What are the Western sanctions? Nothing, says Russian President Putin. The “economic blitzkrieg” had failed. Nevertheless, the Kremlin has been keeping important economic data secret for several weeks. Because they reveal a catastrophic situation in the economy.
The sanctions aren’t working, and the EU is committing “economic suicide” with its planned oil embargo – Russian President Vladimir Putin has no doubt who is suffering most economically from his attack on Ukraine. What the EU and its partners are doing is chaotic and inconsistent, says Putin. In his eyes, the West is creating so many self-inflicted problems that Russia just has to exploit. A flowery view that tends not to be reflected in Russian economic data.
In Germany, the inflation rate is currently 7.4 percent. Driven by high energy prices, this is the highest level in 40 years, and yet only a fraction of Russian inflation: In April, the annual inflation rate was 17.8 percent, according to the Russian statistical authority Rosstat. Food has become particularly expensive, currently costing about a fifth more than a year ago. This is a cause for concern, especially for households with low incomes, which spend the most money on food and drink – and often have to fear for their jobs.
For example, McDonald’s is leaving 62,000 workers behind when it leaves Russia. The American fast food chain will continue to pay salaries for the time being – but only until the 850 restaurants have been sold. Similar wage losses are threatened at Renault, which employed 45,000 people in Russia before he left. Ikea will only transfer the salaries of its 15,000 employees until the end of the year. At Siemens, before leaving, 3,000 Russians were on the payslip.
Data blackout to obfuscate
In February and March, the Russian central bank reacted confidently to the western sanctions and prevented the worst. In the meantime, however, the head of the central bank, Elwira Nabiullina, is facing a bleak future. The Russian economy had to reposition itself because of the sanctions, she warned in April. The inflation rate will not have reached the target of 4 percent again until 2024 at the earliest.
Apart from Nabiullina, very few people can probably assess how bad the economic problems in Russia really are. Inflation figures are yet to be released, as will unemployment figures and the most recent estimate of gross domestic product. Apart from that, the Russian authorities have been very silent for the past few weeks, including this “Wall Street Journal” had reported. National debts are no longer quantified, trade statistics are kept under lock and key, oil production is kept secret.
Since April, Russian Customs has also stopped releasing data on monthly imports and exports, like the independent Russian exile news site “The Bell” added. Since March, with the permission of the Russian government, listed companies have been able to decide for themselves which information they want to present to the public and which not. The state aviation authority has been silent on passenger numbers since the beginning of May.
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Elvira Nabiullina’s Central Bank of Russia is also involved in the data blackout. It has not provided any information on Russia’s foreign exchange reserves since March. The central bank is said to have instructed small and regional financial institutions to reduce the publication of deposits and balances. Deputies in the State Duma are currently drafting a law that would ban Russian banks from sharing key financial metrics with foreign companies, even if they do business together.
“Iron Economic Curtain”
Lots of secrecy, making it even harder to gauge how badly the sanctions are actually hitting Russia. In many cases, not even the companies themselves know whether and which supply chain has broken off where, explained the political scientist Alexander Libman from the Free University of Berlin on ntv. For the majority of goods and goods, this will only be determined in the coming months.
But the Russian leadership apparently wants to prevent this moment of enlightenment, which would possibly show the political leaders in Washington, Brussels, Berlin, London and Paris new levers for sanctions, with their data lock. Economists report in the Wall Street Journal that Moscow is trying to cloud its economic situation. You speak of the “iron economic curtain” that is intended to block the view of supply chains and scarce goods.
No nails, no cosmetics
According to The Bell, that’s just one side of the coin. The news site quotes anonymous sources as saying the missing data is also intended to gloss over the collapse of the Russian economy. Without customs data, for example, it is not clear how good – or rather bad – Russian exports are; Without import data, it is difficult for foreign countries to assess whether Russian industry is actually missing important components for tanks and missiles, which is why refrigerators and dishwashers have to be plundered for new equipment.
Because at the moment, products are scarce that people tend to buy hamsters from, as the Berlin political scientist Libman explains. Food or medicines, for example. The Russia expert is convinced that it will be a while before large-scale shortages of technology goods or consumer electronics are seen. However, he also predicts a greater shortage of everyday goods: for example, cosmetics in Russia are made from 90 percent imported ingredients, newspapers and books are printed on imported paper, nails are only bought abroad.
Falling wages, rising prices
Since the collapse of the Soviet Union, Russia has focused primarily on its natural resources and agriculture. On petroleum, natural gas, wheat and grain. Industry and technology, on the other hand, have been rusting away for 30 years, according to former World Bank economist Branko Milanovic in his blog explained. “Almost everything that is advanced depends on Western technology,” he writes.
An economic misplanning, which is reflected in the few Data, which are still available, are already looming. According to the Russian statistics agency, 72 percent fewer cars were manufactured in March than a year ago. Production of washing machines and refrigerators has also fallen by half. Depending on the estimate and the source, the Russian economy could collapse by 8 to 15 percent this year.
A crash that will soon hit the Russian population with full force, as political scientist Libman explains. Many people have already lost their jobs, and there are no new ones in sight. In return, wages and pensions are falling, while food and medicines are becoming more expensive.
The sanctions have fizzled out and the West’s “economic blitzkrieg” has failed, says Russian President Putin. Propaganda that cannot be substantiated with numbers, even if Russia is trying to close the “Iron Economic Curtain”.
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