Why Russia’s Economy Hasn’t Collapsed Under The Weight Of Sanctions

It has been almost three months since Russia invaded Ukraine, and despite Ukraine's notable resistance and the implementation of an aggressive package of sanctions against Russia, there seems to be no end to the war in sight. So far, much of the analysis has focused on Russia's military failures, Zelensky's impressive leadership, and the surprisingly unified response from the international community. What has been relatively overlooked is the resilience of the Russian economy when it comes to weathering sanctions. In a globalized world already suffering from supply chain problems, energy shortages and an economic downturn, it is remarkable that the sanctions failed to bring Russia's economy to its knees.
Before delving into how Russia has so far managed to avert an economic catastrophe, it is necessary to understand the magnitude of the sanctions it faces. Perhaps most notable is the sanctioning of Russia's central bank, an unprecedented move that essentially froze over $300 billion of the country's foreign exchange reserves. Significantly, the sanctions also banned the export of high technology, power industry equipment and aerospace technology to Russia. In addition to these export bans, the US has banned imports of Russian crude oil, gas, coal, commodities and other energy products from Russia. Recently, the European Union committed to ban coal imports from Russia. Partly as a result of these sanctions, international companies such as McDonald's, Coca-Cola, Apple and BP have all left the country. Unlike the sanctions imposed on Russia after the invasion and annexation of Crimea, these sanctions had teeth and had an immediate impact. The Russian ruble lost nearly 50% of its value against the dollar, the Moscow stock market shut down and it appeared the West was succeeding in fomenting economic chaos in Russia. But then, remarkably, the ruble began to recover.
Today, the ruble is back above pre-war levels, leading observers to wonder how Russia's economy survived. This is not to say that the ruble is a true indicator of Russia's economic health, but when it comes to economic issues, the illusion of stability is almost as important as stability itself dollar trades suggest Russia's "real economy" is suffering. However, other indicators such as the central bank's interest rate cut from 17% to 14% and reports of healthy spending in cafes, bars and restaurants suggest that the Russian economy is holding up remarkably well. How did Russia do it?
Also Read: Russia Will Force Oil Buyers to Pay More if EU Imposes Tariffs
First and foremost, it is Russia's unique position as a net exporter of both energy and essential foodstuffs that has allowed it to stay afloat. For example, if a net importer like China had been hit with similar sanctions, deindustrialization, famine, and mass unrest could eventually be expected. It would be a disaster. Russia, on the other hand, is uniquely positioned to survive this economic onslaught. It is also able to run a massive trade surplus because of its energy exports and because oil and gas prices are at multi-year highs. Strong trade ties with both China and India have ensured ample foreign exchange flows to Russia to calm any fears of bankruptcy. More foreign exchange is coming from the EU, which just can't wean itself from Russian natural gas and is fighting to ban Russian oil imports. Of course, all this foreign exchange would be worthless if Russia could not use it due to sanctions. This fact prompted rating agencies to warn of an imminent default by Russia as early as April. But here, too, Russia was able to buck expectations by exploiting a sanctions loophole.
The story goes on

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