Russian Economy Is Faring Better than Expected
Within days after Russia launched its “special military operation” in Ukraine on Feb. 24, the West unleashed what it called “the largest sanctions in history,” including the “nuclear financial option”, which involved banning seven Russian banks from the SWIFT financial system. A few weeks later, U.S. Secretary of State Antony Blinken announced that, as a result of those sanctions, the Russian economy is “in shambles”, while British Foreign Secretary Liz Truss crowed that they were having “a crippling impact”, before calling for “crushing Russia”. We’ve heard similar statements for the EU from Ursula von der Leyen and Josep Borrell, who claim that the sanctions, while terribly painful for Europeans, are the only way to deprive Russia of the means to finance the war in Ukraine.
What do others, with a less openly ideological agenda, have to say about it? Wall Street giant JP Morgan, for one, recently informed its clients that Russia’s economy is in better shape than expected. While the bank had earlier predicted a 35% plunge in GDP for the second quarter, it now admits the recession “will not be very deep”. The Institute of International Finance, one of the top policy groups for the world’s banking elites, forecasts that Russia will post a record $250 billion current account surplus this year.
In fact, Russia’s trade surplus grew substantially in the first quarter of 2022, mainly due to the rise in the price of oil and gas on world markets, which is due, in turn, to the sanctions imposed by the West. But accounting at the same time for the positive trade balance was a drop in imports, in particular from European nations and Japan. The big problem here, is that many of the products that would have been imported are capital goods, such as machine tools, components for factories, car parts, electronics, etc. These are, of course, important for the real economy as a whole, and have to be compensated either by boosting domestic production or by imports from other countries.
An analysis by EIR experts notes that Russia has been able to offset some of the negative effects of the lack of imports by adopting rigorous capital and exchange controls, directing state-directed credit to the agriculture and industry sectors to boost production, and above all, by collaborating with China, and to some extent India and other nations, to begin laying the rudiments for an alternative trade system. In that respect, economist Sergey Glazyev, a current Minister of the Eurasian Economic Union (EAEU), has advanced proposals for a new monetary and credit system, beginning with Eurasia and China.
Meanwhile, Russia’s farm sector is doing well, which is very good news for the world as a whole. President Putin himself announced on May 12 that experts now estimate that this year’s grain harvests will hit “an all-time high” of 130 million tons of grain this year, of which 87 million tons of wheat. The last peak wheat harvest (85 million tons) was two years ago. In 2020/21, Russia alone accounted for 20% of annual wheat exports.