Russia is economically on its knees. Really.

Ivan Štern


Not only by pro-Russian trolls and useful idiots, but by many people who “mean well”, we have been fed for some time now with the claim that the sanctions applied to Russia are turning against us and causing us more damage without significantly hurting the “traditionally resilient” Russian economy. They claim that it is only thanks to the Russian invasion of Ukraine that energy and food prices have risen in Europe. They convict themselves, if not of mendacity, then at least of a sloppy and sloppy assessment of what is really happening on the economic scene. After all, we have seen a dramatic rise in energy prices long before the Russian invasion. It has only intensified it.


Everything is different

The above argument is refuted quite convincingly by a recently published study by five authors from Yale University (the Yale Study of the Economy in Russia). It demonstrates on the basis of facts that sanctions have brought the Russian economy to its knees and that they have caused damage that is difficult to repair. Sometimes even irreversible.

The reader learns that Russia has abandoned businesses that generated 40 percent of its annual gross domestic product. Thousands of companies have stopped operations since the war began. All the foreign investment made in the last three years has been totally wasted. It is not only capital that has left Russia. Educated, talented and creative people are leaving Russia as never before in its history. Without them, industrial development is simply unthinkable.

Sanctions targeting imports of components vital to Russian production have led to its virtual collapse. Putin’s ideas that Russia would replace imported components with its own production have proved to be more than misguided, literally delusional. Russia lacks not only the necessary production capacities and technologies, but most importantly the people who would be able to start and sustain such production. A number of productions, dependent on imports, have thus stagnated.

All these findings have several common denominators. Dramatic price rises. An insecure consumer. And increasingly barren shelves in shops and supermarkets, if they are free to open at all.


Gas and oil – Putin’s black nightmare

Putin is most tragically landing where he thinks his power lies. In the export of energy commodities. So far, these exports have accounted for 60 per cent of the Russian state’s total revenue, and the state has stood or fallen with them. The prospect of the Russians retaining existing markets is increasingly dim. Although it does not appear so, already now that Europe has reduced imports from Russia on a not yet large scale, the Russians are forced to find other outlets for their energy commodities. They are thus solving a squaring of the circle. New outlets are both investment and technology intensive, and the question is whether Russia is capable of meeting this unexpected challenge both technologically and in terms of engineering.


The authors of the study warn Europe not to listen to the voices that claim that ‘united resistance against Russia has become an economic war of attrition that is taking its toll on the West’ and cannot be won because of ‘the alleged resilience and prosperity of the Russian economy’.This is simply not true!

Pro-Russian trolls and those who “mean well” usually rely on data published by the Kremlin and cherry-picked by the Kremlin to put together an optimistic picture. One thing is true: “As long as allied countries unitedly maintain and increase sanctions pressure on Russia, there is no way for Russia to escape the economic abyss.”


War is not won with weapons alone

One cannot fail to mention in this context the statement by Hungarian Prime Minister Viktor Orbán, who let it be known that “the war cannot be won in this way”. He, too, is right, although it is only half true.

In the autumn of 1914, Lord Horatio Kitchener, the commander-in-chief of the British troops facing, along with the French, the German attack on Belgium and France, published an estimate of how long the war would last. He was of the opinion that it would end in 1918 at the earliest. According to his investigations, by that year the German economy would be completely exhausted, collapsing and with it its military strength. History, in a way, proved him right. Beginning with the First World War, the clash between the belligerent countries did not take place only on the front; its success or failure also depended on the industrial potential of the belligerent country.

The American economist John Kenneth Galbraith, in his study The Abundance Society, pointed out that the Second World War was not only a clash of military forces but also a clash of the industrial potential of the belligerent countries. There was one difference:

The German government, in which the Social Democrats began to have a major say in November 1918, recognized that Germany, if it was not to be completely destroyed, could not continue the war. Adolf Hitler was not of that opinion in April 1945, when Russian cannons were still thundering over his head and the German economy had been in complete ruins for at least a year, although even those closest to him quietly disagreed. He did not commit suicide out of despair, but out of spite. The German people had simply failed him, and therefore he did not deserve it.


The resemblance to Hitler is not accidental

We can expect similar developments in Russia. Sanctions, crowned by a gradual reduction in gas and oil imports, will indeed cause a literal implosion, an internal collapse of the Russian economy, and the Russian economy will find itself in a similar ruin to that of Germany in 1945. But the war will continue.

I fear that this time, the Russian mothers who will lose their sons in it will not speak out, as they did in the late 1980s in connection with the Russian invasion of Afghanistan. Back then, they could have. Power was in the hands of Mikhail Gorbachev and the country was ruled by ‘glasnost’ and ‘perestroika’. There is no Gorbachev on the horizon in the Russia of today. Just Putin, Putin and Putin again. The parallel with Hitler and the attitude of the Allies towards him is more than apt here.

This article was translated from the Czech original published at Časopis Přítomnost.

published: 15. 8. 2022

Datum publikace:
15. 8. 2022
Autor článku:
Ivan Štern