Russia is losing the economic war with the West and its economy is in catastrophic and irreversible decline even as it cuts gas supplies to Europe, according to a new report.
As panic spreads across Europe over the prospect of gas rationing and spiraling energy prices, it is indeed Russia that is on the ropes, with business in retreat and sanctions catastrophically crippling its economy.
And although Putin causes panic in European governments by strangling gas supplies, the strategy is unsustainable for the dictator, as he burns through reserves and his budget goes into deficit.
This is the verdict of a Yale author report which has looked beyond economic figures chosen by the Kremlin to access the private Russian language and other unconventional sources of data.
The report analyzed high-frequency consumer data, multi-channel controls, releases from Russia’s international trading partners, and complex shipping data mining to produce an economic analysis that measures the state of the economy of Putin and what the future might hold.
Vladimir Putin is losing the economic war with the West and his economy is in catastrophic and irreversible decline, even as he cuts gas supplies to Europe, a new report claims.
Putin’s strategy of choking Europe’s gas supply is likely to backfire, as Russia is much more dependent on Europe buying its gas than Europe is on Russian gas to heat its homes. US LNG imports already surpassed Russian pipeline gas in June
In order to prop up the Russian economy, Putin has been dipping into his foreign exchange reserves, worth almost 40% of Russia’s total GDP, which have already fallen by more than ten percent. $300 billion of these reserves held in Western banks were frozen at the start of the war
And the picture it paints is a sad one for the Russian dictator. Since its February 24 invasion of Ukraine, it has been locked in an economic war with the West that is being fought through sanctions, trade and energy supplies.
Although some analysts have denounced the resistance of the Russian economy to Western efforts to cripple it, experts at the Yale School of Management have concluded that “there is no way out of economic oblivion for Russia” .
“Defeatist headlines arguing that Russia’s economy has recovered are simply not facts,” the report said.
“The fact is, by any metric and at any level, the Russian economy is faltering, and now is not the time to slow down.”
All sectors of the Russian economy are affected: both its imports and exports are down, and its allies are not helping, and in some cases actively taking advantage.
And Putin has been burning his funds, on a rainy day, that he had set aside, precisely in case of a confrontation with the West, in an unsustainable effort to cover the cracks.
The government’s budget is in deficit for the first time in years, and that’s despite high energy prices that Putin has been manipulating by strangling gas supplies to Europe.
While this strategy is causing undoubted pain to European governments and the world in the form of inflation, it comes at a price that Putin cannot continue to pay indefinitely.
Russia’s position as a major commodity exporter has irrevocably deteriorated, the report says, as it now treats countries such as China and India from a “position of weakness” with the loss of its main markets
Imports of crucial inputs and technology needed for domestic manufacturing have mostly dried up, meaning Russian-made cars do not have ABS or airbags, and all sorts of consumer goods are unavailable to the middle russian
The Russian inflation rate skyrocketed after the invasion, and although it has been coming down, it still stands at 16% at a time when 9% in the US is considered a disaster.
All sectors of the Russian economy are affected: both its imports and exports are down, and its allies such as India and China are cases where they are actively taking advantage of Putin’s cheap oil and gas.
Russia’s gas exports to China amounted to only ten percent of their total, and China has been extracting a growing $35 discount even as Russia tries to make up for the loss of the European market..
“Despite Putin’s delusions of self-sufficiency and import substitution, Russian domestic production has ground to a complete halt with no capacity to replace lost companies, products and talent.
“The depletion of Russia’s domestic innovation and production base has led to rising prices and consumer distress.”
Imports of crucial inputs and technology needed for domestic manufacturing have mostly dried up, meaning Russian-made cars come without ABS or airbags.
The withdrawal of Western companies, which accounted for about 40% of Russian GDP, has reversed nearly three decades of foreign investment, which, along with a mass exodus of young and educated Russians, has massively eroded Russia’s economic base.
Russia is also unable to borrow the capital it will need to restart its crippled economy, with domestic financial markets – the worst performing in the world – priced in “sustained and persistent weakness”.
The picture across all sectors of the Russian economy is grim, and the only light at the end of the tunnel for Putin is the effectiveness of his propaganda channels, which could undermine European leaders’ willingness to maintain sanctions .
But as long as allied countries stand together to maintain and increase sanctions pressure against Russia, the facts are that, by any metric and at any level, the Russian economy is faltering, and now is not the time to slow down. ‘