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The United States and dozens of other countries imposed sanctions on Russia in reaction to its invasion of Ukraine on February 24, 2022. The scope and severity of the sanctions are unprecedented for an economy the size of Russia’s, but its GDP barely shrank 2.5% in 2022. One year after the war, many are wondering: do sanctions work?
With more than 1,200 Western companies closing their operations in Russia and the European Union approving a radical reduction in the purchase of Russian oil and gas, as well as a freeze on Russian assets abroad and a ban on exports of key technologies, the Russian economy is resilient sign.
During the first week of the war the Russian ruble plummeted as Russians panicked as most Russian banks were locked out of the Swift international transaction system and government assets in foreign banks were frozen. However, the Russian central bank was able to quickly stabilize the exchange rate, bringing it back to pre-war levels. Inflation peaked at 18% in April, before slowing to 12% in December.
Prior to the invasion, Western countries had hoped that the threat of sanctions would deter Russia from attacking Ukraine, but once the invasion began, the goal became to deter Vladimir Putin from escalation and encourage him to withdraw, reducing his ability to finance his war machine.
Russia may be spending more than $300 million a day to fight the war, but for much of 2022 it was earning $800 million a day from energy exports. That revenue stream appears to be enough to prevent a collapse in living standards and to replenish Russia’s stocks of arms and ammunition.
The war caused a spike in oil and gas prices. In the first month of the war, world oil prices rose 50%, peaking at $139 a barrel in April, while wholesale gas prices in Europe rose 500%, peaking at $320. dollars per megawatt-hour. This brought great benefits to Russia.
Although the volume of Russian oil and gas exports to Europe fell in 2022, its energy revenues soared to $168 billion for the year, the highest level since 2011. Russia ended the year with a current account surplus of 227,000 million dollars, a record figure.
Another important instrument to patch up the budget was the National Welfare Fund, FBN, a “piggy bank” that on January 1 accumulated 10.8 trillion rubles or about 155.3 billion dollars, which represents 7.8% of the expected GDP for this anus.
After the start of the war, forecasts predicted that the Russian economy would contract this year to 12%, but the decline in GDP was 2.5%, according to preliminary data from the Ministry of Finance and the Russian Central Bank.
Several analysts point out that the Russian economy will begin to feel the impact of the hardest hit to its finances only this year, largely due to the ban by the G7 countries, the European Union and Australia on Russian oil imports and the imposition of a price ceiling of $60 per barrel for its sale by sea, which went into effect in December.
The Russian authorities expect that this year the oil and gas sectors will contribute to the federal budget 8 trillion rubles or about 117,000 million dollars, which constitutes 30% of the revenue item, all this calculated at an annual average price of 70 dollars per barrel of crude.
with PA
