Western sanctions are weighing on the Russian economy as the war in Ukraine enters its fifth month, and the country’s sinking GDP makes a full economic recovery difficult to envision, according to a new study by Yale academics including Jeffrey Sonnenfeld.
The exodus of over 1,000 global companies from Russia has severely damaged its economy, the authors argue, and any posturing of strength or resilience by Moscow is not an accurate reflection of what’s actually going on. Official data coming out of Russia are not true, they said.
“From our analysis, it becomes clear: business retreats and sanctions are catastrophically crippling the Russian economy,” the authors wrote.
Forty percent of Russia’s GDP is now gone thanks to foreign companies leaving Russia, and almost none of them are set to return soon. That represents a reversal of roughly three decades’ worth of foreign investment and capital.
Russia so far has published statistics that suggest strong oil and gas revenues have been able to stave off the drag of sanctions, though the study says otherwise. The Kremlin has had to rely on unsustainable and artifical capital controls to smooth over the economic weaknesses, the authors said.
“Russian domestic production has come to a complete standstill,” the authors said, adding that Russian imports have “largely collapsed.”
Meanwhile, Russia has been increasingly cutting off the tap for European natural gas via the Nord Stream 1 pipeline. But, according to the study, Russia needs Europe as an energy customer to a greater degree than Europe needs Russian natural gas.
Ultimately, the warring nation has little hope for an economic recovery, the researchers said.
In their words: “Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure.”
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