The first thing that is apparent today is that Western sanctions against Russia have not brought the country to its knees (see chart right). For sure if you are looking for high-end Western brands or a McDonald’s burger, then sanctions have taken a bite, but Russia in general is a closed economy. It manufactures internally most of what it needs.
Where it does rely on trade, oil and gas for instance, buyers have not pulled up stakes, at least not yet. The Economist estimates that in the first quarter of this year, Russia’s revenues from oil and gas jumped 80% year over year.
Russia’s total nominal GDP is smaller than Texas’ and only one half that of California. Oil, gas, and other commodities have historically fueled the military’s growth. The country has the fourth largest military budget in the world, and of course, it has the largest stash of nuclear weapons.
The irony right now, according to Thomas Friedman in The New York Times, is that Russia might be losing the Ukraine war on two fronts. On the ground, things are going slower than Putin expected and on the energy front, the rapid increase in oil and gas prices is pushing the West further (and faster) away from Russia’s fossil fuel reserves and towards renewables. A nightmare scenario for Mr. Putin.
Everyone, it seems, knows the names of the richest people in the U.S. – Musk, Bezos, Buffett, Gates, etc. But what about the Russian wealthy? Can you recognize any of them? According to Visual Capitalist, the Russian oligarchs have lost about $38 billion since the beginning of the year due to sanctions. A considerable amount to be sure, but there is still a lot left in their coffers. The same goes for the Russian economy. Western pressure has caused pain but certainly not collapse.