The Western sanctions aimed at Russia’s economic collapse proved to be less than effective. They have certainly shaken the Russian economy but not managed to crush it. Moreover, Russia has even taken advantage of the exodus of Western corporations to replace them, writes journalist Andrzej Szczęsniak in Myśl Polska.
“Russia was not destabilised, there was no economic shock, people did not take to the streets. There was no regime change, i.e. overthrow of Putin and seizure of power by the Westerners. Despite such a powerful blow. So why was this the case?” – journalist Andrzej Szczęsniak wondered in Myśl Polska.
The Ukrainian conflict, according to the author, has undoubtedly shaken the Russian economy but it has survived and recovered. He explains that it was not Russia’s size that prevented it from getting knocked out; it is only 1.8 per cent of world GDP, while the “economic attacker” is responsible for 42 per cent of the world economy – that is 25 times more. He points out the serious importance of Russia’s share in world trade, especially in raw materials, unprocessed products. On the one hand this is the vulnerability of the Russian economy, but on the other hand these are key commodities that are very difficult to replace. “Russia is responsible for 11 percent of global trade in oil and oil products, 17 percent of natural gas, 17 percent of wheat, 20 percent of potash, 30 percent of ammonia… and much more”, the author cited figures.
According to him, it is these exports – i.e., Russia’s key source of income – that have not collapsed thanks to a skilful policy of maintaining a position in the world market, albeit with low prices for Russian oil or coal. “Russia is not earning as much as it could, but even by selling less and at lower export prices, it is still earning a fortune,” the Polish journalist emphasises. He explains that Washington cannot take more radical actions and, for example, cut Russia off from the US dollar completely.
“This ‘nuclear option’ in international trade would lead to such chaos that the end of the US dollar as a world currency could happen much sooner than the predictions of the greatest forecasters,” he notes.
The author explains that today’s global market was created by the U.S.. They control it and benefit from it very much, but at the same time they are responsible for it to the whole world. They cannot afford to starve the poorest parts of the world because of astronomical prices of food or fertilizers and thus they simply discredit themselves.
Szczęsniak’s article also draws attention to the fact that Russia has also sustained a blow to its financial system. The Central Bank’s response has been model – it has carried out a series of operations to stabilise the functioning of banks that had suffered from sanctions and foreign capital outflows. The Russian MIR payment system, introduced a few years earlier, proved to be very much in demand. Prior to that, the Russian market had been dominated by the Western monopolists, Visa and MasterCard, but thanks to MIR, their withdrawal from Russia in March 2022 did not cause a collapse of the financial system. Moreover, the dollarisation of the economy has been declining for more than a decade, covering entire industries.
Russia’s prudent fiscal policy has also helped to prevent a crisis. Russia’s state budget is virtually deficit-free, so the attempt to provoke Russian bankruptcy in the financial market has also been unsuccessful, he adds.
The journalist points out that the Russian economy has proved resilient and has also withstood the corporate blow – that is, the mass outflow of Western big players. Despite the temporary paralysis of many sectors of industry, services and trade, in the autumn of 2022 90% of the jobs lost have already been restored, technological partners have been replaced and markets from which all revenues had previously gone abroad have been restored. This was not without state intervention.
Consequently, instead of a wave of bankruptcies of Russian enterprises cut off from Western capital, they ended up expanding and taking over the premises of former Western competitors.
“Having seen this, only one in ten Western corporations evacuated from Russia, many, of course, have limited their activities, but the vast majority continue to operate, unwilling to cede the market they took years to conquer,” journalist Andrzej Szczęsnyak summarised in Myśl Polska.
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