Download Learnerz IAS app from the Play Store now! Download



Russia’s economy after two years of war UPSC NOTE

 Surprising resilience of the Russian economy despite facing extensive sanctions following its invasion of Ukraine

  • Two years after its full-scale invasion of Ukraine, Russia is still facing an unprecedented number of economic sanctions.

  • It has been excluded from major global financial services, and around €260 billion (£222 billion) of its central bank assets have been frozen. 

  • Russian airspace is closed to most western planes, and western ports are closed to Russian vessels. 

  • A formal cap has been imposed on buying or processing Russian oil sold for more than $60 per barrel (world prices currently fluctuate between $80 and $100). 

And in theory, it is illegal to sell Russia anything that could be used by the military.

  • Sanctions have had some effects. 

  • According to the IMF, Russia’s GDP is around 7% lower than the pre-war forecast.

  • Despite all of this, Russia’s economy has not collapsed. 

  • But it does look very different, and is now entirely focused on a long war in Ukraine — which is actually driving economic growth. 

  • In fact, the IMF expects Russia to experience GDP growth of 2.6% this year

  • That’s significantly more than the U.K. (0.6%) and the EU (0.9%). 

  • Similarly, Russia’s budget deficit (the amount the government needs to borrow) is on track to remain below 1% of GDP, compared to 5.1% in the U.K. and 2.8% in the EU

  • One reason for this relative resilience is Russia’s strong, independent central bank

  • Since 2022, it has imposed massive interest rate hikes (currently at 16%) to control inflation (still above 7%).

  • This has been combined with government-imposed controls which make it almost impossible for Russian exporters and the many foreign companies still operating in Russia to take money out of the country

  • Together, these policies have helped to avoid a total collapse of the ruble, by keeping the currency flowing inside Russia.

  • Russian firms have also learned to sidestep sanctions, with the oil cap being a prime example

  • In theory, no Russian oil should be traded with the west above the cap, which would have a massive impact on Russia’s public finances

  • In practice, it has been circumvented by a large “dark” fleet of uninsured vessels and the use of accounting loopholes

  • And while sanctioning countries are trying to tighten the rules, Russia’s public coffers have actually been flooded with oil money

  • Many countries have also made money playing the role of intermediaries.

  • Turkey, China, Serbia, Bulgaria and India are among those which have reportedly circumvented sanctions, and carried on selling goods to Russia.

  • Those products are understood to often include dual-use goods such as microchips or communication equipment that are subsequently used by the Russian military. 

  • And despite recent efforts, a full regime of extra-territorial trade sanctions — which ban any foreign company from trading with Russia — is still far away.

  • Thirty-five years after the fall of the Berlin Wall, it has become clear that resource-rich Russia has become much poorer than its former Soviet neighbours such as Estonia, Latvia, Poland and Hungary, who pursued the route of European integration.

  • The Russian regime has no incentive to end the war and deal with that kind of economic reality.

  • So it cannot afford to win the war, nor can it afford to lose it

  • Its economy is now entirely geared towards continuing a long and ever deadlier conflict.



Amritsar,1,April 2024,171,Art & Culture,1,August 2023,251,Courses,7,Daily Current Affairs,48,December 2023,189,Disaster Management,2,Environment and Ecology,54,February 2024,228,Foundation Course,1,GDP,1,GEMS Club,1,GEMS Plus,1,Geography,67,Govt Schemes,2,GST,1,History,2,Home,3,IAS Booklist,1,Important News,71,Indian Economy,46,Indian History,2,Indian Polity,56,International Organisation,12,International Relations,58,Invasive Plant,1,January 2024,240,July 2023,281,June 2022,6,June 2023,268,March 2024,238,May 2022,17,Mentorship,2,November 2023,169,October 2023,203,Places in News,2,Science & Technology,66,September 2023,205,UPSC CSE,111,
Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Russia’s economy after two years of war UPSC NOTE
Russia’s economy after two years of war UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
Loaded All Posts Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy Table of Content