Russia boasts it is beating sanctions, but its longer-term prospects are bleak
Russian President Vladimir Putin has taken to gloating about Russia’s resistance to international sanctions and its supposed economic resilience, despite the best efforts of the United States and its G7 partners to choke off Moscow’s oil revenues and starve it of military technology.
Scoffing at Europe’s economies, Putin said at a recent event: “We have growth, and they have decline… They all have problems through the roof, not even comparable to our problems.”
It’s true that, as the second anniversary of Russia’s full-scale invasion of Ukraine approaches, the Russian state is earning billions from oil and diamond exports, its military factories are working flat out, and many Russian banks can still access the international financial system.
Russia has adapted to the wide range of sanctions imposed by Western nations. Far from buckling under their weight, the Russian economy is in fact 1% larger than it was on the eve of the invasion.
But the longer-term outlook is far less rosy. War is distorting the economy and sucking resources into military production at an unsustainable pace.
Rostec, a Russian state-owned defense company, increased the production of armored vehicles nearly fivefold in the year to November, according to its chairman Sergei Chemezov. There have been similar vast increases in the production of munitions and drones.
“We boosted the production of munitions for firearms and MLRS [multi-launch rocket systems] by 50 times,” Chemezov told Putin at a Kremlin meeting in December.
But building things in order for them to be destroyed on the battlefield is not a path to economic success.
