Russia is losing the economic war with the West and its economy is in catastrophic and irrevocable decline even as it cuts off the gas supply to Europe, a new report has claimed.
As panic spreads across Europe over the prospect of gas rationing and spiralling energy prices, it is in fact Russia which is on the ropes, with business in retreat and sanctions catastrophically crippling their economy.
And while Putin causes panic in European governments by throttling gas supplies, the strategy is unsustainable for the dictator as he burns through reserves and his budget goes into deficit.
This is the verdict from a Yale-authored report that has looked beyond the Kremlin’s cherry-picked economic figures to access private Russian language and other unconventional data sources.
The report looked at high frequency consumer data, cross-channel checks, releases from Russia’s international trade partners and mining of complex shipping data to produce an economic analysis measuring the state of Putin’s economy and what the future might have in store for it.
Vladimir Putin is losing the economic war with the West and his economy is in catastrophic and irrevocable decline even as it cuts off the gas supply to Europe, a new report claims
And the picture it paints is a grim one for the Russian dictator. Ever since his February 24 invasion of Ukraine, he has been locked in an economic war with the West that is being fought across sanctions, trade and energy supplies.
While some analysts have decried the resilience of the Russian economy in the face of Western efforts to cripple it, experts at the Yale School of Management have concluded that ‘there is no path out of economic oblivion for Russia.’
‘Defeatist headlines arguing that Russia’s economy has bounced back are simply not factual,’ the report says.
‘The facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.’
Every single sector of the Russian economy is slammed – both its imports and its exports are down and its allies are not helping, and in some cases actively taking advantage.
And Putin has been burning through his once-hefty rainy day funds that he had set aside – precisely in the event of a confrontation with the West – in an unsustainable effort to paper over the cracks.
The government budget is in deficit for the first time in years, and this in spite of sky high energy prices that Putin has been manipulating by throttling gas supplies to Europe.
While this strategy is causing undoubted pain to European governments and across the wider world in the form of inflation, it comes at a price that Putin cannot keep paying indefinitely.
Russia’s position as a leading commodities exporter has irrevocably deteriorated, the report states, as it now deals with countries like China and India from a ‘position of weakness’ with the loss of its main markets.
Every single sector of the Russian economy is slammed – both its imports and its exports are down and its allies like India and China are cases actively taking advantage to secure cheap oil and gas from Putin
Russia’s gas exports to China only amounted to ten per cent of its total, and China has been extracting an increasing $35 discount even as Russia tries to compensate for the loss of the European market.
‘Despite Putin’s delusions of self-sufficiency and import substitution, Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products and talent.
‘The hollowing out of Russia’s domestic innovation and production base has led to soaring prices and consumer angst.’
Imports of crucial inputs and technology needed for domestic manufacturing have mostly dried up, meaning that cars manufactured in Russia come without ABS or airbags.
The retreat of Western businesses, which accounted for some 40 per cent of Russian GDP, has reversed nearly three decades of foreign investment, which, coupled with a mass exodus of young and educated Russians has massively deteriorated the Russian economic base.
Furthermore, Russia is unable to borrow the capital it will need to restart its crippled economy, with domestic financial markets – the worst performing in the world – having priced in ‘sustained, persistent weakness.’
The picture painted across every sector of the Russian economy is stark, and the only glimmer of light at the end of the tunnel for Putin is the effectiveness of his propaganda channels that could potentially undermine the will of European leaders to maintain the sanctions.
But as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia, the ‘facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.’