Russian economy on brink as Putin ‘can’t deliver promises’: ‘Economy seriously ill’

Russia: Expert says Putin’s plan ‘pretty awful’

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The West has continued to impose sanctions against Russia in response to Putin’s ruthless invasion of Ukraine. Yesterday, the UK’s most high-profile oligarch, Roman Abramovich, was hit with sanctions by the UK, after the Government claimed he had “received preferential treatment and concessions” from the Kremlin. Mr Abramovich, who is the owner of Chelsea football club, had his assets frozen and will be prohibited from making any transactions in the UK, while he has also been subject to a travel ban.

Mr Abramovich has vehemently denied reports alleging that he is close to Russian President Vladimir Putin or the Kremlin, while he has long insisted that he has done nothing to warrant sanctions.

Yet the West’s sanctions against Russia have not merely restricted oligarchs’ ability to do business. 

Ordinary Russians have also been affected, with the poor having been hit by higher prices and the likely prospect of the crashing ruble, while the middle class have been severed from a number of Western products and services they rely on including Apple, Visa and Spotify. 

The Kremlin said yesterday that Russia’s economy was experiencing a shock after an “absolutely unprecedented” economic war waged against Moscow.

Read More: ‘Frightening’ Ukraine war openly attacked on state TV

Kremlin spokesman Dmitry Peskov, told reporters: “Our economy is experiencing a shock impact now and there are negative consequences. They will be minimised.

“This is absolutely unprecedented. The economic war that has started against our country has never taken place before, so it is very hard to forecast anything.”

In 2014, after Putin illegally annexed the Crimean Peninsula, Russia was imposed with sanctions by the West.

Though the measures were significantly less severe than the sweeping sanctions imposed on Russia today, they caused significant damage to the country’s economy. 

This is because the sanctions in 2014 coincided with world oil prices hitting a financial low, which caused the ruble to collapse and inflation to rise by 9 percent. 

At the time, Vedomosti, which is the main Russian business newspaper, published an editorial that compared Putin to Zimbabwe’s former President, Robert Mugabe, who did nothing as the country spiralled to economic collapse.

While noting that Russia was in far better shape, Vedomosti wrote: “The biggest problem of Russian leadership is the inability to admit mistakes.

“The economy is seriously ill, and then the ruble rate is one of the indicators crying about the illness.

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“Russia’s leadership refuses to admit there is an illness and pushes it into the depths.”

At the time, Putin had portrayed the large drop in value of the ruble as useful.

He said in a press conference: “We used to sell by the dollar and get 32 or 35 rubles in return, but if you look at today’s exchange rate we get 45, 47 or 48 rubles for every dollar worth of what we sell.  

“In that sense, budget revenue has even increased.”

The decline in the ruble led to massive inflation at the time, which seriously affected Russian consumers. 

Sergei M Guriev, a prominent economist who fled the country into exile in 2013, said: “The problem is that he cannot deliver on his economic promises, so he has to deliver on post imperial nostalgia. 

“He will say that we are not rich anymore, but we are at least feared.”

This time around, Russian daily life is likely to be even more affected, with Putin’s invasion of Ukraine having effectively turned the country into a pariah state.

Speaking in September last year Chris Weafer, CEO of Moscow-based strategy consultancy Macro-Advisory claimed the Kremlin was becoming “scared” of Russia’s “changing demographics”.

A number of adult Russians were born after the fall of the Soviet Union and are demanding better lives, claimed Mr Weafer.

Speaking to CNBC he said: “[They] want an improved lifestyle, incomes, social support and a better future for themselves and their families.

“The big challenge for President Puitn and the so-called Russian ‘elites’ will be how to satisfy those expectations while keeping power.

“Failures in the former will more severely undermine the latter in the next presidential term ‒ no matter who the President may be.”

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