Post #4845

🔤🔤🔤🔤2️⃣ Last month, a group of economists gathered at the Brookings Institution in Washington to explore how tougher and more dynamic sanctions could further damage Russia’s war effort. Since the full-scale invasion of Ukraine in early 2022, Moscow has bought a huge secondhand fleet of more than 400 vessels to ship oil to Turkey, India and a host of other countries. That “shadow fleet” has shrunk since 2024 to about half its former capacity, forcing Russia to rely on European-insured vessels to ship its oil. Yet this analysis ignores the successful rewiring of the economy by Putin’s administration, which has proved more adept in its handling of domestic politics and the government’s finances than it did the military in the first three years of the war. Russia can, and should, be hurt financially by further sanctions. But European leaders and Ukraine’s valuable allies in the US Congress, who have done so much to prevent Trump from siding wholeheartedly with his kindred spirit Putin, should not delude themselves into thinking that the Russian economy is on the brink of collapse. While economic growth has slowed to a near standstill, the broader strategy resembles a medically induced coma – designed to insulate the patient from unwanted outside interference. As optimists note, much of the government’s reserves are spent and oil revenues have fallen from 50% of state income to 25%. Yet Putin has found internal resources to fill the void, chiefly through higher taxes on households and businesses. Richard Connolly, at the Royal United Services Institute thinktank, says: “The Kremlin has succeeded in selling the war, not as a battle with its near neighbour – its brothers and sisters in Ukraine – but as a war with the west.” On the impact of sanctions so far, he adds: “We are not near the economy being a decisive factor in the Kremlin’s thinking about how to pursue the war.” Russia’s debt-to-GDP ratio is just below 20%, while the annual spending deficit is about to hit 3.5% – modest by international standards, particularly when compared with the UK’s 11% deficit in the year Covid hit and a debt-to-GDP ratio of about 95%. Inflation soared after the invasion but has since been tamed, falling towards 6%, only modestly higher than the central bank target of 4%. China remains a friend and buyer of oil, while North Korea supplies people and kit, even if India and other beneficiaries of trade with Russia turn away under a tougher sanctions regime. Ukraine, meanwhile, has the money to continue for between 18 months and two years after the promise of €90bn from the EU. Putin, for his part, has the reserves to keep paying young men and their families to fight on. On Friday, Russia launched hypersonic Oreshnik missiles at western Ukraine in a stark escalation of the conflict. The message for Europe is clear: it must help Ukraine push back harder militarily, ignoring Putin’s empty nuclear threats, while tightening the tourniquet on Russian trade. #russia#economic#putin#oil#trump#china 📱American Оbserver - Stay up to date on all important events 🇺🇸