The Russian economy is losing more and more ground on the world stage. Moscow is still keeping its head above water because of the sale of oil and gas to China, among others. But this is not sustainable in the long term, as the war in Ukraine is not over any time soon.
“Many young, well-trained forces have fled the mobilizations, have been injured or killed in the war with Ukraine,” says economist and Russia specialist Rob Rühl of Next Markets Advisory. “As a result, the opportunities for Russia to develop the techniques needed for the production of more advanced products have disappeared.”
According to Rühl, this development is disastrous for the families of the victims, but also for education, science and the economy. “Despite the oil and gas reserves, Russia will never become an economic superpower because of this.”
The Russian economy contracted by 1.9 percent in the first quarter of this year. In the same period last year, the economy grew by 3 percent. Moscow is increasingly suffering from Western sanctions because of the war in Ukraine.
For example, there are boycotts on the import of Russian oil, which puts pressure on income from the oil and gas industry for Moscow. There are also significant restrictions on the Russian banking sector and many Western companies have left the country. Since the outbreak of the war, the European Union has seized some 175 billion euros in assets from the Russian central bank.
Russia is trying to get closer to China
The International Monetary Fund (IMF) expects global isolation and lower energy revenues to dampen Russia’s economic growth prospects for the coming years.
The impact of sanctions is mitigated by increased investment and spending on defense, allowing Moscow to continue the war in Ukraine.
Russia is therefore increasingly seeking rapprochement with China, as Beijing does not care much about international sanctions. Earlier this week, both countries signed a bilateral agreement further expanding economic cooperation.
Energy deliveries to China increase by 40 percent
Because of the boycotts and sanctions, Russia is increasingly forced to orient itself towards China and India, says economist Rühl. “Trains full of white goods, cars and car parts are transported from China to Russia. Russia in turn sends trains with raw materials, such as coal, to China.”
2023-05-28 03:02:39
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