Poor prospects for Putin
Russian economist: Oil embargo deals ‘major blow’
May 31, 2022, 7:32 p.m
Since the start of the Russian war of aggression in Ukraine, Western countries have passed unprecedented sanctions packages – but the big blow to the Russian economy has so far failed to materialize. That could change with the new oil embargo at EU level, says a Russian economics expert.
The package of sanctions agreed at EU level will hit Russia hard economically and put Putin in an unprecedented situation. This is the conclusion reached by the Russian economist Sergei Gurijew, who teaches in Paris. “This will deal a very heavy blow to the Russian budget,” he told the “Frankfurter Allgemeine Zeitung”.
Diverting its oil to China and India as a substitute will not be easy for Russia, as the EU will most likely impose further measures in the coming months against Russian tankers, against the transport of Russian oil by ships of other countries and against the insurance of such transports. In six months, Vladimir Putin will be faced with the choice of who to cut the salaries of – soldiers, civil servants, police officers – or whether to give fewer jobs to his friends. “Putin has never been in a situation like this before,” Guriyev said.
“Budget deficits were significant”
The researcher predicts that the price of Russian oil will fall in the medium term. When the price of oil fell earlier, Putin used currency reserves. “They are now frozen. And the budget deficit was already significant in April,” Guriyev said. Extrapolated for the year, it should be around 2.5 percent of gross domestic product. “The country spends more money on the war and collects less tax from non-oil and gas exports,” the economist summed up.
At the moment, Putin is hiring new soldiers in poor regions for a lot of money and promising the families large sums in case they die. “But if the budget deficit continues to grow, Putin will run out of funds to continue the war at the current intensity,” said the 50-year-old economist, who teaches at the Institut d’Etudes Politiques (Sciences Po).
The economist expects that the poor economic prospects will make it difficult for Putin to survive the crisis as president. “It’s hard for me to imagine that he can go on like this for five years under these conditions,” Guriyev said.