Skip to content
Magazine
Friday, August 1, 2025
SUBSCRIBE
  • About Us
  • Belgium News
    • Belgium Police News
    • Brussels News
  • EU Institutions News
    • European Commission News
    • European Parliament News
    • European Council News
  • Europe News
  • World News
  • Belgium Business News
  • Culture and Society News
  • In Depth
    • Ambassador’s Corner
    • The American Angle
    • Sustainable Perspective
    • Europe With Transparency
    • Place de la Bourse
    • The Macro-Economist
    • Southeast Europe
  • About Us
  • Belgium News
    • Belgium Police News
    • Brussels News
  • EU Institutions News
    • European Commission News
    • European Parliament News
    • European Council News
  • Europe News
  • World News
  • Belgium Business News
  • Culture and Society News
  • In Depth
    • Ambassador’s Corner
    • The American Angle
    • Sustainable Perspective
    • Europe With Transparency
    • Place de la Bourse
    • The Macro-Economist
    • Southeast Europe
SUBSCRIBE

Russia’s Tanking Economy: Sanctions Begin to Bite?

Sam Vaknin by Sam Vaknin
11 May 2024
in Opinion
RUB USD exchange rate crash because of Russian invasion of the Ukraine. Declining currency chart. Currency collapse. Concept, 3D illustration

RUB USD exchange rate crash because of Russian invasion of the Ukraine. Declining currency chart. Currency collapse. Concept, 3D illustration

Belgium (Brussels Morning Newspaper) A mere four months into 2023, Russia’s entire forecast annual budget deficit is used up, conceded its beleaguered Ministry of Finance on May 10. The target of 2% of GDP in terms of shortfall now looks like a pipedream. 

Federal revenues shrank by a whopping 22% compared to the same period in 2022. The government’s intake amounted to slightly less than 12 billion USD per month, according to Moscow Times. 

Compared to the same timeframe last year, the energy (oil and gas) sector endured a devastating plunge of 52% in its revenues during these months, to less than a total of 30 billion USD. 

The meager 5.5% increase in income from the other, non-energy, sectors of the economy – a paltry 72 billion USD – could not offset this precipitous drop.

In the meantime, Moscow spent a mind-numbing 145 billion USD in the first four months of this year. 

The ineluctable result: a budget deficit of 45 billion USD, one of the largest ever in the history of the country.

Russians would be surprised to learn that the economy is in trouble. Military manufacturing and explosive state spending camouflage the true dismal state of affairs. 

Nor did inflation rear its ugly head yet. But the central bank’s ability to cut rates will now be severely hampered, confronted by fiscal haemorrhaging. 

But the situation is bound to get much worse if energy prices remain depressed. The government’s attempts to rein in spending are laughable in the face of the military debacle in Ukraine.

Sanctions are beginning to bite as well.

Handcuffs,On,The,Russian,Flag,Look,From,Above,As,A
Credit: Shutterstock

Consider the agricultural sector: Russian Agricultural Bank (Russkolkhozbank) was booted from the SWIFT system; there is a ban on exports of agricultural machinery and spares to Russia; insurance of Russian ships and cargo is restricted as is access to many ports; the pipeline pumping ammonia from the Russian city of Togliatti to the Ukrainian port of Odesa is turned off; and the accounts of Russian fertilizer companies are frozen.

So, the two pillars of Russia’s defiant response to Western sanctions are crumbling: surging public spending and spiking oil revenues. 

When the USA and the EU imposed a price cap of 60 USD per barrel of Russian oil, Putin laughed it off. He is laughing no more. It proved to be surprisingly efficacious in cutting into Russia’s proceeds. 

Calling a halt to the war in Ukraine might actually make matters worse as military-industrial production winds down and soldiers are demobilized and rejoin the civilian workforce.

The only way out of this conundrum is a sharp rise in the prices of energy products in Eurasia’s markets. 

Fears of a global recession, struggling sectors of the economy in China (real estate) and in the West (banking), as well as a still stubborn inflation all portend ill as far as this scenario is concerned. 

But, ironically, the aforementioned price cap, coupled with OPEC+ (including Russian) production cuts can deliver this salvation by the end of this year. 

The adversaries of the Russian kleptocracy should not celebrate yet, though. Putin’s incentive to hang on to power via repression at home and military aggression abroad would be only buttressed as he is cornered into a nosediving, solipsistic economy. 

Regrettably, for numerous reasons, regime change should be ruled out as a strategic goal at this stage: both the West and Russia are not ready for it.

But there are calls for innovative solutions to this quagmire, incentivizing prosocial behaviors rather than penalizing antisocial ones. 

Western buyers can put aside the differential between the cap on Russian oil and its market price. This fund will be released to Russia only when the war ends and the regime changes. It will be used to defray the costs of demobilization and disarmament.  

The removal of the sanctions must be tied to a roadmap of Russia improving behavior.

Sanctions must be surgically waived on opposition figures, locales, and activities and, as gestures of goodwill, in response acts of defiance by oligarchs and siloviki who are targeted right now.

Similarly, grace periods on sovereign bond repayments and concessions on foreign direct investment (FDI) in Russia should offer a carrot at least as substantial as the sanctions stick.

The war in Ukraine may well constitute a proxy war between the West and Russia. But it is also a veritable morality play, a clash of values and civilizations, and a defining moment as to the shape of things to come. A Russian meltdown is in no one’s interest.

Dear reader,

Opinions expressed in the op-ed section are solely those of the individual author and do not represent the official stance of our newspaper. We believe in providing a platform for a wide range of voices and perspectives, even those that may challenge or differ from our own. As always, we remain committed to providing our readers with high-quality, fair, and balanced journalism. Thank you for your continued support.Sincerely, The Brussels Morning Team

Related News:

  • Western companies begin pulling out from Russia
  • Merkel congratulates Scholz as coalition talks begin
  • Greek retail chains begin rationing flour and sunflower oil sales
  • Summit Highlight: EU Leaders Agree to Begin Accession Talks with Bosnia
Tags: Brussels LatestEurope-FeatureNewsOpinion section
Next Post
Why Do My Teeth Hurt At Night

Why Do My Teeth Hurt At Night

Latest post

EU-elections-UK

EU elections: UK looks on from the “outside”

1 year ago
Galeries-Royales-Saint-Hubert

What Makes Galeries Royales Saint-Hubert an “Institution”?

1 year ago

Most Read

    Follow Brussels Morning
    Facebook Twitter Youtube Linkedin

    Browse Important News

    Belgium News
    Brussels News
    Culture and Society News
    Economy News
    EU Institutions News
    European Commission News
    European Council News
    European Parliament News
    Europe News
    Health And Fitness News
    Southeast Europe News
    Sustainable Perspective
    World News
    Diplomacy News
    US Elections News

    About Us

    Brussels Morning is a daily online newspaper based in Belgium. BM publishes unique and independent coverage on international and European affairs. With a Europe-wide perspective, BM covers policies and politics of the EU, significant Member State developments, and looks at the international agenda with a European perspective.

    More Info

    • About Us
    • Advertise With Us
    • Contact Us
    • Cookies Policy

    Join Our Newsletter

    Brussels Morning Newspaper – All Rights Reserved © 2024

    No Result
    View All Result
    • Home
    • About Us
    • Belgium News
      • Belgium Police News
      • Brussels News
    • Brussels Bubble
      • European Parliament News
      • European Commission News
      • European Council News
    • Wider Europe
      • Member States
    • World News
    • Business & Society
    • Europe With Transparency
    • Culture & Society
    • Policy Talks
      • Place de la Bourse
      • The Macro-Economist
      • Sustainable Perspective
      • Ambassador’s Corner
      • The American Angle
      • Southeast Europe
    • Print Magazine

    Brussels Morning Newspaper - All Rights Reserved © 2020

    We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
    Cookie settingsACCEPT
    Privacy & Cookies Policy

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT