FAISAL ISLAM: RUSSIA’S WAR ECONOMY Submersible Pump sets LE & BOOSTER PUMPS TRUSTED . RELIABLE CANNOT LAST BUT HAS BOUGHT TIME Solar Pumps
Ustrial Area, Opposite A.P.G Milling, Lusaka, Zambia, Email: info@uci.co.zm
IT was March 2022. The Russian rouble crashed, the value in London of corporate giants Gazprom and Sberbank fell 97%. Queues began to form at cash machines in Moscow. Oligarchs’ yachts, football teams, mansions and even their credit cards were seized.
Russia crashed into a major recession.
This was the immediate result of the most extraordinary attempt by the West at financial
. containment of Russia after its invasion of Ukraine.
At its heart was the seizing of the Russian state’s official foreign exchange assets and, in particular, the unprecedented freezing of the central bank’s $300bn (£238bn) in reserves.
Western governments pointedly shied away from using phrases like “economic war”, but it certainly seemed like there was a financial theatre of battle with the Kremlin. 2018 It was better than the alternative of direct confrontation between nuclear states.
Some two years on and there is quite a change in this over the medium term. The country has skirted sanctions revenues, on China and on of policy is not to try to prevent economic backdrop.
But the question is - for how by buying and deploying non-productive war spending. India, for example, from buying In a long and rambling interview
long it can sustain? a “shadow fleet” of hundreds of As demand for oil and gas Russian oil but to limit the this week, President
Russia has transformed its tankers. peaks, and competitor production profits from that trade going Putin gleefully exclaimed Russia
economy into a mobilised war Last week, its finance ministry from the Arabian Gulf back to the Kremlin war machine. as the fastest growing economy CASTLE SHOPPING CENTRE
economy. The Russian state reported that hydrocarbon comes on-stream in the coming in Europe.
is spending a record in the taxes in January exceeded levels year, Russia will be exposed. But this resilience and stalemate Last week, the International
post-Soviet era. seen in January 2022, just Statistical rises in gross domestic can last the rest of this Monetary Fund (IMF) underlined
Military and security spending before the invasion. product (GDP) from the year at least. It feeds into the the resilience of the Russian at up to 40% of the budget The ongoing flow of foreign production of tanks and shells clear strategy in the Kremlin of economy when it upgraded
is back to late-Soviet era levels. exchange into Russian oil, gas, that are then blown up in the waiting for a possible change its forecast growth for this
PRIME SHOP FOR RENT
Other areas of state support and diamonds has also helped Donbas, in eastern Ukraine, are of US president and a reduction year to 2.6% from 1.1%.
to the population have been alleviate the stress on the value also far from productive. of Western funding for Based on the IMF’s figures,
squeezed to make up for funding of the rouble. Meanwhile, Russia has Ukraine’s defence. the Russian economy grew the production of tanks, Western leaders are adamant experienced a brain drain of That is why attention is now faster than the whole G7 last
missile systems and those defences that this cannot last, but some of its most talented citizens. turning back to the central role year, and will do so again in in occupied Ukraine. recognise its impact. of those hundreds of billions in 2024. These are not just numbers.
1250Sq metres prime shop for rent in
On top of that, despite Western One world leader recently The Western strategy has frozen Russian financial assets. The stalemate in Ukraine restrictions on Russian oil said privately: “2024 will be been not to lay siege to Russia’s Ukrainian President Volodymyr last year and the growing expectation
and gas, the flows of hydrocarbon much more positive for Putin economy, but to engage in a cat Zelensky told me of a frozen conflict revenues have kept coming than we thought. He has managed and mouse game to restrict access last month: “If the world has a secure clean shopping complex along on the ground across this year, into the state coffers. to reorganise his own industry to technology, raise costs, $300bn, why not use it?” All has been underpinned by Russia’s
The tankers are now going more efficiently than we limit revenues and make the of those frozen funds should remobilisation of its economy
to India and China and more thought.” conflict unsustainable longterm. be deployed to fund Ukraine’s to its military effort, especially
of the payments are in Chinese rebuilding effort, he said. The in the construction of
yuan rather than the US dollar. “We’d rather Russia uses its UK’s Chancellor Jeremy Hunt defensive lines in the east and
Russian oil production remains money to buy tankers [for oil] and Foreign Secretary David south of Ukraine.
at 9.5 million barrels per day, than tanks” one US official told Cameron back the move. ECURE
Western leaders argue that
barely down on pre-war levels. me. In the oil market, the aim Lord Cameron told me: this model is utterly unsustainable
77 744 325 Kafue Road. Russia exposed
But this form of economic growth has greatly increased Moscow’s dependence on oil “We’ve frozen these assets. The question is are we going to use them?”
He said “using some of this money now is if you like an advance payment on [Russian] reparations” for its illegal invasion of Ukraine, and could be used “to help Ukraine and save Western taxpayers money at the same time”.
The G7 has asked its central bankers to come up with a technical and legal analysis. Central bankers are understood to be uneasy. One top financier told me there would be risks to what he called “weaponising the dollar”. Traditionally, central banks enjoy sovereign immunity from these sorts of actions.
A plan being developed would use the funds, or the profits from the investments to raise tens of billions of dollars for Ukraine.
PON But it is a balancing act. If Russian assets are seized in this way, then what message does it send to other nations, perhaps in the Gulf, or Central Asia, or Africa, about the safety of their safe-haven reserves in Western central banks?
These relationships are some of the central arteries of global finance, recycling hundreds of billions of dollars used to pay for energy, across the world. Putin certainly wished to communicate that China was now emerging as an alternative, if not for the West, then for emerging economies.
The Russians have also indicated that they will take court action over any seizure, and in turn take similar assets from Western companies frozen in
Promoting Standa Russian banks.
So the shadow battle over Russia’s economy is essential to
ARE YOU understanding where this conflict and the world economy, is going. Russia’s war economy can not sustain long-term, but has bought the country some COLLEGE OR extra time. The West is about to up the ante, after Russia displayed this unexpected resilience.