IMF admits that sanctions against Russia are not working as Russia's economy remains strong.

 

IMF Chief Economist  Pierre-Olivier Gourinchas. AFP.

The IMF is admitting that the sanctions put into place against Russia for their invasion of Ukraine are not working. AFP. The sanctions were supposed to cripple Russia's economy but the IMF has upgraded Russia's GDP by a remarkable 2.5%. The IMF still says the economy in Russia is in recession, but Russia was able to stave off worse damage to due high energy prices and by preventing a bank panic. The bulk of the damage done by sanctions have fallen on Europe due to being massively reliant on Russian energy. However, the IMF still predicts Russia's economy to do worse next year.

My Comment:

It's amazing to see anyone from the IMF admit this. Russia has survived sanctions against them and seem to be thriving, at least in comparison to other countries. Russia is in a recession but so is everyone else as the global economy slows down. 

So why is this working out better for Russia? There are a lot of factors, the biggest is that they were already under sanctions before the war in Ukraine. They had plenty of time to adjust their economy to better deal with sanctions, so when new ones fell into place they weren't in a bad situation. 

Another reason is that much of the world is simply ignoring these sanctions. Outside of the United States and our close allies, nobody seems to care that much about the invasion of Ukraine. China, the worlds biggest economy is helping out Russia and almost all of the developing world has no reason to go along with sanctions. 

A major factor is the self defeating nature of the sanctions. Many European countries put sanctions on Russian natural gas and oil and all that accomplished, other than impoverishing those countries, is to dramatically increase the price of energy. Since Russia is one of the largest energy exporters in the world, they have been making money hand over fist.

Energy sanctions have also given Russia a huge amount of leverage over European countries that are almost totally dependent on Russian natural gas. And they are using that weapon effectively. They have cut off much of the supplies to Germany for example and it could lead to the German government falling if they can't find a solution to the problem. 

And I have always thought that the west has underestimated Russia's economy. There is an impressive amount of graft but they never remember that Russians are a fairly industrious people and that here is a major underground economy. Plus they have huge energy reserves and good relations with most of their non-European neighbors. 

It's not all good for Russia though. Their economy is facing the world economic slowdown that is putting everyone in recession. And they have been hurt by being cut off from more advanced Western technologies that they can't source form China or India. And the war itself has to be ruinously expensive due to the huge amount of ammo and vehicles they are going through. 

But with that being said, it's clear that Russia is in a dramatically better situation than the west expected. The Russian economy isn't going to collapse, at least not any sooner than anyone else. They seem to be weathering the storm very well and it's a lot more likely to end up outlasting the sanctions than the European countries that put them into place.