Every month the war takes $8-9 billion from the Russian budget, which was covered by the National Welfare Fund.
This year could be a turning point in the economic impact of the sanctions on Russia.
Andriy Yermak, head of the Office of the President of Ukraine, wrote this on Telegram, noting that the McFaul-Yermak International Working Group on Sanctions against the Russian Federation, together with experts from the Kiev School of Economics, published a study of the impact of sanctions on the Russian economy over the past year. According to him, the key conclusion is that sanctions work, but there is room for strengthening them.
“Researchers are unanimous in their opinion that the impact of the sanctions burden on the Russian economy, in particular on its trade and the public sector, continues to increase. First of all, this is due to the introduction of export restrictions on Russian energy resources, in particular oil and natural gas. Experts believe that 2023 the year could be a turning point in the economic impact on the aggressor country,” Yermak said.
He added that the sanctions pressure on the Russian Federation will certainly affect its future ability to wage war. The head of the OP notes that even official sources of the Russian Federation recognize the deterioration of key macroeconomic indicators in 2022: a fall in GDP, an increase in inflation and unemployment, a decrease in investment, and the like.
“This proves the correctness of the strategy chosen by Ukraine and its allies to influence the aggressor. At the same time, there are still opportunities for further increased pressure,” Yermak notes.
According to the study, the effect of the sanctions had a significant inertia, and is now significantly affecting the Russian economy.
The report says that the current account surplus is declining significantly (-60% for the period from Q2 to Q4, and data for December-January indicate an increase in this dynamics), and in 2023 it will amount to $63 billion (compared to $227 billion in 2022) with the prospect of further decline.
There is also a depreciation of the ruble and an increase in inflation: since November 2022, the ruble has lost 20% of its value, which creates preconditions for an increase in consumer prices. Because of the war, Russians are getting poorer and losing access to quality goods and services.
Referring to the research data, Yermak notes that the lack of liquid resources also affects: every month the war takes 8-9 billion dollars from the Russian budget, which were covered by the National Welfare Fund. “With such a rate of use of funds, the Kremlin will lose the entire liquid part of the NWF by the end of 2023,” he said.
The report says that revenues from oil and gas trading this year will fall by about 50%, and in the long term the situation for the Russian oil and gas industry will look even more depressing.
“By exerting pressure on the oil and gas sector, we hit the aggressor in the heart, bleed his potential. The statistics quite clearly reflect this impact. If in 2022 the key component of export earnings was the sale of oil and gas ($350 billion of the total $540 billion of trade balance) , we are already seeing a drop in revenues from the sale of oil and gas by 46%,” Yermak said.
According to him, the sanctions regime is still far from exhausting its potential and requires constant updating and improvement.
“Russia still has enough resources to continue the war, so the speed of the cessation of hostilities depends on the power of the imposed sanctions,” Yermak stressed. He noted that the priority areas for the work of the international working group are: lowering the level of price limits for Russian energy resources, in particular for oil, avoiding exceptions for state corporations directly involved in the aggression against Ukraine, such as Rosatom, ensuring proper control over compliance with existing sanctions and strong opposition to their circumvention.
Sanctions against Russia
The United States, Canada, the European Union and other countries have imposed wide-ranging economic sanctions against Russia for its attack on Ukraine. Sanctions are being strengthened and increased from time to time. Thus, the European Union has already put into effect 10 packages of sanctions against the Kremlin.