Putin May Bluster, but Western Sanctions Are Working and Dragging Russia to Economic Collapse.

The departure of foreign companies cancels almost three decades of foreign investment.

Vladimir Putin continues to boast that Western sanctions do not affect the Russian economy. The reality is quite different, and you have to see the increasing communications on this subject from those close to Putin as a sign of an economy that is approaching collapse in reality.

A study from Yale University points out two interesting things. The first is that Western sanctions against Russia are working. The impact on the Russian economy is much greater than the official figures in Russia would have us believe. The second is that the pivot to China that Putin wants to cling to seems unrealistic.

“A common narrative has emerged,” say the authors of this study: economic sanctions imposed by Western countries against Russia since the invasion of Ukraine, would have created “a 'war of economic attrition that is wreaking havoc in the West', given the supposed 'resilience' or even 'prosperity' of the Russian economy.” “This is simply not true,” say these experts from the Yale School of Management, denouncing “statistics selected” by the Russian president, Vladimir Putin.

Vladimir Putin would lie to get by with reality? This should come as no surprise given the track record of the Kremlin dictator.

According to the analysis made by Yale experts, “corporate departures and sanctions cripple the Russian economy, both in the short and long term. Economic sanctions, for example, deter many companies and countries from continuing to trade with Russia. And the country is struggling to obtain spare parts and raw materials or certain essential technologies.” The picture is bleak: “Despite illusions of self-sufficiency and import substitution, Russian domestic production has come to a complete halt and cannot replace lost companies, products, and talent.”

Fiscal and monetary interventions are unsustainable in the long term

The companies that have left the country “represent about 40% of its GDP, canceling out almost all of the three decades of foreign investment,” the authors of this study also argue. To compensate for these weaknesses, Vladimir Putin “has resorted to unsustainable fiscal and monetary intervention,” and the Kremlin's finances “are in a much more desperate situation than is admitted.”

As for the “pivot to China” desired by Vladimir Putin, it could be based on “unrealistic optimistic assumptions.”

“Russia is a minor trading partner for China, and most Chinese companies cannot risk violating U.S. sanctions,” the authors describe. They also point out that Chinese companies “lack many of the upstream technologies needed to maintain and service Russian oil and gas supplies.”

According to the International Monetary Fund, Russia is doing better than expected this year, with an expected GDP recession of 6.0% in 2022, according to its latest forecasts published in early August 2022, far less than the 8.5% plunge the organization was expecting in April 2022. But the recession in 2023 is likely to be deeper than expected, and the trend will accelerate in subsequent years if this war continues and Western sanctions continue to weigh on Russia.

The war of attrition will be in favor of Ukraine

Despite what Vladimir Putin says, the war of attrition that is coming in Ukraine will be to the disadvantage of his army. The more time passes, the more the Russian economy will collapse. The more difficult it will be for the Russian army to finance the war effort desired by Putin.

The reality is that if the balance of power is in favor of Russia, especially Europe's dependence on Russian gas, it will eventually reverse itself in 12 to 18 months. This will be the opportunity for Ukraine to lead a great counter-offensive allowing it to take back the territory illegally annexed by Putin's Russia.

For this scenario to come true, the key is for the West to remain united and welded behind Ukraine. This is why Putin is multiplying his attempts to destabilize the European people, to see the support of European countries for Ukraine weaken over time.

Putin challenges the West in the context of this war in Ukraine. It is up to the West to respond in the only way Putin can understand: by force. The future of freedom and democracy in Europe is at stake.

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