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Will Putin’s War In Ukraine Destroy the Russian Economy?

Su-34
Russian Su-34. Image Credit: Creative Commons.

Analysts Say Western Sanctions Could Destroy Russian Economy – As the Russian invasion of Ukraine enters its second week, economic sanctions placed on Russian banks, financial institutions, and oligarchs by the United States and Europe have caused major financial uncertainty in Russia.

Unprecedented sanctions were placed on Russia’s Central Bank as well as some of the nation’s top oligarchs, political officials, and President Vladimir Putin himself. The threat of such sanctions was used to potentially prevent war, but now that the invasion of Ukraine has begun, the increasingly severe sanctions imposed by G7 nations will continue to put pressure on Russian leaders to scale back their war efforts in Ukraine.

Economists Say Sanctions Are Working

On Thursday, JPMorgan said that Russia’s economy will come to a halt as a result of the sanctions and that the country’s gross domestic product will contract by 35% by the second quarter of this year.

The Wall Street multinational investment bank said that Russia’s GDP will contract by 7% for the full year.

JPMorgan strategist Anatoliy Shey told clients in a memo that sanctions “have led to a stall in international trade” as well as “reduced output, and supply chain-disruptions.”

“The shock implies a lower potential output, which will be accompanied with a spike in prices — A credit crunch will add to pain, although there are signs that the run on banks is easing,” he said.

On Tuesday, French Finance Minister Bruno Le Maire told the French media that the primary aim of the country’s most recent round of sanctions against Russia was to “cause the collapse of the Russian economy” – and it is starting to work.

Liam Peach, an emerging markets economist at Capital Economists, said on Tuesday that Western sanctions are already having an impact.

“The ratcheting up of Western sanctions, alongside a tightening of financial conditions and the prospect of a banking crisis, mean that Russia’s economy is likely to experience a sharp contraction this year,” he said.

Daniel Tannebaum, the global head of sanctions at the Oliver Wyman consulting firm, also told NPR that the sanctions placed on Russia are unprecedented – and damaging.

“Never before have we seen such a significant economy be subject to such comprehensive actions, and at the present pace, we’re seeing Russia well on its way to being spoken of in the same breath as Cuba and Iran,” he said.

Is It Worth It for Putin?

Vladimir Putin will no doubt be weighing up his options at this point, and deciding whether the war in Ukraine will be a long or short-term conflict. With discussions between the two countries resulting in an agreement to establish safe corridors on Thursday, there are some signs that the conflict can be brought to and in the near term.

Long term, however, these sanctions could have a devastating impact on the Russian economy – and Putin will likely want to know whether the sanctions will remain in place should he withdraw his troops, and whether the revocation of these sanctions depends on whether or not he takes control over pro-Russian regions of Ukraine like Donetsk and Luhansk.

Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and report on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.

Written By

Jack Buckby is 19FortyFive's Breaking News Editor. He is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.

2 Comments

2 Comments

  1. Jacky

    March 4, 2022 at 9:58 am

    All this talk or stream of pronouncements about destruction of Russia, collapse of Russia, death of Russia,,,,mirrors almost exactly Hitler’s strikingly confident assessment just before he took on the USSR.

    But hitler turned out to be nothing but a fool, unable to fathom the immensely sheer size of his enemy, his ability to rush large numbers of fresh divisions from the east and the vastness of space and time needed to just even survive or stay in one piece in the depth (interior) of the Russian hinterland.

    Biden obviously is of the opinion he’s no hitler, but America’s very own super iron mike and thus he is on the right path and on the correct side of history.

    Whose economy would soon be destroyed by ukraine crisis depends on the price of energy, the supply, the ability of most manufacturing industries to withstand supply chain hiccups, the survival of the global airline and air travel industry, the ability to maintain stable food prices, the ability to keep viruses at bay,the ability to tamp down crowd trouble and social anarchy and much, much more.

    The answers by Biden and co to all the queries above are no, no, no, no, no and no-no.

    Thus like hitler, it is US and minions that are destined for collapse, and as for Biden, it’s bye-bye 2024, and bye-bye, and goodbye, white house.

  2. Alex

    March 5, 2022 at 4:53 am

    If Russia was preparing for sanctions, as they claim for any. So far we do not see any catastrophe in Russia. Russia laughs more at the sanctions than how the West wanted to cry.

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