + even + prosperity + of the Russian economy”. “It’s just plain wrong”assure these experts from the Yale School of Management, denouncing “selected statistics” by the Russian presidentVladimir Poutine.

However, according to their analysis, “Company departures and sanctions cripple the Russian economy, in the short and long term”. Economic sanctions, therefore, deter many companies and countries from continuing to trade with Russia. And the country is struggling to obtain spare parts and raw materials, or to obtain certain essential technologies.

The picture is dark: “Despite the illusions of self-sufficiency and import substitution (…), Russian domestic production has come to a complete halt and lacks the capacity to replace lost companies, products and talent”. Companies that have left the country “represent about 40% of its GDPcanceling almost all of the three decades of foreign investment”, also advance the authors of this investigation.

To overcome these weaknesses, Vladimir Putin “is resorting to unsustainable fiscal and monetary intervention”and the Kremlin’s finances “are in a much more desperate situation than is admitted”.

As for the “pivot to China” wanted by Vladimir Putin, it could be based on “unrealistic optimistic assumptions”. “Russia represents a minor trading partner for China, (…) and most Chinese companies cannot risk violating US sanctions”, describe the authors of the study. They also point out that Chinese companies ‘lack upstream many of the technologies needed to sustain and service Russia’s oil and gas supply“, they detail.

According to the International Monetary Fund, Russia is doing better than expected this year, with an expected GDP recession of 6.0% in 2022, according to its latest forecast published on Tuesday, much less than the 8.5% plunge on which the organization expected in April. But the recession in 2023 should be stronger than expected (3.5% instead of 4.7%).

“A common narrative has emerged”, say the authors of this study: the economic sanctions imposed by Western countries against Russia since the invasion of Ukraine, have created “a war of economic attrition which is wreaking havoc on the West+, given the supposed +resilience+ or even +prosperity+ of the Russian economy”. “It’s simply false,” say these experts from the Yale School of Management, denouncing “statistics selected” by Russian President Vladimir Putin. However, according to their analysis, “the departures of companies and the sanctions paralyze the Russian economy, in the short and long term”. Economic sanctions, therefore, deter many companies and countries from continuing to trade with Russia. And the country is struggling to supply itself with spare parts and raw materials, or to obtain certain essential technologies. is completely shut down and does not have the ability to replace lost businesses, products and talent”. The companies that have left the country “represent about 40% of its GDP, canceling out almost all of the three decades of foreign investment”, also argue the authors of this survey. To overcome these weaknesses, Vladimir Putin “has recourse to a unsustainable budgetary and monetary intervention”, and the Kremlin’s finances “are in a much more desperate situation than is admitted”. As for the “pivot to China” wanted by Vladimir Putin, it could be based on “unrealistic optimistic assumptions “. “Russia represents a minor trading partner for China, (…) and most Chinese companies cannot risk violating US sanctions”, describe the authors of the study. They also point out that Chinese companies “lack upstream many of the technologies needed to maintain and maintain Russian oil and gas supplies”, they detail. According to the International Monetary Fund, Russia is doing better than expected this year, with an expected GDP recession of 6.0% in 2022, according to its latest forecast published on Tuesday, much less than the 8.5% plunge the organization had expected in April. But the recession in 2023 should be stronger than expected (3.5% instead of 4.7%).

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