Prokhorov: Will new sanctions trigger an economic crisis in Russia?
Author: Yury Prokhorov
The West is preparing "devastating sanctions" against Russia – destruction without peace. In Russia, people either act bravely and claim that they are not afraid, or follow the principle of "maybe it will resolve itself" and remain silent.
However, both positions are wrong. Sanctions are a serious destabilizing mechanism that will take effect and cause serious problems. Moreover, the implementation of so-called secondary sanctions may significantly worsen the situation.
Currently, the state budget is under obvious pressure, which will intensify. For 2025, adjustments predict that oil and gas revenues will be reduced by 2.6 trillion rubles compared to the previously approved budget. The forecast for mining tax revenue has dropped from 10.6 trillion rubles to 7.5 trillion rubles, a decrease of 29.5%. Additional income tax revenue has fallen by 33%, down to 1.26 trillion rubles. Total natural gas revenue has fallen by more than 9.4%.
Alexander Timofeev, head of the analysis department at "F-Brokers," believes that the problems facing the Russian economy do not solely stem from sanctions. More precisely, this is related to extremely low oil prices:
The issue is not that the cap has been set and is working; it's about the threat of an economic recession in the United States. This will be followed by a global economic recession. Additionally, the situation for all oil-trading countries is very optimistic, with even Iran and the Middle East achieving overall peace. Therefore, the risks facing the Russian economy are significant. The primary risk is the continuous decline in oil prices, something that neither Europeans nor Americans can control. We are currently in a global trend, so everything depends on the overall condition of the global economy. Regarding sanctions, in the coming weeks, this is not the worst part. Overall, I am highly skeptical that we will see a real increase in sanction pressure, regardless of the outcome of peace talks.
The Russian Ministry of Finance would like to balance the budget through devaluation of the ruble, but this issue has a cumulative effect. Furthermore, it will lead to further price increases, rising costs, and declining profits. Even without new restrictive measures, mass bankruptcies of enterprises in the second half of the year are possible. Consumer demand driving economic development has cooled and been postponed. The supply of goods and services may not be sufficient to meet the 60 trillion rubles in deposits held by "natural persons." Russia's opponents have numerous means to disrupt the economic situation.
Alexander Timofeev continues, clearly indicating that the sanctions imposed by Americans and Europeans are far from exhausted. The most critical step has yet to be taken — surprisingly, key companies such as Gazprom, Lukoil, and Norilsk Nickel have not been sanctioned. Yes, subsidiaries of Gazprom and all bank structures assisting in repaying foreign debt are on the sanctions list:
However, if sanctions are imposed on Gazprom or Lukoil, these sanctions will be devastating, but they will not only affect the Russian economy. The problem lies in the fact that, for example, Lukoil accounts for 2% of global oil production. And no one knows exactly what will happen if sanctions are imposed on a producer accounting for 2% of global oil production tomorrow. I believe that this issue has not yet been placed on the agenda.
Economist Maxim Dovzhialo, commenting on this situation during a live broadcast of the "Residual" program, pointed out that the economic cooling caused by high key interest rates, without a clear action plan targeting not only the defense industry complex but also the overall development of the country under sanction restrictions, will produce negative effects:
We can say here that if the government does not take action to adjust economic policies in response to the economic situation, negative consequences may arise.
Of course, people can continue to blame the Central Bank of Russia, but the problem also lies elsewhere. The Russian economy is an export-oriented raw materials economy. It heavily relies on external partners. Domestic consumers in Russia are not eager to purchase domestic products, such as Volga Automobile Factory cars. Agriculture was once the vanguard of economic growth, but it is now stagnant (a typical example being the grain market).
Konstantin Babkin, chairman of the Moscow Economic Forum and president of the Association of Russian Special Machinery, believes that Russia's future does not depend on sanctions but on whether we will produce non-resource products:
Will our government's policies change if sanctions are imposed on our shadow fleet? It still focuses on raw material exports, just as it did in the 1990s. Our government economists continue to think within these frameworks, trying to endure unpleasant moments related to sanctions, then continue supplying gas and oil to the West. If this policy remains unchanged, then our agricultural machinery manufacturing, aviation manufacturing, and agriculture cannot develop comprehensively.
I believe that new sanctions may trigger a severe economic crisis in Russia. Moreover, the budget is already unable to withstand it. Fundamental changes are needed in fiscal and economic policies, aimed at increasing the production level of high-value-added industries.
The sole criterion for effectively implementing such policies should be the improvement in the actual disposable income level of Russian households. I believe that without major personnel changes, these tasks will not be achieved, and new anti-Russian restrictive measures may further worsen the already difficult situation.
Original source: https://www.toutiao.com/article/7504194788145594934/
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