How Russia Profited from the Ukraine War: Implications and Economic Impact

Thea Fathanah Arbar, CNBC Indonesia

Tuesday, 12/12/2023 09:55 WIB

Photo: Russian President Vladimir Putin attends a ceremony to resume tram operations in the Sea of Azov port city of Mariupol in the Russian-controlled Donetsk region, via video link from Saint Petersburg on May 2, 2023. (SPUTNIK/AFP via Getty Images/MIKHAIL KLIMENTYEV)

Jakarta, CNBC Indonesia – During the prolonged war in Ukraine, Russia received a series of embargoes and economic sanctions from Western countries. However, the Red Bear Country reportedly made a big profit from the conflict.

Huge profits were made after Moscow diverted most of its trade flows to the eastern region following the collapse of most supply chains in European markets due to Western sanctions.

The country led by President Vladimir Putin has successfully reimposed some capital controls that require exporters, including major oil producers, to sell their earnings from foreign trade in the domestic market to secure foreign currency inflows.

Thanks to this, the ruble managed to strengthen around 5% against the United States (US) dollar in October.

In addition, it is reported that Moscow’s monthly income from oil exports is now greater than before the invasion of Ukraine. This shows the failure of measures to curb their war funding.

In the first 10 months of 2023, Russia’s transaction balance recorded trade, investment and transfers to the country amounting to US$53.8 billion or around IDR 834 trillion.

After reaching its highest level in September, Russia’s surplus even exceeded US$11 billion in October alone. The country’s central bank even revised its transaction projections from US$45 billion to US$60 billion due to soaring oil prices.

Thanks to strict sanctions, Moscow’s revenue from oil and gas sales instead reached US$17.7 billion in October, surging to its highest level in a year and a half despite forecasts of a large deficit.

Previously, the Minister of Tourism and Creative Economy (Menparekraf) Sandiaga Uno, via his personal Instagram account, also said that Russia made a profit of US$5 billion or Rp. 74 trillion per day from the Ukraine war.

He said the profit was made from the increase in world oil prices that occurred as a result of the war. This increase provides huge profits for Russia, which is also the third largest oil producer in the world after the US and Saudi Arabia.

Sandiaga said, even though Russia is currently selling oil below market prices, the third largest oil producing country still makes a profit of US$6 billion or around Rp. 89.2 trillion per day. Thanks to these huge profits, it is not surprising that the Russian-Ukrainian war lasted so long.

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