When the war started it was seizure-this and sanction-that. I’ve read that $350B in Russian assets were seized and held, while major companies exited the Russian market, the ruble crashed, and inflation rocketed.
Meanwhile the cost of the Russian war must be astronomical to maintain, imports/exports have halted with Europe, there’s no financial aid to Russia (that I’m aware of) and multi-billion dollar resource supplies were cancelled.
All this, and Russia seems to still be having a good old time. Russians are on holidays en mass, the country is buying up arms and fossil fuels like its church Sunday, and their war machine still powers away and is prepared to keep fighting for a decade if it has to.
How? How does a country take that much of a financial beating and still be thriving? Where is the point of being broke and not being able to fund a war anymore?
An economics student from Russia here, here’s my perspective.
First, is that a country’s economy is a lot less volatile than we expected. There is also another factor that played into it. During covid, Russian companies amassed a sizable amount of inventory that was already inflated compared to European companies due to how volatile our economy is. This has given them enough time to reroute supply chains once sanctions hit.
Basically, the so-called “grey import” plays a major role in assuring the stability of our economy. Companies either route their import/export through neighboring countries or through affiliated companies.
Second is the competency of our central bank. After most of the major banks were cut off from SWIFT (used for international transactions), they raised the key rate, limited the amount of money you can cash out at one time, and did some other stuff. Higher key rate = higher deposit interest rate, but at the same time, credit became more expensive. All of this was needed for preventing banks from defaulting. Once panic died down, the changes were reverted. Now, they’re dealing with inflation.
Lastly, the majority of our budget comes from oil and gas. Since Europe didn’t want to buy it, Russia started selling it to Asia at discounted prices. Quantity of oil/gas sold drastically increased, which mitigated reduced prices and led to a surplus budget. Not to mention that they started pushing on large companies to reduce the amount of dividends and instead re-invest the money.
I wouldn’t call it “thriving,” however. All of this has definitely led to a slowdown in growth, which, as time goes by, will only get worse. But for now it’s fine.
The central bank has been surprisingly competent. But it seems like they’re often trading short term problems for long term ones, so we’ll see how they deal with them.
What do you think of this assessment? You agree, or is William Spaniel missing some stuff? https://youtu.be/ecdxs8Al424
They guy did his research, and he did it right. Even mentioning the “social contract”, that’s not something you hear from an average youtuber.
There’s only a few things I’ve noted
Although the monthly rate can be calculated as yearly÷12 and is acceptable, it is inaccurate. Doesn’t change much, but still. ( (1+monthly rate)^12 = 1+yearly rate <= this is the accurate conversion)
Next is “failed pension reform.” It’s failed in political sense. The intent of it was to temporarily lessen the depletion of pension fund, which it technically did do. But, yeah, it was absolutely not popular. Not to mention that it didn’t solve the root of the problem, which was obvious from the start. Back during his first or second presidency period, he promised not to raise the age for retirement, yet in 2018, he did exactly that. Needless to say that his ratings have been falling ever since then and up till February of 2022.
The one thing I would’ve liked him to also mention is “quality of foreign exchange earnings,” which is a relatively new term. Essentially, companies now need to pay attention to wether or not they can exchange earned currency for something that they can trade with other countries or within Russia. Previously, they traded in dollars, so it was never an issue.
Very informative, thanks
Great insights. Thank you.
As far as I understand they had prepared a pretty big warchest, and gas is still worth a lot and is being sold to countries that didn’t commit to sanctions (like China and India).
had prepared a pretty big warchest
And stupidly kept 1/2 of it in Western financial institutions.
We’re about to start selling Ukraine NATO weapon systems with what used to be Russian money.
Pootin also launders oil money offshore, so… all means are good for him.
And yet, he is a “former” KGB officer, a bandit from St. Petersburg who has been involved in dubious schemes since the 90s, so what else could you expect from him…
And if that actually happens, then very few countries will trust the US dollar as they reserve anymore and buy up gold as they are already doing.
Well, their warchest mostly consisted of assets in western countries. Most of these were immediately seized. That didn’t completely destroy Russia, but it put them in a far worse situation.
Because even if they actually had an income of zero, they had saved up enough money over the years to be able to survive off it for some time. Commonly referred to as a “war chest”. They don’t actually have an income of zero though, their income is actually quite significant since they still have major trading partners like Iran, India and China to sell their fossil fuels and other resources to. They don’t buy fossil fuels, incidentally, they sell them. Like Saudi Arabia.
Also, you can buy things with more than just money. People figure that Kim Jong Un probably isn’t trading his stuff to them for money, but instead is getting technological assistance from them. Just one of their modern fighter-bomber tech, for instance, would be immeasurably valuable to N Korea, where their own tech has lagged behind a good bit over the years.
Lastly, people in the west have been doing sanctions evasion. I recall some German financial/tech company has its CEO now wanted by Interpol for being a Russian agent. So, when your own people are playing fast and loose with the law, that’s going to make things like sanctions more difficult.
Russia lived with sanctions for 70 some years as the Soviet Union, and has always been prepared to endure more. They are an economy built around raw, natural resources and can be largely self-sustaining…
And it has been pointed out, that Iran has been fighting off sanctions very successfully over the last twenty, thirty yeas…
Their secret then is Russia’ secret now, more or less:
India will trade with anybody and be neutral, and it isn’t a large task to create a shell company in India that peddles your wares throughout the whole of the world, repackaged and rebranded. At the height of Trump’s reintroduced sanctions on Iran, I was able to eat Iranian dates in South Korea - a country that followed US protcols and actually made it impossible for Iranians to start new private bank accounts unless in specific circumstances and did everything they could to place barriers on trade.
Heed you, these shell companies used to exist in places like Macao, Hong Kong, Singapore, etc., but US sanctions shut this down. It all moved to India…
Which is likely where a lot of Russian exports head when they aren’t just being imported completely independent of the Western world to places like Iran and China… China, of course, is another factor, as trade between RU and CN have increased exponentially over the last few years since the war started…
I could go on but, already, I am rambling… Suffice it to say, there’s a mssive block of countries that hate Western imperialism and/or are neutral and/or already face sanctions, and this network continues to trade with one another, and they also have begun to help facilitate one another trading with the West, either knowingly or just because they lack the will or robust enough resources to police it up.
Globalization is its own enemy when it comes to the West trying to impose sanctions, IMO.
Most companies don’t bother to setup a shell company. International businesses often have an existing distributors in several different countries.
When one country gets sanctioned a distributor in a neutral country suddenly increases their local sales by the same amount that the one in the sanctioned company used to have.
I used to work in international business a decade ago. I learned about a customer on the Saudi peninsula who purchased a huge amount of product (1,000x more than their entire market). It was strangely enough to cover Iran not that far away across the Persian Gulf.
Very cool, thank you
Adding to all the reasons already listed, Russia isn’t striving. For example, right now there is a number of towns and cities experiencing outages in central heating (with houses designed around central heating so basically no other option to heat their appartments) while the weather dips to -20°C (around -4°F). All because the centralized boiler facilities weren’t properly maintained due to the lack of money (or, to be more precise, due to money being diverted towards the war).
There are other signs, like plains malfunctioning and flights getting delayed because some component broke and cannot be replaced due to sanctions, and they happen more and more often. Also the less noticeable stuff like prices of common goods increasing by a factor of two in the last couple of years while salaries barely increased at all.
So yeah, Russia is keeping itself afloat, but it isn’t thriving at all
Did you mean “thriving?”
Uhhh, yes. It was 3am when I wrote this, so my brain probably farted hard
Also the less noticeable stuff like prices of common goods increasing
I mean Putin had to apologize for high prices of eggs, that was very noticeable (of course a show to make him seem to care for the common people, which he doesn’t give a f*ck about). https://www.reuters.com/world/europe/putin-rare-apology-over-price-eggs-2023-12-14/
I meant that these things aren’t as noticeable from outside of the country. Like, foreign news outlets probably won’t report on it much. Plus, eggs are more of an exception because of sudden shortage and prices rising rapidly. For most of the other goods the price grows more gradually and isn’t as obvious. Like in that metaphor about slowly boiling a frog.
Another problem that is noticeable from inside the country (at least by those affected by it) is that certain medications are vanishing from the pharmacies because they are no longer imported and they were never produced locally, or the local production is insufficient to meet the needs. I don’t know the full list, but the stock of ADHD meds is definitely low, and I’ve heard from friends that they had to switch to a different antidepressant due to shortages.
By the way, the RuSSians thought that if they could no longer fly to vacation in Europe or the USA, they would be able to vacation in Dubai, but after they bought tickets for the return trip, they could not even (there was news recently) return to RuSSia by plane, because the plane (RuSSian plane) broke down and they, as always, were “stuck” at the airport for several hours, ha-ha
… The way which you wrote this made me think there was a far more dramatic ending than being stuck at an airport for several hours due to mechanical failure.
My brother in Christ, I experienced that in Cleveland…
But I am not sure what you mean at the end - are these guys STILL in Dubai?! You said they were stuk at the airport for several hours… Like… What, they had to stay at the airport to wait for their boat because, as you said, they couldn’t return by plane? … Or they waited several hours at the airport to catch another flight…? What are you saying?
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They are technically still on the way, on day 117 of an epic, unplanned, and wholly uncontrolled kite-surfing misadventure.
…NGL that kinda sounds fun
They are still selling literal boat loads of Oil, just not as much to Europe.
they are selling it to countries which then sell it to europe so we just pay more for the same thing but can be happy we do definitely not fund the russian invasion :D :D :D
As I understand it, China/etc can buy the oil cheaper because there’s no competition from Europe anymore. Then they can sell it to us more expensive because we don’t have an alternative. So China/India profit from it, while Europe and especially Russia lose in comparison to how it was before. This is not ideal, but still better than supporting Russia by buying from them directly.
Please someone correct me who knows how that actually works…
No you got it right, this is the mechanism. India is apparently also making bank with this.
India kinda got fucked by Europe in the earlier chapters, lol we let em have this one I say.
They’re still selling it to europe, but because of the sanctions, Russia sells it to India and then India sells it to Europe.
Basically all these sanctions did was add a middle man for Europe making it more expensive but still financially supporting Russia.
Oil and gas is massively profitable. Western nations have crippled that industry resulting in countries like Russia becoming energy giants. The world is consuming new records in consumption this year and let capita, developed nations are nearly a factor more then emerging nations.
How? How does a country take that much of a financial beating and still be thriving? Where is the point of being broke and not being able to fund a war anymore?
Not only that but I remember reading a lot of articles about how Russia was going to economically collapse as a result…almost two years ago.
Also a lot of articles about how weak Russia was militarily, how they lost all their troops and equipment already, how morale in their military was so poor the army was just going to run away at any moment, how one major asset after another was destroyed by the Ukrainians…for almost two years now.
Yet here they are still, not collapsed, not defeated. It probably is a good idea to take the media with a grain of salt and realize just because they’re the so-called free press doesn’t make them necessarily the truthful press.
Yeah, for people listening to good analysts we knew all that stuff about Russia collapsing was mostly wishful thinking. Perun is a good example, early on he talked about how russia will likely be able to maintain their economy and military production, albeit at wartime levels. But I can see how a layperson only reading sensationalized news headlines pushed by mainstrean media and social media could’ve of thought there was a real possibility.
The media is complete fucking bullshit. On both sides of the poltical spectrum. And private forums/platforms, even such as this one, are unfortunately also full of bullshit. It is very very very very difficult to obtain accurate information and analytics these days. Hence all the issues with misinformation all over the place. Then throw in AI to make it exponentially worse… it’s not great. Unfortunately at this point I jjust assume that literally no one has any fucking clue what they’re talking about and everyone is lying. Fun times we live in :-/.
assume that literally no one has any fucking clue what they’re talking about and everyone is lying
I’m not sure this is a new development.
Hello fellow ex-Redditor
It’s not, but it has gotten worse over the past like 7 years. Now it’s even more accelerated with AI. Not sure most people realize how absolutely fucked the Internet is with AI. Like just check Google search results for anything. It’s dogshit. Thx AI! It will only get worse. A lot of news articles now are also written by AI and it’s blatantly obvious. The quality is worse.
Russia is like 7x the size of Ukraine and has been losing for over a year.
To be fair the russian army has lost experienced leaders in all areas and it will have long term negative effects. Morale has been particularly low, maybe it didn’t cause a collapse but it sure caused an increase in russian POWs, abandoned vehicles, and a lack of initiative. Supply problems have also slowed down artillery and operations.
They have a decent source of their own fossil fuels, and certain deals go through non-sanctioned countries to countries that sanctioned Russia.
They have control of their rouble so they can promise soldiers a big payday and stiff the payment when they went “missing”. In particular their ex-con division.
I’m pretty sure their overall stocks of military equipment are dwindling, as you heard a few high-value targets were downed in the last month that are irreplaceable in the medium term. They still have their own production of tanks and ammunition, and China, NK and Iran trade various equipment to them such as drones, missiles, artillery. They are happy to get whatever Russia has left to offer.
Rich Russians will stay rich for the most part but poor Russians will be stuck in their miserable situation.
Long term is where things can fall apart. Yeah, currently stuff goes well to Putin, but the moment the Russians realize their emperor is naked, Russia will have a very bad time, with the worst thing that can happen to them is a Balkanization with all of its nastiness.
And that’s why there will be civil wars in RuSSia…
Yup, 9 just more destroyed A-50’s & Russia is blinded on the battlefield & out $3.3B in materiel
Some possible reasons:
- One of their sources is Sudanese gold. Basically, they’re helping to exacerbate the genocide in Sudan, so they can fund their genocide in Ukraine.
- Russia has arguably won the sanctions war. They’ve shifted trade to China and India. Or they’re exporting raw materials through third countries to Europe, or transfering oil at sea, bypassing sanctions at a relatively low cost.
- Made deals with other oil producing countries to not increase production, so that prices remain stable.
- War isn’t that expensive, unless you’re the US (and care about casualty rates). North Korea. Dirt poor country, almost entirely cut off from the world, still manages to maintain a sizeable military and even develop nuclear weapons. Russia? Old soviet stock that was rusting in a barn, North Korean shells that occasionally kill your own troops, troops you only pay if they survive if at all. Send prisoners to the front, saves money on prisons. Send people from the poorest regions, so you don’t have to pay them much, and it doesn’t negatively affect GDP that much.
- Do like the Russians did during and after WW2. Rape and pillage. Russia is actively stealing Ukrainian resources, equipment and grain from the occupied territories.
- Sell (or barter with) pariah states like North Korea or Iran military technology they would otherwise not have access too, like nuclear or ballistic tech.
- War time economy means you can cut lots of stuff. Education, pensions, healthcare, drugs… all very expensive. Not as if the kids dying at the front will need an education anyway. Hell, apparently they’re sending disabled soldiers back to the front. Great way to get healthcare spending down.
I like your explanation, and it’s true
It would be funny if, for example, Iran did not fulfill/deceived its obligations, as RuSSia did with the West and, in my opinion, one day even with Iran itself.
But these countries may also be terrorist states, like RuSSia, but they probably still have a “credit of trust”, unlike unreliable RuSSia
That’s annoying, please stop it.
If RuSSia invaded your country, you wouldn’t say that
Please stop that.
Please stop that.
Why Russia isn’t actually collapsing (RealLifeLore on YT)
It’s a bit long and I don’t remember everything, but a good part is that Saudi Arabia reduced their oil production so that the price goes up, and Russia is still selling a lot of oil to China and others
There is also a Perun Video that talks about war economies more in general and the Russian and Ukrainian economies specifically.
war economics 101.
There are few things people have been keener to predict throughout history than ‘quick’ wars. Pro Russian commentators after February 24th 2022 expected a rapid victory - while Western media was quick to suggest that Russia’s economy was collapsing soon after sanctions were implemented.
Instead, both Ukraine and Russia show signs of increasing their wartime production and scaling up their armed forces. That should not come as a surprise. Historically, the process of converting from a civilian to a wartime economy has yielded more than enough results to overcome even significant trauma inflicted on the industrial base (for example, strategic bombing attacks).
Russia’s economy is suffering, it’s long term economic prospects have been badly wounded by a collapse in international trust, market denial, and a barrage of sanctions. Ukraine’s economy is likewise under immense pressure - primarily from physical attacks by the Russian armed forces. But it would be naïve to think that either is likely to collapse in the coming weeks and months. As long as the will to go on (and foreign support) remains in play, there is every reason to think that both nations will find a way to keep their economies going.
In this episode, we look at the basics of war-economics, industry conversion, and try to understand why ‘short wars’ are so hard to win between peer opponents, once the economic struggle begins in earnest.The comments on that video are cancer. That level of astroturfing reminded me of why I left Reddit lmao.
Trade with the EU hasn’t completely halted, we still buy gas from Russia.
But much less. Germany completely stopped importing Russian gas in 2022, so did Poland and some other countries. These were the biggest European customers.
They’re a petro state. Attempts to keep them from profiting from oil have completely failed, as Russia can sell it to their friendly countries
They are being financed by China and India. Their long time prospects are pretty terrible because they will rack up massive debts to those countries. But I suspect they will be able to continue the war longer than Ukraine can stay politically favored in the West. If Trump is elected, it’s over for Ukraine.
half their economy is oil. the other half’s bleeding out
