The confrontation between Russia and Western sanctions is politicized to maximum.  Comprehending the real effect from economic pressure from Western countries is a complicated, but doable, task.

In his Facebook page, a Kazakh Economy Expert, Mr. Almas Chukin, made an attempt to explain what the real effects from sanctions are and why senseless is the “tough-nut-ism” of those ready to return back to USSR and uniform color of “Ladas for Commies”.  Below is literal translation:

Average Diagnostics

One party keeps “thumbing” that Russia has not collapsed, and the sanctions are failing, while Collective West is about of grow tired from suffering and shall step back.  The other party confidently reiterates that Russian economic collapse is imminent. 

If to discuss the topic seriously, I will resort to the professional language of medical workers, not economists.  Here on Facebook, in the Month of December, I already predicted the beginning of the “decomposition” of the Russian economy, and many people read it in the wrong way.  So, here we go – as the physicians say – “this diagnosis is deplorable, there are irreversible changes taking place in this patient”, and the time-frame for full completion of those processes is not predictable. 

But let us take three particular medical analyses and they will be sufficient to draw a general picture.

Classified Alterations in the Russian Economy

Let us take the Gross Domestic Product, the Russian Central Treasury Budget and the Population Prosperity.

The majority of those fond of arguing and debating, happily discuss the fact that in 2022, the Russian GDP fell down not by 4% (not 10 to 20, as even the Russian Central Bank thought in March 2022), but only 2% and that fact was supposed to demonstrate the might of the Russian economy.  They also insist that in 2023, Russian economy will show 0%, or plus 1% of growth, and that is so great.

That is actually, a disaster.  While the rest of the world are growing, Russia is stepping back.  Zero per cent growth, after 2% reduction means that the Russian economy shall stay at the level of 98% of the Year 2021, which year was not the best.

Arty Vs Butter

But the matter is not even in that.  One does not have to an economic specialist, to understand that the “classified” changes in the Russian GDP stand for – those are tanks, cannons, ordnance and ammunition, which goods also become parts of GDP.

Trillions of Russian Rubles injected into military technology and industry change the balance in the “Arty Vs Butter” equation.  The Russian GDP is saturated with the odor of gun-powder.  When it comes to things that are significant in the Russian economy, they suffer from material funding cuts.

First of all, many civilian goods and commodities are becoming technologically poorer, not better.  The quality of the Russian GDP finds its best manifestation in those Ladas without ABS and safety bags.

The general prosperity of common masses in Russia still remains afloat, but the 10% reduction in the retail trade is one objective indicator of the condition of people’s wallets and moods

All Gazprom Profits Depleted in Autumn

The Russian Central Treasury’s Budget is the one that shows most nerves-thrilling statistics.  Worse than German Leopards, was the latest package of sanctions aimed at the most exposed point in the body of the Russian economy – the wallet of the state.  In December, West introduced the top margin limitations for Russian crude oil deals – USD 60. The discounted rate for Urals and Brent reached the top of Everest, and now Russian crude is traded for half of its initial price.  Yesterday, West introduced top margin limits for refined oil products – USD 100.

Many of the readers are not aware of the fact that almost one half of Russian petroleum exports to Europe is comprised from gasoline and diesel fuel, not crude oil. Now, let us see what that means. Gas profits mean nothing.  Russian would collect a lot for gas, but still less than it earned for crude.  All Gazprom profits have been depleted in autumn.

This is for the first time in many years, that the Russian national budget is showing deficit instead of net surplus, and that will only proceed to be. And there is no light in the tunnel envisaged.

With its present stocks, Russian will keep itself buoyant for 2 to 3 years of war, and this is it.

Afterwards, Russia will bring itself into the hermetic regime of defense and thus it will exist for years.  USSR existed in such a regime of isolation for 70 years.  That regime will mark the transition from the second stage of disease to the terminal – fourth stage.

Extinction as a Means to Handle Unemployment

In that gloomy performance, there is one tiny inspiring episode.  There is no unemployment in Russia, and there will be no unemployment in Russia.  There are many reasons why – Russia is a big country, its population is aging and dying out, half a million to one million a year. Labor output is low, and all intellectuals are employed in public service or security and defense sectors.  Besides, almost one million economically active Russians have fled the country.

Open Data from Russian Mass Media, as Proof and Evidence

Nezavisimaya Gaseta. 05.02.2023 – Russian Finance Minister reports that in January profits from oil and gas totaled RR 425.5 billion, while the planned indicator was RR 585.1 billion.  That is deemed the lowest level since August of the pandemic 2020. For comparison – in December 2022, oil and gas profits were 2.2 times higher – RR 931.5 billion, the greater portion of which sum was spent to pay the last part of Minerals Extraction Tax imposed on Gazprom.  In January of the last year, oil and gas profits totaled RR 794.5 billion.

In the first month of 2023, Minerals Extraction Tax transfers decreased by 39%, i.e. down to RR 437.7 billion year-on-year.  Minerals Extraction Tax on oil reduced by 42.6% year-on-year – down to RR 364.1 billion, the lowest point since January 2021.  Oil exports tax decreased by 53.8% — down to RR 24.4 billion, the lowest point since June 2020.

Minerals Extraction Tax on gas reduced to minimum since September of the previous year and dropped down by 24% — down to RR 44.3 billion.  Gas exports tax in January reduced by 50% — down to RR 71.2 billion.