As the first year has passed since the Russian invasion of Ukraine, the European Commission is working on a new sanctions package. This tenth package, if approved by all 27 European Union members, will target Russian individuals and the circle around President Putin himself. The question is what the effects of those sanctions really are.
BNR posed this question to Han de Jong, the station’s in-house economist, and sanctioned attorney Heleen on de Linden. “They suffer from it,” Over de Linden says, though figures from Russia’s statistics office, Rosstat, paint a different picture.
Russia’s gross domestic product (GDP), the total of goods and services produced in the country, decreased by 2.1% last year. It’s better than expected, but that doesn’t mean sanctions against the country aren’t working.
No symbolism
“This is not symbolic politics. That may have been until last year’s invasion, when the sanctions were already there. But hardly anyone knew about it’, underlines Over de Linden.
Russia was a very important trading partner of the EU. And that’s largely gone now. That’s billions a day. So you can’t really say it has no effect.’ Nor is the purpose of sanctions to remove a dictator. “The goal is to make that leader and his entourage pay a higher price than he does.”
Russia won’t want to admit that sanctions are bad for several reasons, he thinks. Just as they won’t acknowledge battlefield losses, they won’t say anything about economic measures.
The blow to the Russian economy is really big, says Han de Jong. “They have lost an important part of their suppliers and their markets.” The main source of income, oil and gas, now goes to India and China, which are now the largest customers. But those countries will not long accept the high prices Russia is asking. “This is already happening,” says De Jong. Before the war, the price of Russian oil was about the same as Brent oil. Now the price is much lower. So Russia gets less for it.’
Central bank
Russia’s central bank is “quite open about this,” says De Jong. The trade balance, the balance of payments, will show a surplus of $80 billion in 2021, according to the figures. In 2022, it was 227 billion, but Russia’s central bank expects it to drop to 66 billion this year. “It’s a huge setback,” says De Jong. “There’s a surplus left, they have sufficient financial reserves, but it’s starting to bite.”
However, Russians have experience with pain, they also know about de Linden, who studied in Moscow in the 80s. “That country couldn’t take it anymore. He was dead, penniless. No more products, no more basic needs.’ According to Over de Linden, if this situation, the war and the sanctions, continues for long, Russia could end up in the same situation. “We’re not there yet.”
Put in
For the moment, neither Putin nor his entourage nor the country’s oligarchs seem impressed by the announced sanctions. “They were supposed to be hit, but so far it hasn’t happened. As far as we know,’ says De Jong.
The population, on the other hand, does. The question then is what the long-term effects will be. “There will always be a Russian population, but Putin will disappear at some point. And our relationship with the Russian population? Russia remains a very large and important neighbor with a large stock of natural resources.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
