After nearly 3 years of severe economic and financial sanctions by NATO/EU Russia is advancing in Ukraine and the IMF has ranked the country as the world’s fourth-largest economy by purchasing power parity. Russia’s PPP share of the global economy now stands at 3.55%, ahead of Japan’s at 3.38%.
Russian economic growth has been outperforming all European countries and the USA. In the second quarter of 2024 the Russian economy grew 4% while the USA grew by 3%.
Three out of the four largest economies in the world are the BRICS members China, India, and Russia. The G7 has seen its share of the global economy falling from 50.42% in 1982 to just 29% in 2024 with the European Union showing a large fall and now falling further behind the (equally falling!) USA. No wonder the BRICS formation has attracted new members.
These developments have led the USA and the Europeans themselves to bypass their own sanctions. A report on goods from the USA and Europe available in a Russian supermarket listed: Coca Cola, Dr Pepper, Tabasco from US, Pringles, Ben and Jerries ice cream, UK and Italian biscuits, UK peanut butter!
BYPASSING SANCTIONS
GERMANY
According to the German SWR TV company Germany delivered more than 300 machines for the production of ammunition to Russia in 2023. Companies like Walter Maschinenbau, Vollmer, Fein GmbH and Heller were involved and sales were largely through Turkish intermediaries. The broadcaster identified more than 30 German companies whose machines ended up in Russia.
INDIA
In addition to earning vast sums by buying Russian oil at a discount and selling both crude and refined products on to the West, India is now the second largest supplier of critical technologies to Russia: Apparently when confronted on this by the US and Europe the Indians refuse to discuss the issue!
U.S. and European officials said Indian exports to Russia of items such as microchips, circuit boards and machine tools topped $60 million in April and May 2024, and jumped to $95 million in July. Only China sells more to Russia.
US and EU Officials said recent data showed that nearly a fifth of the critical technology entering Russia’s military-industrial complex was routed through India.
RUSSIAN OIL TANKER FLEET
Russia’s oil tanker fleet has seen a massive rise in tonnage traded since 2022. The FT reported that according to the Kyiv School of Economics the volume of Russian oil transported increased from 2.4mn barrels per day in June 2023 to 4.1mn in June 2024,
https://www.ft.com/content/fbad4462-5ed8-4f75-80d7-7945960727
COUNTRIES INCREASINGLY REFUSING TO JOIN SANCTIONS
Georgian Parliament Speaker Shalva Papuashvili said that Tbilisi refused to Impose Sanctions on Russia because they would greatly damage Georgia, not Russia!
“The demand put forward in the resolution regarding Georgia to establish bilateral sanctions against Russia is disgusting. <…> We would certainly plunge the people and the country into economic collapse and would most likely place it under the threat of military confrontation,”
Serbia, Slovakia and Hungary have all to a greater or lesser extent refused to apply EU sanctions.
EU PAYING FOR OWN SANCTIONS
Ironically other western countries are benefiting from EU gas sanctions against Russia whose gas is nevertheless arriving in Europe but at a higher price.
Russia says its revenue from oil and gas sales in August rose 20% to $8.7 billion compared to the same month last year, Bloomberg reported. This was due to the rise in prices for Russian Urals oil ($74 per barrel) and the increase in gas exports.
Gas supplies to China in July via the Power of Siberia gas pipeline set a historical record. According to Bloomberg gas exports to China increased by almost 33% compared to last year while pipeline gas supplies to Europe via Ukraine and Turkey increased by almost 6% to 2.67 billion cubic meters.
RUSSIA AHEAD IN AI?
As the great hope of a new industrial wave is seen in the West in Artificial Intelligence it was ironically a Russian team that won gold at the first International Olympiad in Artificial Intelligence (IOAI), which took place in Bulgaria from August 9 to 14 this year.
The team of students and graduates of Moscow Letovo School beat 40 teams from such countries as the USA, China and Japan.
THE RUSSIAN ECONOMY
Despite sanctions (the first were introduced in 2014 but then greatly increased after 2022) Russia’s external debt has reduced dramatically while internal reserves have substantially increased. Hardly what one would expect after some 15,000 sanctions applied by western economies!
I set out the reasons for Putin’s convincing election victory here:
The economy today is overheating and interest rates have risen substantially. Retail turnover in Russia shot up by 8.8% year on year during the first six months of 2024 to $299.3bn. Living standards have been rising across all social groups and the percentage living below the poverty line fell from 13.5% in 2016 to 8.5% in 2023. In addition to policies aimed at regional inequalities, many of the poorest regions have benefited from war spending on the defence industries which are located there.
COUNTER SANCTIONS BENEFITS
As western corporations were forced to abandon their Russian affiliates Russian state and entrepreneurs took over their facilities. The former VW plant is back at work under new owners and the new owner of the former Volvo Trucks plant in Kaluga, the Automobile Motor Society, plans by the end of 2024 to increase production to 2,000 trucks and 27,000 cars per annum.
In February 2024, more than 56 thousand passenger cars were produced in Russia, up nearly 15 thousand from the previous month and up 52,000 since its lowest level at less than four thousand vehicles in May 2022.
In the retail sector firms like McDonalds left and a Russian equivalent now flourishes under the name of Tasty!
In August 2014, Russian President Vladimir Putin imposed a food embargo banning the supply of meat, dairy products, fish, fruits, and nuts from the United States, the European Union, Canada, Australia, and Norway, after the first sanctions were imposed on Russia for the annexation. Since then Russia has more than doubled its agricultural exports. Between 2014 and 2023, agricultural production grew by 33.2%, and food production increased by 42.9%.
Over 10 years agricultural exports have increased 2.6 times – from $17.1 billion in 2013 to $43.4 billion in 2023. Russia is currently the world leader in the supply of wheat, peas, barley, oilseed flax, and frozen fish.
A GEOPOLITICAL DISASTER
All in all not a very successful use of sanctions as a strategic weapon but whether in the financial, agricultural, automotive, commodities or money transfer sectors the NATO/EU sanctions have failed. But they have weakened the Dollar, boosted Russia’s self sufficiency and driven ever more “Global South” countries towards Russia, China and the rising influence of the BRICS nations which are now determined to construct a rival economic order.
