Russia’s economy is on the verge of “hitting the ice,” warned billionaire businessman Oleg Deripaska, described as President Vladimir Putin’s “favorite oligarch.”
The businessman, whose fortune Forbes estimates at $2.4 billion, issued the warning in a post on his Telegram channel, saying that there was a general decline in commodity prices, including those that Russia exports, and that this could have a negative impact on the country’s economy.
Russian President Vladimir Putin (L), followed by businessman Oleg Deripaska, watches an agricultural exhibition on September 17, 2013 near Ust Labinsk, Krasnodar Region, Russia. The oligarch warned that the Russian economy was on the verge of a “collapse.”
Sasha Mordovets/Getty Images
According to the Carnegie Endowment for International Peace, the Russian economy suffered a blow in February 2022 after the full-scale invasion of Ukraine began, when the country was subject to more than 13,000 restrictions and became the most heavily sanctioned country in the world. Foreign exchange reserves were frozen and Russia was cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system.
The economy also suffered from the increase in military spending. After the ruble hit a 17-month low against the U.S. dollar in August, Russia’s central bank raised interest rates from 8.5 percent to 12 percent at an emergency meeting. Last month the bank again decided to increase it to 15 percent a year, citing the need for “a long period of maintaining tight monetary conditions in the economy.”
On November 17, Russian lawmakers approved a 2024 budget that includes a record amount of defense spending. The Russian Finance Ministry said total spending in 2024 will reach 36.66 trillion rubles ($411 billion), with a projected budget deficit of 0.8 percent of Russia’s gross domestic product, the Associated Press reported.
Newsweek has emailed the Russian Foreign Ministry for comment.
Deripaska warned that next year’s budget could be tight by 10 to 12 trillion rubles ($112.8 billion to $135.36 billion) due to the current drop in commodity prices. This could be caused by a general decline in global commodity prices, “muted economic growth” and “the tyranny of state capitalism, which raises prices for all its products and services and takes subsidies and subsidies from the budget,” the oligarch said.
He said the current situation was a “trap” that could only be escaped through “serious economic changes for which there appears to be no will yet.”
“What the world calls a ‘soft landing’ continues, with prices for all commodities falling. And we have a record tax revenue of 46 trillion rubles this year. The income situation will improve as early as next year.” [government revenues] will end up on the ice,” he added.
The IMF forecasts the Russian economy will grow 2.2 percent this year after contracting 2.1 percent last year, although it expects GDP growth to slow to 1.1 percent in 2024 slowed down.
Russia’s economy is heavily dependent on oil, but crude oil prices hit a four-month low last week despite international tensions over the Gaza and Ukraine conflicts.
The impact of Western sanctions against Russia is being felt across the country, according to a survey by the independent Moscow-based research group Chronicles, published a year after the conflict began. Support for the war is falling as Russians feel the resulting financial squeeze.
In a thread on
“A few comments on the Western sanctions against Russia. They are often misunderstood. Western politicians like to talk about ‘sanctions from hell,’ but good sanctions cost 2-3% of GDP every year, and that’s what they did for Russia, whose GDP.” “Stagnant since 2014,” he wrote on Wednesday.
“Putin and his ilk claim, on the contrary, that the sanctions only make them stronger (which is false) and that they must be abolished (which they should not). Your support shows that the sanctions are really taking effect.”
A third group, Aslund said, includes people who call for much tougher sanctions and claim, contrary to the evidence, that the sanctions don’t work and are useless.
“While they call for tougher sanctions, their arguments help Putin,” he said.
“A realistic expectation is: 1. The sanctions will cause the Russian economy to continue to stagnate. 2. Increasingly strict technology sanctions will make Russian technology increasingly outdated. 3. The financial and energy sanctions impose a harsh budget constraint on the Russian government,” Aslund wrote.
“But much more can and should be done. 1. The West should tighten and coordinate personal sanctions. 2. All military-industrial enterprises should be sanctioned. It is annoying that Rosatom is not sanctioned. 3. The energy and technology sanctions must be enforced,” he added.
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Newsweek strives to challenge conventional wisdom and find connections in the search for common ground.
Newsweek strives to challenge conventional wisdom and find connections in the search for common ground.
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