Russia facing 'economic oblivion' due to sanctions: study

26 July 2022

Five months have passed since Russian forces, on orders from President Vladimir Putin, launched a full-fledged invasion of Ukraine. For all the misery Putin has caused Ukraine, the war hasn’t gone well for Russia. Ukraine’s military has turned out to be much more robust than Putin anticipated, and the Russian economy has suffered major pain thanks to the punitive sanctions that the Biden Administration and its allies in the North American Treaty Organization (NATO) have enacted in response to the invasion. Ukrainian President Volodymyr Zelensky, in late July, alleged that the number of Russian troops killed in Ukraine since the invasion was approaching 40,000.

Moreover, NATO — a 73-year-old alliance that former President Donald Trump wanted to pull the U.S. out of — has grown in size. For decades, Sweden and Finland were adamant about staying out of NATO; after the Ukraine invasion, they changed their mind and applied for membership.

The amount of damage the Russian economy has suffered thanks to the Biden/NATO sanctions is the focus of a new 118-page report authored by Yale University researcher Jeffrey Sonnenfeld and co-authored by 18 of his associates.

In the report, released on July 20, the researchers note, “Russian imports have largely collapsed…. Russian domestic production has come to a complete standstill.”

That economic pain doesn’t mean that Putin will decide to discontinue the invasion of Ukraine and withdraw Russian forces from the country. Putin is quite stubborn where the invasion is concerned. But the Yale paper demonstrates that sanctions are having a harsh effect.

“Looking ahead,” the report says, “there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure.”

But the report notes that the United States’ European allies are also feeling some of the pain, as Putin has responded to the sanctions by reducing the flow of natural gas to European countries — which are more reliant on Russian fossil fuels than the U.S. On July 25, the New York Times’ Melissa Eddy reported that Gazprom, Russia’s state-owned gas monopoly, had decided to further reduce the amount of natural gas it sends to Germany.

Axios reporter Felix Salmon, discussing the report in an article published on July 26, observes, “Russia has announced further cuts in its supply of natural gas to Europe. But the paper makes the case that Russia needs Europe to buy its natural gas more than Europe needs Russian natural gas to buy. Because natural gas is ‘a highly non-fungible commodity,’ delivered through pipes that take decades to build, Russia has very few alternative export markets for its gas, and 83 percent of its natural gas exports go to Europe. Europe, on the other hand, imports just 46 percent of its natural gas from Russia.”

Salmon adds, “The bottom line: The economic repercussions of Russia's war of aggression in Ukraine are being felt in all countries. But they're particularly devastating in Russia — with little, if any, future upside so long as sanctions remain in place.

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