Russia’s success in evading Western sanctions has helped its economy outperform expectations ahead of Vladimir Putin’s all but certain re-election on Sunday.
Ever since Russia’s invasion of Ukraine in February 2022, the Russian economy has consistently defied the dire predictions of critics.
That resilience appears to be holding firm as Russians head to the polls between Friday and Sunday for a presidential election that is set to ensure Putin’s rule until at least 2030.
At the start of the war, the International Monetary Fund expected a prolonged recession, forecasting the economy to contract by 8.5 percent in 2022 and 2.3 percent in 2023. While Russia’s economy did shrink in 2022, the contraction was just 1.2 percent, according to government figures. Last year, the economy officially grew 3.6 percent.
According to Castellum.AI, a global risk platform, Russia has been slapped with 16,587 sanctions since the start of the war – the majority of them against individuals. Some $300bn of Russian assets have been frozen.
Other restrictions apply to international debt markets and industrial imports. The most consequential sanctions limit natural gas exports and place a cap on Russian oil prices.
“I can’t say sanctions have had a big impact on me,” Nikolai Zlatarev, a Moscow resident who works in education, told Al Jazeera. “My weekly shop is a little more expensive and I buy more Russian brands. But I doubt that drinking Dobry Cola instead of Coca-Cola will change the election.”
Owing to high oil prices and elevated military spending, Russia has managed to mitigate much of the impact of sanctions. But the costs of prolonged conflict, and the possibility of yet more sanctions, look set to weaken output over the medium term.
Russia’s economy has performed better than expected since the invasion of Ukraine [File: Elena Chernyshova/Bloomberg via Getty Images]
“Extra spending unleashed by war can boost economic activity. But it also represents a redistribution of income away from state services towards the army,” Konstantin Sonin, a political economist at the University of Chicago, told Al Jazeera.
Military spending has swelled in recent years, rising from 3.9 percent of the gross domestic product in 2023 to about 6 percent in 2023 – the highest it has been since the collapse of the Soviet Union. This year, military expenditure is expected to account for almost one-third of government outlays.
Significant investment in military hard and software, together with welfare handouts for the families of soldiers killed in the war, have supported wage growth.
Meanwhile, Russia’s massive energy sector has kept money flowing into state coffers, while local companies have made substantial efforts to substitute Western imports.
“Import substitution always happens with trade restrictions,” Sonin said.
“Most critically, Russia has continued to sell plenty of fossil fuels. It’s true that oil and gas exports have fallen because of sanctions, but elevated prices have kept overall revenues high,” he said.
Sonin added that “it’s important to recall the size of Russia’s fossil fuels sector. Domestically, oil accounts for roughly one-third of tax receipts and half of all export revenue”.
The Kyiv School of Economics estimates that Moscow made $178bn from oil sales last year and that revenues could rise to $200bn in 2024 – not far off the $218bn earned in 2022.
In May 2022, the European Union agreed to cut 90 percent of its oil imports from Russia. Then, in December 2022, Australia and G7 members announced a price cap on Russian crude oil – known as Urals crude – aiming to squeeze Moscow’s finances even further.
Under the rules, non-G7 oil traders can only use Western ships and finance or insurance services provided they pay $60 per barrel, or less – well below the market-rate.
Russia’s massive fossil fuels sector has helped its economy withstand sanctions [File: Tatyana Makeyeva/Reuters]
But Russia has proved adept at countering these measures, according to Switzerland-based energy trader Mohammed Yagoub.
“Russia has built up a large ‘shadow fleet’, which are tankers with opaque ownership and no Western ties in terms of finance or insurance. In addition, Russia has found plenty of non-Western oil buyers at discount prices, China and India most notably,” Yagoub told Al Jazeera.
“Last month, the majority of Russian Urals were sold above $60. But, Western countries have been clamping down,” Yagoub added, pointing to a reported information request from the US Treasury to shipping companies suspected of violating the cap.
“Over the past year, the Kremlin’s been lucky. Western countries don’t want to snuff out Russian oil altogether, because a supply crunch would trigger global inflation. So, they’ve just chugged along much as they were before the war.”
Russia has also found ways to skirt import restrictions by sourcing goods from countries acting as intermediaries for Western goods. For instance, Serbia’s exports of phones to Russia rose from $8,518 in 2021 to $37m in 2022.
Some observers dispute the suggestion that the pressure campaign against Moscow has backfired.
“Sanctions are working,” Liam Peach, a senior emerging markets economist at Capital Economics, told Al Jazeera.
“It’s reasonable to assume that longer journey times for tankers [previously travelling to EU countries], together with high insurance premiums, have added roughly $30 a barrel to the cost of oil sales.”
“On top of elevated military spending, lower oil revenues will see the deficit widen to 3 percent this year, from 1.5 percent in 2023,” Peach said. “That will require scaling back on other areas of state spending, like healthcare and education, which will slow growth over time.”
Peach also pointed out that falling exports have led to sharp currency depreciations, making imports more expensive. To put a lid on rising prices, the Bank of Russia hiked interest rates by 8.5 percent in 2023, which will also slow economic activity.
The UK Ministry of Defence has estimated that more than 350,000 Russians have been killed or injured in the war in Ukraine. [File: Russian Defense Ministry Press Service via AP]
Elsewhere, Putin is grappling with a labour shortage aggravated by his military mobilisation efforts. The UK Ministry of Defence has estimated that more than 350,000 Russians have been killed or injured in the war.
Re: Russia, an analysis and policy network, has estimated that close to one million Russians, roughly 1 percent of the workforce, have emigrated since the invasion.
These losses have compounded looming demographic challenges as Russia’s birthrate was already below the replacement level of 2.1 before the war.
“The upshot is that economic growth will become more constrained on the supply side, and GDP will likely fall from around 3 percent this year to 1.5 percent by the end of the decade. National output will be particularly weak during periods of low oil prices,” Peach said.
“But I don’t think a gradual economic slowdown will be a big threat to Putin,” Peach added. “Russia has experienced its fair share of crises in recent decades. As long as inflation and the rouble remain broadly stable, low growth is unlikely to topple the government.”
For Zlatarev in Moscow, conditions remain far better than the widely remembered economic crises of the 1990s.
“Compared to then, things are OK. Even if the costs of this conflict are high, Putin is still viewed as a net positive,” he said. “Most people I know have said they’ll vote for him.”
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.
Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.
The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.
“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.
“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”
Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.
The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.
The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.
Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.
More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.
Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.
“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.
Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.
“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.
Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.
Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.
Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”
“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.
This report by The Canadian Press was first published Sept. 18, 2024.
