Russia’s war economy has gained time, but cannot endure – Faisal Islam


It was March of 2022. The Russian money (rouble) lost a lot of its value, and the big companies Gazprom and Sberbank lost almost all of their worth in London. Lines started to form at the ATM machines in Moscow. The rich people’s expensive boats, sports teams, big houses and even their credit cards were taken away.

Russia’s economy went into a big downturn.

This happened right after the West tried really hard to control Russia’s money because they invaded Ukraine.

At the center of the situation was taking control of Russia’s official money from other countries, including freezing the central bank’s $300 billion in reserves.

Western governments did not say “economic war”, but it seemed like they were fighting with the Kremlin over money. It was better than if the nuclear states had fought directly.

A lot has changed in the economy in the past two years.

This week, President Putin said in a long interview that Russia has the fastest growing economy in Europe, and he seemed very happy about it.

Last week, the International Monetary Fund (IMF) said that the Russian economy is doing well and they expect it to grow by 2. 6% this year, which is higher than they previously thought.

According to the IMF, the Russian economy grew faster than the economies of the G7 countries last year, and it is expected to do the same again in 2024.

These are more than just numbers. Russia has been using its economy to strengthen its military presence in Ukraine, especially by building defense lines in the east and south of the country. This has led to a deadlock in the conflict and the expectation that it will continue for a long time.

Western leaders say that this model cannot continue for much longer. But how long can it last.

Russia changed its economy to focus on supporting the war. The Russian government is spending more money than ever before since the Soviet Union broke up.

The amount of money being spent on the military and security is now as high as it was during the late Soviet era, up to 40% of the budget. Other government services for people have been reduced to pay for making tanks, missiles, and defenses in Ukraine.

Furthermore, even though Western countries have put limits on Russian oil and gas, the money from selling these resources has still been coming into the government’s bank account.

The tankers are now going to India and China. They are getting paid more in Chinese yuan than in US dollars.

Russian oil production is still at 9. 5 million barrels every day, which is not much lower than before the war. The country has avoided sanctions by purchasing and using a large number of tankers that are not officially registered.

The government’s finance department said that in January, they collected more taxes from oil and gas than they did in January 2022. This was just before the war started.

The money coming into Russia from selling oil, gas, and diamonds has also helped to make the value of the rouble less strained.

Western leaders strongly believe that this cannot continue, but they understand how it is affecting things.

One important person said in secret that Putin will have a better year in 2024 than we thought. He did a better job of organizing his business than we expected.

Russia showed something.

However, this way of economic growth has made Moscow rely a lot on money from selling oil, on China, and on spending money on wars instead of making useful things.

As the need for oil and gas goes up and other countries in the Arabian Gulf start producing more, Russia will have to face challenges.

The GDP goes up when tanks and shells are made and used in eastern Ukraine, but this doesn’t help the country’s economy.

In the meantime, Russia has lost some of its smartest people to other countries.

The West’s plan is not to attack Russia’s economy directly, but to play a game of cat and mouse to limit their access to technology, increase their expenses, reduce their income, and make the conflict difficult for them in the long run.

One official from the US said they would prefer if Russia used its money to buy oil tankers instead of tanks. In the oil market, the goal of policy is not to stop India, for instance, from purchasing Russian oil but to reduce the money going to Russia’s military from that trade.

However, this strength and deadlock may continue for the rest of the year. It fits with the plan in the Kremlin to wait for a new US president and less money from the West for Ukraine’s defense.

That’s why people are now focusing on the important role of the billions of dollars in Russian money that is frozen.

Ukrainian President Volodymyr Zelensky said last month that if the world has $300 billion, they should use it to fund Ukraine’s rebuilding. He wants to use the frozen funds for this purpose.

The Chancellor of the UK, Jeremy Hunt, and the Foreign Secretary, David Cameron, support the decision.

Lord Cameron said: “We have stopped these assets from being used. ” The question is, will we use them.

He said that using some of this money now is like getting an early payment for Russia’s debt for invading Ukraine. This money could be used to help Ukraine and also save money for Western taxpayers.

The G7 wants its banking experts to study and explain the details. Central bankers are nervous. A top money expert warned me that there could be dangers in using the dollar as a weapon. Normally, central banks are protected from these kinds of actions by government authority.

A plan is being made to use the money made from investments to raise a lot of money for Ukraine.

But it is a delicate balance. If Russia’s money is taken like this, what will other countries think about keeping their money safe in Western banks. This could worry countries in the Gulf, Central Asia, or Africa.

These relationships are really important for global money flow, moving a lot of money around to pay for energy worldwide. Putin wanted to say that China is becoming a choice for countries that are not part of the West.

The Russians also said they will go to court if anything is taken from them, and they will take assets from Western companies in Russian banks in return.

Understanding the fight for control of Russia’s economy is really important for knowing what’s going on in this conflict and the global economy.

Russia’s economy during war is not able to last a long time, but it has given the country more time. The Western countries are going to increase their efforts, because Russia has shown unexpected strength.

The way money is growing will have big effects, not just in Russia and Ukraine, but in other places too.


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