Russian trade has almost returned to pre-war levels. Sanctions failed
Trade at Russia's three largest ports is rising and approaching pre-war levels despite sweeping sanctions from major Group of Seven (G7) economies, according to a new report.
“Activity in Russian ports is surprisingly high. For the first time since the outbreak of the war in Ukraine, the volume of goods unloaded in Russia's three largest container ports, St. Petersburg, Vladivostok and Novorossiisk, is approaching the levels observed at the outbreak of the war,” writes the German Institute for Kiel's world economy in a report published on September 7.
The United States and its allies imposed tough economic sanctions on Russia after it launched a full-scale invasion of Ukraine in February 2022, banning high-tech exports needed for industrial production and isolating many of its banks from Western financial markets .
Many economists expected a sharp contraction in Russian economic activity now that it was isolated from the West, but it is now clear that the move has proved futile. Goods, however, find a way to enter and exit Russia in the quantities deemed necessary.
Moscow has diverted Western goods through third countries such as Turkey and Kazakhstan, data shows, and Russia's economy is expected to grow more than 2% this year.
Moreover, the very countries that apparently act tough against Moscow are the first to circumvent the sanctions by transiting through third countries, such as Central Asian ones, as evidenced by a graph by Robin Brooks
“It is not clear from the movements of container ships where the goods are coming from, but Russia appears to be re-entering world trade,” the Kiel Institute wrote.
The increase in imports was driven both by the needs of the Russian military-industrial complex and by citizens' demand for consumer goods.
Russia has been spending heavily on the military, causing a large budget deficit, while its nearly 19-month invasion of Ukraine falters. Massive government spending has been a boon to Russian workers, who have seen their household incomes rise, giving them the financial means to purchase larger quantities of foreign goods.
But the jump in spending and imports has put a strain on the ruble, whose value fell below a cent in August, making the Russian currency one of the worst performers among emerging markets this year.
That also led to inflation soaring to 5.2%, forcing Russia's Central Bank last month to raise rates by a whopping 3.5% in an emergency meeting.
Russia should counterbalance parallel imports via third countries with parallel exports, but I certainly don't have to make suggestions on this matter…
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The article Russian trade has almost returned to pre-war levels. Failed Sanctions comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/commercio-russo-normale-sanzioni-fallite/ on Mon, 11 Sep 2023 19:45:30 +0000.