Although Russia has been subject to the most extensive sanctions in history since February 24, 2022, when the war in Ukraine began, the process of adapting to the new conditions of the country’s economy continues with various difficulties, despite the course of a year.

Due to the Russia-Ukraine war that started last year, Western countries have imposed sanctions against Russia in hundreds of different areas, especially in the fields of finance and energy.

While the first effect of the sanctions was felt by the rapid depreciation of the Russian ruble against the dollar, the Russian economy contracted by 3.6% in the first half of 2022 and is estimated to contract by approximately 2.5% for end of the year

RUBLE LOSSES

Thanks to the measures taken by the Central Bank of Russia, the Russian ruble made up for its depreciation and fell from 120 bands to 60 rubles against the dollar.

Among the measures adopted, the strict restrictions on withdrawals of cash and foreign currency from the bank, the obligation to sell 80 percent of their income in foreign currency to exporting companies and various restrictions on money transfers abroad stand out.

One of the most important areas affected by the sanctions in Russia in the last year was import and export.

While Russia’s Federal Customs Service stopped publishing import and export statistics after the sanctions, imports are estimated to have fallen by around 13 percent in the first 11 months of 2022 compared to the previous year, according to several reports. studies carried out in the country.

Although it is estimated that exports increased by 23 percent in said period, it should be noted that foreign direct investment has stagnated and the gap in the economy created by the departure of hundreds of companies has been offset by the high level of oil and natural resources. gasoline prices

WESTERN COMPANIES ARE TRYING TO FILL THE GAP

After the start of the war, hundreds of Western companies, especially McDonald’s, IKEA, Zara and H&M, decided to withdraw from Russia under the pressure of sanctions.

While tech companies like Apple, Sony and Spotify restrict their activities in Russia, companies that Russia considers friendly, especially Russian companies, are trying to fill the gap in the market.

While Chinese and Turkish companies are taking steps to expand their fields of activity in the fields of textiles and home appliances, Russian Internet companies like Yandex and VK are developing new products instead of competitors like Google.

While the Vkusno i Toçka restaurants, which opened in place of McDonald’s, quickly gained popularity in the country, they managed to match the occupancy rates experienced during the McDonald’s era.

The automotive sector was one of the sectors most affected by the decision of Western companies to leave.

While Western auto companies such as Renault, Nissan and Mercedes decided to withdraw from Russia, these companies transferred all their assets in Russia to the Russian state. Car sales in Russia decreased by 62.8% in October compared to the same period a year earlier and fell to 45 thousand.

Mass production of the famous Moskvich brand cars in Russia has begun at the facilities of the French concern Renault, while similar steps are planned at the facilities of other brands.

Parallel imports were also released into the country for the supply of products whose direct import is no longer possible. Russian Federal Customs Service (FTS) Chairman Vladimir Bulavin announced that $17 billion worth of products were imported in the period May-October 2022 using the parallel import method.

RUSSIA IS CREATING ALTERNATIVE MARKETS FOR THE EXPORT OF ENERGY

Western countries apply some of the most extensive sanctions against Russia to the Russian energy sector.

In December 2022, the countries of the European Union (EU) agreed to apply a maximum price of $60 per barrel to oil transported by sea from Russia. Russian diesel and kerosene were also capped at $100 a barrel, and cheaper liquid fuels and light-colored petroleum products were capped at $45 a barrel.

Russia, on the other hand, announced that it would not sell oil to countries participating in the application of maximum prices in response to these steps.

Russian Deputy Prime Minister Aleksandr Novak said on February 13 that they will cut oil production by 500,000 barrels per day in March.

Many countries that continue to buy Russian oil, especially China and India, are demanding discounts from Russia, pointing to potential sanctions risks.

In the statement made by the Russian Ministry of Finance, it was indicated that the average price of Ural oil was $49.48 per barrel in January, while the price of Ural oil, which traded at an average of $85, 64 in January of last year, decreased by 42 percent in 1 year.

As for natural gas, Russia’s dominant position in Europe, which has been Russia’s biggest customer for almost half a century, has changed.

RUSSIA’S DOMINANCE IN THE EUROPEAN GAS MARKET IS REDUCED

The country’s natural gas production amounted to 673.8 billion cubic meters in 2022, while exports decreased by 25.1% to 184.4 billion cubic meters.

While activities on the Nord Stream pipeline, one of the main lines used in Russian gas shipments to Europe, were halted in August 2022 on the grounds that the necessary maintenance could not be carried out, the Nord Stream 2 line, the construction of which was completed, it was not put into operation due to the war in Ukraine.

Explosions occurred on both lines in September 2022 and natural gas leaks occurred.

While Yamal-Europe, another Gazprom pipeline that plays a critical role in delivering natural gas to Europe, is now idle due to sanctions, the company’s shipments from Ukraine’s natural gas distribution point called Sohranovka are stopped in May 2022.

With the closure of that entry point, the amount of natural gas the company sends to Europe via Ukraine has decreased by 60% compared to May 2022.

Ursula von der Leyen, President of the EU Commission, announced in September 2022 that Russia’s share of European natural gas imports had decreased from 40% to 9%.

Russia plans to compensate Europe, where its market share has fallen significantly, with natural gas shipments to the Asian market, especially China.

The last alternative that Russia proposed to export its natural gas to foreign markets was to establish a natural gas center in Turkey.

Russian President Vladimir Putin said on October 12: “By providing the main route for our fuel and natural gas resources through Turkey, a natural gas hub can be established in Turkey for Europe.” he had used the phrase.

Russian Deputy Prime Minister Aleksandr Novak, in his assessment to AA correspondent, said that the South Stream project, which was replaced by TurkStream, was designed with a capacity of 63 billion cubic meters per year on 4 lines and this potential could used to send Russian gas to Europe via Turkey.

Liquefied natural gas (LNG) exports are of strategic importance for Russia, which has lost a significant part of its gas export market with its pipelines in Europe.

TRANSFORMATION IN THE BANKING SYSTEM AND ACCELERATED BILATERAL TRADE

One of the processes in which Russia underwent a radical change as a result of the sanctions was the use of foreign currency in the country.

Russia, which has been trying to reduce the use of dollars for 10 years, especially in its trade with China, began to take these steps in all areas of the economy in 2022 with the sanctions of Western countries.

According to data from the Central Bank of Russia, the dollar’s share in the country’s imports and exports decreased from 51.7% to 33.9% in the third quarter of 2022 compared to the first quarter of the year. The euro’s share also decreased from 35.1 percent to 18.7 percent, while the yuan’s share rose from 0.4 percent to 14.1 percent.

The share of national currencies, especially the ruble, in trade with the Eurasian Economic Union increased by 3.5 percentage points to 74 percent in 2022 compared to the previous year.

Russian President Vladimir Putin, in a September 2022 statement, said that the de-dollarization process in his country was inevitable and that they would continue to take steps in that direction.

USE OF DOLLARS AND EUROS DECREASED

The president of the Central Bank of Russia, Elvira Nabiullina, also said in a statement in September 2022, noting that the use of dollars and euros has decreased due to sanctions in Russia: “The dollar and the euro have become toxic for many people due to the risks of frostbite. Those who print these coins do not want us to actively use them,” she said.

The Ministry of Finance of Russia announced that it will constantly reduce the share of the currencies of “unsympathetic” countries in the National Welfare Fund, which holds a significant part of the country’s reserves.

Accordingly, the yuan’s maximum participation limit in the fund was increased from 30 percent to 60 percent, and the gold’s maximum participation limit was increased from 20 percent to 40 percent. While the dollar is no longer at the bottom, the euro’s share is expected to drop to zero by the end of the year.

Russian authorities have also intensified their work on various regulations for “digital rubles” and cryptocurrencies, as major banks like Sberbank and VTB were banned from SWIFT.

While tests for the digital ruble are expected to begin this year, the Russian government continues to work on various bills to make cryptocurrencies usable for international payments. (AA)