Russia’s Economic War Efforts Under Scrutiny
Four years after Russia‘s full-scale invasion of Ukraine, the devastation wrought by the Kremlin’s drones, infantry, missiles, and armor continues to be matched by economic destruction. This is a cost borne mostly by Ukraine: The World Bank now estimates the cost of reconstruction, were the war to end today, is now $588bn, nearly three times the country’s GDP.
Myth-Busting Russia’s Economic State
The nature of the changes in both sides’ economic fighting conditions is obscured by a dense fog of war. This is compounded by the fact that most participants in this economic conflict are increasingly happy to obscure the state of the geo-economics at play, and to let narratives play out that are more rooted in propaganda and politics than fact. To understand where the war is headed, it could help to bust three myths about Russia‘s current state of economic affairs and Western capabilities.
Myth One: The Economic Cost Russia Has Borne Is Manageable
The Kremlin may appear willing to wage the war no matter the cost to its coffers and people, but that does not mean that doing so is not devastating its economy. As a result of the 2022 invasion, the Kremlin has lost what was its largest gas export market: Europe. Before the war, Russia sold roughly 150 billion cubic meters (bcm) of gas to the EU annually; that number is down to 38 bcm. Based on recent prices for European gas futures, every billion cubic meters is worth more than 300 million euros ($353m), meaning Russia is losing out on as much as 34 billion euros ($40bn) annually. That sum will increase next year when EU countries will phase out completely Russian gas imports.
Myth Two: The US Has Lost Interest in Fighting the Economic War Against Russia
President Donald Trump may be making offers for Russian-American cooperation if a ceasefire and potential settlement to the conflict are reached, but it is still maintaining the sanctions. In fact, his administration’s punitive economic measures are bringing real additional pain to the Kremlin in its sole remaining other major export market: oil. Since Washington imposed sanctions on Russia‘s energy sector, the country has lost significant revenue from oil exports.
Myth Three: The Russian Economy Is Performing Well
The Kremlin has also acknowledged that its remaining domestic piggy bank, the National Wealth Fund, is running dry, and with withdrawals at a record pace at the beginning of the year could even be spent by year’s end, barring a sustained uptick in oil prices. The sole area of the economy that is performing well is that connected to the military and defense production, but sustained high borrowing costs and the decline in employable Russians due to war losses and recruitment mean that the Russian economy continues to bleed, too.
Conclusion
The economic war between Russia and the West rages on, with both sides employing various tactics to gain an upper hand. As the conflict drags on, it is essential to separate fact from fiction and understand the true state of play in this geo-economic battleground. By busting these three myths about Russia’s current state of economic affairs, we can better grasp where the war is headed and what the implications may be for Ukraine, Russia, and the global economy.
Original Article: Three myths about the Russia economic war | Russia-Ukraine war | Al Jazeera — Aljazeera