In a June 22 to the annual forum of BRICS (Brazil, Russia, India, China and South Africa), Russian President Vladimir Putin painted a rosy but distorted picture of Russia’s economy and relationships with foreign partners.
“I would like to stress that Russia's strategy has not changed: while strengthening our economic, technological and scientific potential, we are ready to work openly with all bona fide partners based on the principles of mutual respect for each other's interests, the primacy of international law, and equality for all nations and peoples,” Putin said.
But that statement leaves a false impression of Russia’s economic woes. Moreover, Putin’s war on Ukraine, , is widely regarded to be a .
Putin’s claim that his policies have strengthened Russia’s economy and relationships with foreign partners is misleading.
While it’s true that Russia has found willing buyers for its oil – importantly, China – it is undeniable that have slammed the .
For starters, more than 1,000 foreign companies have fully or partially ceased operations or left Russia since the invasion began on February 24. As of June 24, only about 400 foreign firms were continuing to do business in the country, according to a .
The sanctions will likely wipe out 15 years of gains in the Russian economy, on June 8, citing recent analysis by the Institute of International Finance, a global association of trade groups and banks.
As a result of the ongoing “exodus of companies, a Russian ‘brain-drain’ and collapse in exports,” Russia’s economy “will shrink 15% this year and 3% in 2023,” the report said.
Some analysts predict that despite oil purchases by China and India, Russia could soon default on debt obligations. , a senior researcher at the Netherlands’ Hague Center for Strategic Studies, tweeted on June 24 that Moscow will likely not be able make payments on Eurobonds due June 27:
“A revolutionary default: because of #EU and US sanctions, #Russia is heading to a default on its $ 40 billion bond payments next Monday (27 June), something not seen since the 1917 Russian Revolution. In effect this will turn Russia into a ‘toxic asset’ for (Western) #investors,” Salemon said.
The Eurobonds at issue are denominated in U.S. dollars, meaning Russia must make monthly interest payments in U.S. currency. However, in April, the U.S. Treasury Department banned Russia from making dollar debt payments, a measure which, Bloomberg News reported, was “intended to force Russia into either draining its domestic dollar reserves or spending new revenue to make bond payments, or else go into default.”
By May, the sanctions on Russia had already led to of half the country’s $640 billion in foreign reserves. “The central bank says it’s also sold some of its foreign currencies to support the ruble, leaving questions on how long it can pull from its local coffers to pay its debts,”
Russia claims that it has been paying debts in rubles. To receive Russian debt payments in rubles, however, creditors will have to open ruble accounts. , “[i]t is unclear as yet whether foreign investors – many of whom will have to navigate sanctions imposed by their own governments – will be willing or even permitted to open such accounts.”
Inside Russia, inflation has spiked, and tech components are scarce. This has caused a range of problems, from crashing computers to grounded flights. It has also left Russia unable to restore or refurbish some weapons and other military equipment, . The paper said the war had “erased” two years’ worth of tank production.
According to the , Russia’s inflation rate stood at 17 percent in late May, and consumer and business confidence were in negative territory.
On June 23, – a reorganized version of the independent newspaper the Russian government banned for its coverage of war in Ukraine – provided insight into the lives of ordinary people in Russia with a report from the central region of Samara.
More than 14% of Samara’s population lives below the officially set poverty line, and 44% have a monthly income of a mere 19,000 rubles, or about $351. Between January and March this year, the number of poor in Russia increased by 100,000 compared to 2021, reaching 20.9 million, .
The report included interviews with Samara residents who said they had given up many types of food and other products that are now are considered luxury items thanks to rising prices.