The sanctions imposed by the European Union to suffocate financially Russia over the war in Ukraine could be having the desired effect, despite the best efforts of the most optimistic Kremlin officials for showing calm in public.
So holds a internal report (and private) of the Russian Government where a “prolonged and deep” recession is predicted as the restrictions of the West are extended. Specifically, it is estimated that the Gross Domestic Product (GDP) sink 8.3% in 2023 compared to 2021 and register its biggest drop in 2024, when it will drop to 11.9%.
The document, to which you have exclusively accessed Bloomberg, aims to assess the impact of the country’s isolation, which is already hitting hard the strategic sectors that have driven the national economy for years. This includes, above all, the industries “export oriented“, such as gas and oil or chemicals and wood. In all of them, the “volumes of production will be reduced,” according to the text.
[Putin quiere limitar los barcos con grano ucraniano hacia Europa tras cortarle el gas]
And not only because the European Union and the G7 countries (the United States, Germany, France, the United Kingdom, Italy, Canada and Japan) have decided to impose a cap – that is, set a limit price – on Russian crude and gas. . Also because Russia could cut off the flow of hydrocarbons overnight.
That is precisely the warning issued by Vladimir Putin on Wednesday, when he claimed to be willing to suspend all its energy supply contracts – which include gas, oil and coal – if measures are taken “against its interests”, such as setting a cap.
The leaders of the G7 countries during the meeting in Germany in which they set a cap on the price of Russian gas.
The words of the Russian president have raised (even more if possible) the tension with the West. Especially since he has pronounced them a few days after Gazprom, the gas company controlled by the Kremlin, has indefinitely closed the Nord Stream I gas pipeline, which runs under the Baltic Sea to Germany, due to an alleged “oil leak”.
That Putin uses energy as a military and commercial weapon is not something new. yes it is the threat of a total power cut that there are those who interpret as a desperate cry of Moscow to curb the impact of the sanctions, which have the objective of twisting the arm of the Russian war machine that makes it possible to continue the offensive in Ukraine.
And is that,why would russia want to stop the flow of gas in europe if it is your main export market? In fact, stopping it completely would cost the Kremlin up to 400 billion rubles. ($6.6 billion) per year in tax revenue, according to the report that includes Bloomberg.
A loss of sales that, according to the text, it would not be possible to compensate completely with new export markets, not even in the medium term.
And for now, so far this year, deliveries of Russian natural gas to the countries of the European Union have fallen by 48% (49% if the UK is included), the Russian gas giant Gazprom announced on Wednesday.
Another study, prepared by the Center of Research on Energy and Clean Air (CREA) indicates that, in the six months that the war lasted, Russia has pocketed a total of 85,000 million euros for the sale of fuels to the EU, which represents 53% of the total exported by Moscow (158,000 million). To get an idea, it is almost Putin’s military spending during the war, which the study estimates at 100,000 million.
Russia has pocketed 85,000 million euros for the sale of fuel to the EU during the war, according to CREA
That means that the country, which is home to the world’s largest proven natural gas reserves and eighths of oil, could not alleviate the blow of Europe’s energy isolation even with (increasing) exports to India and China. Two Asian countries that have become the back door for Russian fuel since the invasion of Ukraine began.
So o Putin a lantern has been thrown or has found a substitute for European money in another sector. In any case, the report consulted by Bloomberg points out that Europe’s plans to stop buying Russian oil products (about 55% of exports went there last year) could trigger sharp cuts in Russian production, which would also would leave the internal market without fuel.
No critical imports
However, the problem is that Putin not only does the reduction in exports, but many domestic areas, such as transport, finance or technology, have also been and will be affected by the war.
The main reason is restrictions on access to advanced Western technology, which could push the country a generation or two behind current standards, and cause a brain drain without precedents. In fact, according to the document, up to 200,000 Information Technology (IT) specialists could leave the country by 2025.
[Putin aprueba una nueva doctrina para justificar la invasión de territorios donde se hable ruso]
Added to this scenario is Russia’s inability to “find alternative suppliers for some critical imports.” This is the case, for example, in the aviation sector, where the 95% of passenger volume it is transported on foreign-made aircraft, which means that a shortage of imported spare parts could lead to a reduction in the fleet.
The agricultural sector It is another of the areas affected by the limitation of supplies from outside the borders. Specifically, “99% of poultry production and 30% of Holstein dairy cattle production” come from imports, according to the report. A dependency that, in the long run, “could force the Russians to reduce your consumption of certain foods as supplies dwindle.
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