Valves near a drilling rig at a gas processing facility on the Arctic Yamal peninsula, Russia, on May 21, 2019.MAXIM SHEMETOV/Reuters
Near the start of the war, as the sanctions piled up, the Russian economy was thought to be doomed, possibly forcing President Vladimir Putin to sue for early peace. Almost three months later, there is no sign that a peace deal is about to be negotiated, nor is there much sign that the Russian economy is collapsing. The two may be related.
Yes, the Russian economy is hurting and no doubt in recession. But the economy is also showing annoying signs of resilience, in good part because oil and natural gas revenues are climbing even as Europe tries to wean itself off Mr. Putin’s hydrocarbons as punishment for having launched an unprovoked war that is killing an alarming number of civilians and triggering war crimes investigations.
Last week, the International Energy Agency said that Russia’s oil revenues are up 50 per cent this year even though some refiners are refusing to take Russian shipments. But other refiners are buying as much as they can – China and India are gobbling up the cargoes no longer wanted in Europe and North America. Moscow has been earning about US$20-billion this year – money that is used to fund the war – from the sale of crude and refined products.
At the same time, the sanctions, coupled with the proposed embargo on Russian oil exports to Europe, are putting the Europeans into a low-grade panic that is intensifying by the day as energy prices soar and across-the-board inflation takes off – always a popularity-shredding recipe for any ruling politician.
This week Italian Prime Minister Mario Draghi, calling for a ceasefire and the start of peace talks, indicated that the country’s support for the war is waning. Italy was one of the European countries most dependent on Russian energy and one of the biggest exporters to Russia – until the war began. Recent polls say nearly half of Italians now oppose sending arms to Ukraine and a similar proportion say that Russia should be handed Crimea and the eastern parts of Ukraine it now occupies, if doing so is what it takes to end the war. The figure is double the level of those who think Ukraine should fight to reclaim the territories lost to the Russians.
Sanctions and embargoes are tricky, often hazardous, pursuits. The working idea is that those on the receiving end should suffer far more than those delivering them. In this case, the pain is shared by both sides, though Russia is suffering more. Still, as energy writer Irina Slav points out, Europe’s assumption – that Russia needs to sell Europe its hydrocarbons more than Europe needs to buy them – may not hold true.
Take Hungary. The European Union is struggling to ban oil imports from Russia because Hungary is completely dependent on Russian oil; its economy would shut down without them, all the more so since most of its refineries are incapable of processing non-Russian oil. About two-thirds of Hungary’s oil, and more than 80 per cent of its gas, come from Russia.
And because much of the rest of Europe is addicted to Russian hydrocarbons too, the sanctions are taking on a two-sided flavour. Finland revealed Friday that Gazprom, the Kremlin-controlled gas giant that holds a monopoly on Russian gas exports, will cease gas supplies to Finland on Saturday (since Russia supplies only 5 per cent of Finnish gas, the move won’t hurt much but will act as a warning to the European heavyweight economies far more reliant on Russian gas, notably Germany and Italy).
The sanctions and embargo wars, like the war in Ukraine itself, are getting ugly, with no obvious winners or losers. The West is still waiting for the Russian economic implosion.
In March, shortly after war started, JPMorgan predicted a 35 per cent fall in second-quarter Russian GDP over the same period in 2021. Earlier this month, the Wall Street bank said the GDP hit would likely be less severe than it had forecast. They wrote that the data “do not point to an abrupt plunge in activity, at least for now.”
One of the reasons for Russia’s relative rude health is the country’s oil and gas export revenues are not only intact – they’re rising – even as the EU tries to curtail, and ultimately stop, imports of those fuels (the United States and Canada have already banned Russian oil and refined oil products).
Russia was making fortunes from oil and gas revenues even before the war started as global demand rose. Oil began to surge about this time last year as pandemic restrictions eased off and economies bounced back to life. Brent crude, the international benchmark, is up 73 per cent in a year; OPEC undershooting its oil production target is certainly addingto the upward price pressure, much to the irritation of the Americans. Mr. Putin is not complaining.
As Russia’s hydrocarbon revenues rise, its current-account surplus, which includes trade and some financial flows, is hitting record levels. The Institute of International Finance recently estimated that Russia’s surplus could hit US$250-billion this year, about double the figure recorded in 2021. Meanwhile the Russian ruble, which got slaughtered in the early days of the war, has rallied and is one of the top performing currencies in the world, in part due to capital controls and Moscow’s insistence that Gazprom be paid in rubles, not dollars or euros.
To be sure, Russia is suffering. Various Russian and international forecasts predict Russian GDP will shrink by 10 per cent this year. Russia’s central bank is hobbled by the sanctions on its foreign exchange reserves and Western companies are leaving in droves (though Russian companies are picking up some of those discarded assets at fire sale prices). But the country is not suffering enough to be motivated to end the war to save its economy. That may change, but probably not anytime soon.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
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