One of Russia’s toxic TV presenters recently cackled that Western sanctions ‘have only helped Russia wean itself off dependence on foreign imports and given a boost to our own producers’. At a time when Russia’s third quarter growth has actually exceeded expectations, hitting 5.5 per cent, it is worth noting what sanctions can and cannot do. The bottom line is that sanctions have not failed – but were never going to be the silver bullet solution to Kremlin aggression some claimed at the start.
As in so many aspects of the West’s response to the 2022 Ukraine invasion, unrealistic early boosterism has led to subsequent, and arguably equally unrealistic, despondency. Daleep Singh, US deputy national security adviser for international economics, had claimed that the Russian economy would quickly be in ‘freefall’. Certainly there was a serious initial impact: Kremlin spokesman Dmitri Peskov recently admitted that ‘there was a threat of a collapse, we really had to mobilise all resources and internal forces in order to prevent this collapse’. But Russia’s technocrats have proven themselves rather more competent than its generals, and although no one had anticipated the scale of the Western response, they had been wargaming such a situation for years.
As things stand, the Russian economy seems to be doing inordinately well. Even though this year’s massively-increased defence spending may account for a third of the federal budget, the economy could grow by 3 per cent this year, even above of the 2.2 per cent the International Monetary Fund anticipates.
Much of this growth, however, is down to ‘military Keynesianism’ – the massively increased spending on the war. There have also been all sorts of indirect effects, with salaries inflated by the need to lure more workers into the factories, to the way the substantial bonuses paid to the families of fallen soldiers have tended to boost consumer spending in the impoverished regions from which so many of them came.
Capital flight from Russia, though, is undiminished and the value of the ruble on international markets has plunged.