WP: Russia's economy has not collapsed, but there is a way to make it suffer

14 May 2023, 18:13 | Economy
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Air is 'bleeding' out of Russia's sanctioned economy, but not fast enough to thwart Vladimir Putin's disastrous war against Ukraine or inconvenience most Russians. Ancient visitors to Moscow and other cities report that store shelves are full and daily life hasn't changed appreciably, thanks in part to massive government subsidies..

“It is now clear that the West’s campaign to weaken Russian finances in the hope of weakening Putin’s resolve and popular support will be more of a race than a sprint.. However, Washington and its allies still have powerful ways to undermine the Kremlin’s military capabilities over time, if honed and strengthened,” writes the Washington Post in an editorial..

Better coordination and tighter enforcement of existing restrictions is key to increasing the cost of the war for Russian industry and consumers, and further undermining its ability to continue producing high-tech weapons.. Just as important, the West could double its success in putting pressure on the Russian state's most important source of revenue, energy..

All of this will not be easy.. US Efforts to Extend Export Ban to Russia Face Wall in EU and Japan. And the application of numerous rounds of sanctions imposed on Russian entities and individuals during the 15 months of the war has turned into a growing game of cat and mouse.. As the number of sanctions increases, so does the ingenuity of Russia's efforts to circumvent them..

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This is especially true of Moscow's attempts to obtain dual-use products - Western-made products and electronic components produced for civilian use that can be used in the creation of weapons.. The publication notes the need for closer coordination between the US and Europe in export bans..

A group of Harvard economists explored the differences in sanctions relating to several thousand goods needed by Russia.. The experts found that many were subject to EU or US restrictions, but less than half were sanctioned by both sides.. For example, high-end washing machines are banned for export to the EU, but not to the US.. And in some cases, they contain microchips that can be withdrawn for use in the Russian military industry..

This may seem like a minor disadvantage.. In fact, many analysts believe that increased control over electronic components will exacerbate Moscow's problems in producing precision-guided missiles and other increasingly advanced weapons systems..

For goods that Russia can no longer import directly from the West, it found workarounds in friendly third countries that served as transshipment points.. This led to an increase in the cost of purchases. But that's the price the Kremlin, with its hoards of money from last year's energy price hike, can afford for a while..

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“This means that the West must focus on these transit countries and redouble its efforts to prevent the flow of electronics and other key components to Russia.. The EU, which is considering a ban on the export of sensitive products to countries that resell them to Russia, must act aggressively, even at the cost of diplomatic repercussions.. It would be wise to target companies in China, Iran, Turkey, Kazakhstan, Armenia and other countries that supply the Russian military. South Africa, which the United States accuses of secretly supplying arms and ammunition to Russia, should also be subjected to scrutiny..

The West may increase pressure on Armenia, which has seen a sharp increase in re-exports to Russia of a number of critical goods, including electronics. Armenia, whose large US diaspora could be useful in exerting pressure, seeks US security assistance in the face of recent armed conflict with Azerbaijan. Washington, according to the Washington Post, should stretch his muscles.

The West has been aggressive in its fight against oligarchs helping to prop up the Putin regime. It must also take stronger action against the service network and service providers: lawyers, money managers, intermediaries, shell companies supporting them.. Cultivating discontent among the elite can have a devastating effect on regime stability over time.

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The most effective move by the West to date was to set a cap on Russian oil at $60 a barrel last year, to which were added earlier this year similar restrictions on diesel and other petroleum products.. These restrictions reduced Russia's oil export earnings by almost a third in the first three months of this year compared to the last three months of 2022, amounting to $15.

7 billion in a single fiscal quarter..

“The Russian economy, although remarkably resilient, is smaller than the Canadian or Italian. It cannot indefinitely absorb such a loss of income, let alone even less income, if the West continues to lower the limit,” the article says..

Ukrainian military stopped Russia's advance on the battlefield. By expanding the battlefield to drain the Russian economy, the West may hasten the reckoning for Putin and his entourage sooner or later..




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