Russia's Economy Performed Much Better Than the West Expected Despite Sanctions
As of 15 December 2022, there were 8,613 sanctions against individuals, 1,658 against Russian entities, 92 against ports and 14 in the aviation industry. With this, Russia became the most sanctioned…
Friday, December 30, 2022
Ahmed Adel, Cairo-based geopolitics and political economy researcher Russia became the most sanctioned country in the world in 2022. Despite experiencing a deluge of sanctions from Western powers, the results against Russia were grossly unexpected as the country not only survived, but Western economies are now in disarray instead.
Following the launch of the Russian military operation in Ukraine on February 24, the West imposed trade bans on most Russian exports, restricted international airspace, imposed sanctions on Russian banks, created difficulties in the shipping industry, and ensured the impossibility of using the SWIFT international payment system.
The most self-destructive sanction was imposed on the energy sector despite Russia being one of the main exporters of gas and oil in the whole world, especially for Europe. As every sensible expert predicted, the sanctions against Russian oil and gas led to an energy crisis in Europe, having a knock-on effect on energy prices, inflation, and the cost-of-living.
According to Castellum.AI, a compliance screening platform, prior to the start of the special military operation in Ukraine, Russia had 2,695 economic sanctions directed against individuals, entities, and different industries. Most of these sanctions were imposed due to Crimea's reunification with Russia in 2014, marking another failed attempt to undermine the Russian economy.
However, after the start of the conflict in Ukraine, the US and its allies increased the sanctions. As of 15 December 2022, 8,613 sanctions were against individuals, 1,658 against Russian entities, 92 against ports, and 14 in the aviation industry. With this, Russia became the most sanctioned country in the world in the West, with 13,072 imposed in total. This incredible amount means Russia surpasses Iran (4,069), Syria (2,644), North Korea (2,143), Belarus (1,172), Burma (787) and Venezuela (651).
Of the total number of imposed sanctions, the US obviously tops the list, with 2,778. This is followed by Canada (1,928), Switzerland (1,667), the UK (660), the EU (1,444), France (1,382), Australia (1,197) and Japan (962).
The West hopes to destroy the Russian economy through sanctions as a strategy to weaken its military. However, even Western media had to begrudgingly acknowledge that none of the negative forecasts have occurred.
According to The Economist, at the beginning of 2022, it was estimated that sanctions would reduce Russia's Gross Domestic Product (GDP) by 10%. The White House, for their part, expected the contraction to be 15%. However, The Economist had to recalculate their estimation as the contraction was reduced to 2.5% for the last quarter of 2022.
The Financial Times predicted in the middle of the year a drop in the Russian GDP – somewhere between 3.5% and 5.5%. However, on December 29, the media outlet reported that Russia instead recorded a surplus.
The results achieved by the Russian economy even exceeded the estimates made by the Central Bank of Russia and the Ministry of Economic Development. At the start of the conflict, the Central Bank of Russia expected a contraction of 8% to 10% in the GDP, while the Ministry of Economic Development estimated a drop of 7.8%. Now, the Central Bank of Russia reported that the decrease was between 3% and 3.5%, and the Ministry stated that the GDP will drop by only 2.9%.
Russia is suffering from inflation, but it is miniscule in comparison to Europe. Although inflation was a growing problem in Europe in 2021, the lack of Russian energy has only worsened the crisis in 2022.
The recorded 10% inflation rate in Russia is miniscule in comparison to the hostile Baltic countries of Latvia, Estonia, and Lithuania, which reported inflation levels between 21% and 23% in November. Bulgaria, Croatia, the Czech Republic, Italy, Poland, Romania, and Slovakia reported inflation levels between 12% and 17%. Germany, the country most dependent on Russian energy, had an inflation level of 11.3%, while Austria, Belgium, Portugal Slovenia, and Sweden reported inflation rates between 10% and 11.2%. Cyprus, Finland, France, Greece, Ireland, Luxembourg, Malta, and Spain reported levels below 10%.
Meanwhile, the Foreign Affairs magazine published an article in the last week of 2022 which questioned whether 'The End of the Age of Sanctions?' is coming as a diplomatic tool of coercion for the US. The American magazine pointed out that measures, such as local currency transactions, the creation of alternative payment systems to SWIFT, and the use of electronic currencies have diminished the effectiveness that Western economic sanctions once had.
Precisely, some of the measures that Russia made in 2022 to circumvent the sanctions was to trade its energy sources in local currencies and to prohibit the export of oil to countries that established a limit on the price per barrel.
In this way, Russia has not only survived the West's ultra-aggressive economic attacks, but has in fact accelerated the de-Dollarisation of the global economy by creating alternative systems to SWIFT and using local currencies in transactions. At the same time, the West's economy, especially in Europe, has plummeted much deeper than was ever considered. In fact, Europe has suffered even more than Russia.