Western Sanctions Hurting Russia's Economy
2022-03-15
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1Russia's economy was suffering long before the invasion of Ukraine.
2That suffering is now increasing.
3But a total collapse is unlikely, several economists say.
4Richard Connolly is an expert on the Russian economy at the Royal United Services Institute in Britain.
5He said Russia has built, "an economy that's geared for conflict."
6The Russian government's involvement in the economy, and the money it continues to make from oil and gas exports,
7will help ease the economic effects for many workers.
8Russia has experienced three serious financial crises in the last 30 years.
9Still, the value of Russian money has fallen greatly.
10That will drive up prices for imported goods.
11Inflation was already at 9 percent before the conflict.
12Sanctions have frozen a large amount of Russia's foreign money.
13State finances, however, are doing well with low debt.
14When the government does need to borrow, it can borrow money from local banks.
15Additionally, the government announced support this week for large companies it believes are important to the economy.
16The short-term effects of Russia's economic growth have differing estimates.
17That is because more sanctions could come, and the fallout from President Vladimir Putin's war are unclear.
18Tim Ash is a senior market researcher at BlueBay Asset Management.
19He said, "Russians will be a lot poorer - they won't have cash to holiday in Turkey or send their kids to school in the West - and even then, because of Putin, they will not be welcome."
20He sees economic growth dropping 10 percent.
21Other economists see a drop of as little as 2 percent or something in between.
22The long-term outlook for Russia's economy is not good, for reasons that were clear before the war.
23A few favored insiders control major companies and industries.
24Russia mainly depends on the oil and gas industry.
25The average amount a Russian person produces in 2020 was around what it was in 2014.
26Since the collapse of the Soviet Union, foreign investments built up over the last 30 years, and jobs it brought, are leaving Russia.
27Large companies like Apple and Ikea have stopped sales or production in Russia.
28Large energy companies like BP, Exxon and Shell have said they will stop buying Russian oil and gas or leave their partnerships.
29Russia's central bank has stepped in.
30It has attempted to strengthen the ruble and the banking system, restrict taking out foreign money from banks, and has kept the stock market closed for nearly two weeks.
31The Russian government has announced measures to restrict foreign investors from fleeing.
32Such restrictions avoid a complete financial collapse,
33but they also close off the economy to trade and investment that could fuel growth.
34Since facing sanctions over its 2014 seizure of Ukraine's Crimea, Russia has prepared for sanctions brought on by the West.
35Connolly has written a book on Russia's reaction to sanctions.
36He said Russia's economy is "a durable, in some ways primitive system."
37He said it is based on low debt and the government controls most of the banking system.
38The central bank is able to intervene and support the ruble and banks.
39"I'm not saying they're going to have a wonderful time. I'm saying they have the resources to deal with these problems," he said.
40Trade will fall and fewer goods will be available.
41But the weaker ruble means the Russian government earns more money for the oil it sells because oil is priced in dollars.
42With recently higher prices, Connolly estimates Russia is getting 2.7 times the number of rubles from oil compared with 2019.
43That money can pay workers and those who are retired.
44U.S. and British officials said they will ban oil imports from Russia.
45Europe, which depends more on Russia for energy, has held back.
46I'm Gregory Stachel.
1Russia's economy was suffering long before the invasion of Ukraine. That suffering is now increasing. 2But a total collapse is unlikely, several economists say. 3Richard Connolly is an expert on the Russian economy at the Royal United Services Institute in Britain. He said Russia has built, "an economy that's geared for conflict." 4The Russian government's involvement in the economy, and the money it continues to make from oil and gas exports, will help ease the economic effects for many workers. Russia has experienced three serious financial crises in the last 30 years. 5Still, the value of Russian money has fallen greatly. That will drive up prices for imported goods. Inflation was already at 9 percent before the conflict. 6Sanctions have frozen a large amount of Russia's foreign money. State finances, however, are doing well with low debt. When the government does need to borrow, it can borrow money from local banks. Additionally, the government announced support this week for large companies it believes are important to the economy. 7The short-term effects of Russia's economic growth have differing estimates. That is because more sanctions could come, and the fallout from President Vladimir Putin's war are unclear. 8Tim Ash is a senior market researcher at BlueBay Asset Management. He said, "Russians will be a lot poorer - they won't have cash to holiday in Turkey or send their kids to school in the West - and even then, because of Putin, they will not be welcome." 9He sees economic growth dropping 10 percent. Other economists see a drop of as little as 2 percent or something in between. 10The long-term outlook for Russia's economy is not good, for reasons that were clear before the war. A few favored insiders control major companies and industries. Russia mainly depends on the oil and gas industry. The average amount a Russian person produces in 2020 was around what it was in 2014. 11Since the collapse of the Soviet Union, foreign investments built up over the last 30 years, and jobs it brought, are leaving Russia. Large companies like Apple and Ikea have stopped sales or production in Russia. Large energy companies like BP, Exxon and Shell have said they will stop buying Russian oil and gas or leave their partnerships. 12Russia's central bank has stepped in. It has attempted to strengthen the ruble and the banking system, restrict taking out foreign money from banks, and has kept the stock market closed for nearly two weeks. 13The Russian government has announced measures to restrict foreign investors from fleeing. Such restrictions avoid a complete financial collapse, but they also close off the economy to trade and investment that could fuel growth. 14Since facing sanctions over its 2014 seizure of Ukraine's Crimea, Russia has prepared for sanctions brought on by the West. 15Connolly has written a book on Russia's reaction to sanctions. He said Russia's economy is "a durable, in some ways primitive system." He said it is based on low debt and the government controls most of the banking system. The central bank is able to intervene and support the ruble and banks. 16"I'm not saying they're going to have a wonderful time. I'm saying they have the resources to deal with these problems," he said. 17Trade will fall and fewer goods will be available. But the weaker ruble means the Russian government earns more money for the oil it sells because oil is priced in dollars. With recently higher prices, Connolly estimates Russia is getting 2.7 times the number of rubles from oil compared with 2019. That money can pay workers and those who are retired. 18U.S. and British officials said they will ban oil imports from Russia. Europe, which depends more on Russia for energy, has held back. 19I'm Gregory Stachel. 20The Associated Press reported this story. Gregory Stachel adapted it for VOA Learning English. 21____________________________________________________________________ 22Words in This Story 23sanctions - n.(pl.) actions taken to force a country to obey international law by limiting or stopping trade or cutting economic aid 24gear - v. to get ready or to cause (someone) to get ready for something or to do something 25cash - n. money in the form of coins and bills 26seizure- n. the act of taking control of something especially by force or violence 27durable - adj. staying strong and in good condition over a long period of time 28primitive - adj. very simple and basic: made or done in a way that is not modern and that does not show much skill 29wonderful - adj. extremely good 30We want to hear from you. Write to us in the Comments section, and visit our Facebook page.