Vladimir Putin Says Sanctions Haven’t Hurt; Russia’s Economy Says Otherwise

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It’s hardly news that one should take every word out of the mouth of Vladimir Putin with a grain of salt. Thus, last week, when he proclaimed that Western sanctions against Russia — what he called “an economic blitzkrieg” — had failed, most economists reached for a value-size salt shaker.

The latest figures suggest Putin’s bluster is the bluff of a mostly toothless bear.

Nothing to See Here

A few days ago, Russian authorities abruptly suspended the publication of statistics on the country’s debt, trade, and oil production. The Bank of Russia cut the amount of data local banks have to disclose and stopped publishing its foreign-debt payment schedule, a slightly sensitive topic given the country is teetering on the brink of default after trying to make an interest payment on dollar-denominated bonds in rubles — akin to servicing a Mustang with LADA parts. The Federal Assembly, controlled by the pro-Putin United Russia party, is fast-tracking a bill to ban lenders from sharing data abroad.

In total, the actions amount to what is essentially a cover-up to mask the increasing toll of unprecedented sanctions levied against the nation:

  • Russia’s Ministry of Economic Development reported that the 17.5% annual inflation in Russia as of April 8 was the highest since 2002. By comparison, the International Monetary Fund expects consumer prices in developing countries to increase by 8.7% in 2022.
  • The Mayor of Moscow said his city alone will face the loss of 200,000 jobs as a result of foreign companies pulling out of Russia. The country’s failure to service its dollar bonds — which S&P has already ruled a default — will hamstring its ability to raise debt for years.

Russia does sport one trump card, at least for the moment. “As long as Russia can continue to sell oil and gas, they will muddle through this,” Michael Alexeev, an economist at Indiana University, told the Associated Press. But even Russia’s oil and gas revenues — which account for 45% of the federal budget — are waning.

Gas Running Out of Steam: Russia still makes $850 million a day from oil and gas sales to Europe, but many countries are now rapidly shifting to other sources. Russian refiners are pumping the brakes on processing all that pumped crude, taking 1.7 million barrels of production per day offline as of the week of April 8, because the country can’t find enough buyers, according to S&P Global Commodity Insights. The International Energy Agency forecasts nearly 3 million barrels in Russian production per day will be turned off starting next month.