Russia has been feeling the sting of Western sanctions hamper Russia’s economy, but the war in Ukraine that sparked those repercussions still rages at year’s end.
Missiles are falling on Ukrainian cities, soldiers are fighting and the death toll continues to mount.
Critics may point to the continuing conflict as proof sanctions have failed. But experts say these measures serve to maintain pressure on Moscow, and they still serve a purpose even though Russia hasn’t withdrawn its forces.
“I don’t think that sanctions are going to necessarily force Russia to negotiate,” said Alexander Lanoszka, an assistant professor of international relations at the University of Waterloo in southwestern Ontario.
However, Lanoszka said the sanctions put stress on the Russian state and make it harder for Moscow to fund its war.
“[They can] raise the opportunity costs that the Kremlin faces when deciding its budget,” said Lanoszka, who believes Western financial and military support for Ukraine will provide more tangible effects on the war-fighting front.
Less decline than forecast
The International Monetary Fund (IMF) estimates Russia’s economy will shrink 3.4 per cent this year — a fraction of the 35 per cent it projects Ukraine’s war-ravaged economy will contract.
The drop in Russia’s GDP issharply lower than predicted, though Sergei Guriev, an economics professor and provost at Sciences Po in Paris, said the measure “overestimates the performance” of the country’s wartime economy.
Increased production of artillery shells in Russia makes it appear that the GDP is increasing, but Guriev noted that “has no positive impact on the quality of life of Russian households.”
A marked drop in household spending is a true indication of how the war — and sanctions — have affected people’s lives there, he said.
Joy Neumeyer, a historian and journalist, said Russian state media are promoting a view that sanctions have been a costly failure for the West, while domestic consumers are doing well.
“The state media also claims, contrary to most economists, that Western brands are being seamlessly replaced by domestic equivalents,” Neumeyer, who has previously worked as a reporter in Russia, said via email.
Top Russian officials have publicly acknowledged the challenges sanctions pose.
In July, Russian President Vladimir Putinslammed the “economic blitzkrieg” the country has faced. Yet he suggested it wasn’t causing the damage the West had counted on.
More recently, Elvira Nabiullina, the head of Russia’s central bank, had a similar message, telling lawmakers the country’s economy and banking sector had withstood Western pressures — though she notes their effects have been widely felt.
“Sanctions are very powerful and their influence on the Russian and global economy should not be downplayed,” said Nabiullina,who faces sanctions herself.
Janis Kluge, senior associate at the German Institute for International and Security Affairs, said Russia’s introduction of capital controls at the onset of the war was the most important adjustment it made.
“This helped to stabilize the ruble exchange rate in the first weeks after sanctions were imposed, and the stronger ruble took some pressure off inflation,” Kluge said via email.
Higher energy prices
Energy prices have soared amid the war’s chaos, with European gas prices up “more than four-fold since 2021,”according to the IMF in October.
Higher gas prices benefit Russia, which is why Western governments — after months of discussions — enacted a price cap on Russian oil in a bid to limit the income Moscow can generate from its exports.
Russian authorities have rejected the price cap and threatened to cut shipments to countries that endorse it.
In response to sanctions, Kluge said Russia “conquered new markets for its oil exports,” selling more oil to China and India.
However, Guriev said the average price that Russia gets for its oil is decreasing, and this has already had implications for its war effort — such as when Moscow turned to a mobilization effort to bring more soldiers to Ukraine.
“It felt that it no longer has an unlimited amount of cash to spend on hiring soldiers,” said Guriev. “And that’s the major impact of the sanctions so far.”
Western exodus
The Russian economy has also been harmed by the exit of many Western companies — more than 1,000 of which have, to varying degrees, curtailed business activities there.
Experts say major industries in Russia — including some key to its war effort — have been compromised by this exodus and by sanctions that have cut access to Western technology and finances.
“Russia did not fully understand how dependent its military-defence complex is on Western components, so now we see that Russia cannot reproduce the stock of modern tanks, modern jets, modern rockets,” said Guriev.
The war in Ukraine has upended markets, driven up global food prices and created uncertainty about Europe’s security.
It has also prompted Western countries to act.
The University of Waterloo’s Lanoszka said the countries involved in the sanctions efforts have stuck together more closely than expected.
Ten months into the war, he judges the differences among them to be “more tactical than strategic.”
For Russia, the longer it’s isolated from interacting more widely with the world, the more damaging the sanctions are predicted to be.
“While sanctions are a slow tool, time works in their favour,” Kluge and a co-authorwrote in a fall brief for the European Union Institute for Security Studies.
Guriev said the sanctions’ ongoing strength will depend on how tightly the West enforces them.
If the goal is to hamper Russian industry and its military industry in particular, he said the West must continue to “play this difficult and tiring, whack-a-mole game” of crimping other countries’ efforts to help Russia circumvent sanctions.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.