The authors claim their work casts doubt on Moscow’s claims that the economy remains robust and that the West is suffering more from “a war of economic attrition”.
What does the study say?
The Yale team of experts used consumer data and data from Russia’s international trade and shipping partners to measure economic activity five months after Moscow launched its invasion of Ukraine. They found that Russia’s position as a commodity exporter had been irreparably eroded as it was forced to shift from its main markets of Europe to Asia. The study said that Russian imports have largely collapsed since the start of the war and that the country faces severe challenges in securing critical inputs, spare parts and technology. “Russian domestic production has completely ground to a halt without the ability to replace lost businesses, products and talent,” the group found. “The elimination of Russia’s domestic innovation and manufacturing base has led to soaring prices and consumer anxiety,” the authors add. With the exit of about 1,000 global companies, Russia lost companies that account for about 40 percent of gross domestic product, according to the study.
How Putin’s War Affects the Global Economy Shopping is getting more and more expensive German consumers are feeling the pinch of the rising cost of living. The consequences of the war in Ukraine and the sanctions against Russia did not go unnoticed. In March, Germany’s inflation rate hit its highest level since 1981. The German government wants to move quickly with an embargo on Russian coal, but is still fighting over whether to ban Russian gas and oil imports. How Putin’s War Affects the Global Economy Hurry up to fill up in Kenya Cars queue at gas stations in Nairobi. Here too, people are noticing the effects of the war in Ukraine. Fuel is expensive and in short supply – not to mention the food crisis. At the UN Security Council, Kenya’s UN ambassador Martin Kimani expressed his concern, comparing the situation in eastern Ukraine to the changes that took place in Africa after the end of the colonial era. How Putin’s War Affects the Global Economy Who will secure supplies to Turkey? Russia is the largest producer of wheat in the world. Due to the ban on Russian exports, the price of bread is now rising in many places – including here in Turkey. International sanctions are disrupting supply chains. Ukraine, too, is one of the world’s five biggest wheat exporters, but the war with Russia means it cannot transport supplies from its Black Sea ports. How Putin’s War Affects the Global Economy Wheat prices are soaring in Iraq A worker stacks sacks of flour at Jamila Market, a popular wholesale market in Baghdad. Wheat prices have soared in Iraq since Russia invaded Ukraine, as the two countries account for at least 30% of the world’s wheat trade. Iraq has remained neutral so far, but pro-Putin posters are now banned in the country. How Putin’s War Affects the Global Economy Demonstrations in Lima Protesters clashed with police in Peru’s capital Lima. Among other things, they are protesting the rise in food prices. The crisis was exacerbated by the war in Ukraine. Peruvian President Pedro Castillo temporarily imposed a curfew and state of emergency, but when these were lifted, protests resumed. How Putin’s War Affects the Global Economy State of emergency in Sri Lanka In Sri Lanka, too, people have taken to the streets to express their anger. A few days ago, some even tried to break into the private residence of President Gotabaya Rajapaksa. Growing protests against the rising cost of living, fuel shortages and power outages prompted the president to declare a national emergency and ask India and China for help in supplying the resources his country needs. How Putin’s War Affects the Global Economy The Scots have had enough! There were protests against rising food and energy prices in Scotland too. Across the UK, unions are organizing demonstrations to protest the rising cost of living. Brexit had already led to price increases in many areas of life and the war in Ukraine will make things worse. How Putin’s War Affects the Global Economy How much does the fish make? The British have reason to worry about their favorite national dish. Around 380 million portions of fish and chips are eaten in the UK each year. But tough sanctions now mean prices for Russian whitefish, cooking oil and energy are rising. In February 2022, UK inflation was 6.2% year-on-year. How Putin’s War Affects the Global Economy Economic opportunity for Nigeria? A trader in Ibafo, Nigeria packs flour for resale. Nigeria has long wanted to reduce its reliance on imported food and make its economy more resilient in other areas as well. Could the war in Ukraine offer opportunities for Nigeria? Aliko Dangot, Nigeria’s richest man, recently opened the country’s largest fertilizer factory and hopes it will have many buyers.
The report said Putin is resorting to apparently unsustainable, dramatic fiscal and monetary intervention to smooth out structural economic weaknesses. He added that the Russian state budget was in deficit for the first time and the Kremlin’s finances were “in much, much worse shape than conventionally realised”. Meanwhile, the authors said Russian financial markets – looking forward – were the worst performers in the world, limiting the ability to harness new investment to revive the economy.
“Cherry-picked” statistics.
“Since the invasion, the Kremlin’s economic releases have become increasingly selective, selectively rejecting unfavorable metrics while releasing only those that are more favorable,” the study said. “These statistics chosen by Putin are then carelessly touted in the media and used by a host of well-meaning but careless pundits to create predictions that are overly, unrealistically favorable to the Kremlin.” New data on Russian industrial production for June showed it was down significantly in a number of sectors compared to last year. For cars, production fell by 89%, while for fiber optic cables it fell by almost 80%.
What’s next for the Russian economy?
The authors of the Yale study said Russia had no way out of “economic oblivion” provided Western allies remained united on sanctions. “The defeatist headlines that Russia’s economy has recovered are simply not substantiated – the facts are that, by any measure and at any level, the Russian economy is faltering and now is not the time to hit the brakes,” he said. A separate study by the German Institute for International and Security Affairs published in June also showed that the Russian economy was in dire straits, despite initially holding up well in the face of sanctions. “The effects of the sanctions are just starting to play out: supply chain problems are intensifying and demand is falling fast.” “In the long run, Russia’s economy will become more primitive as it becomes partially disconnected from international trade,” he said. “To avoid social tensions, the government will step in to support Russian businesses, leading to more protectionism and a bigger state footprint in the economy.”
