Russian economics
Nuke posts are clickbait
After recently finishing a couple of projects, Ben is preparing a proper article on the impact of the war (notice how so people can’t use that term) on the world food market and economy, so I thought I’d put some notes and ideas about the state of the Russian economy. Phil is busy doing a lot of book-related work and personal stuff and so am I. So less posting this week.
But you all need some Fallout. So let’s talk economics instead of a click-bait nuke post.
Let’s have a look at Russian and Ukrainian data via the World Bank.
Russian GDP will be down 4.5% which is significant - and its not more only because of:
“strong fiscal response (3 percent of GDP), capital controls, monetary tightening, swift action to stem financial sector risks, as well as high FX inflows driven by the surge in global commodity prices” but “trong fiscal response (3 percent of GDP), capital controls, monetary tightening, swift action to stem financial sector risks, as well as high FX inflows driven by the surge in global commodity prices”.
I don’t know where the Council of Europe got a 11.5% drop in Russian GDP. That would have been game changing - with huge political and military consequences for a regime built around redistribution and corruption.
Russia is still running a two billion euro monthly surplus - which many countries would love. That’s down from twelve billion a month. We need to cut fossil fuels completely out of our energy supply because the West is financing Russian and Saudi genocide. No more murdering the planet and buying bullets and bombs for children. Cutting Russian fossil fuels out of our energy mix is good for the environment, good for Ukraine and good for Russia in the long run - it cannot exist as a kleptocratic resource robbery state. Russia needs factories, technology, education universities (not only for the urban elite) and in-door plumbing. Not oligarch yachts. Not via the moron apex predator propertarian Elon Musk model but a real knowledge mittelstadt based economy.
BTW fuck Elon Musk. Fuck you bro. And I will leave Twitter if he buys it.
Genocidal chitchat between billionaire bastards.
Yes this is Dustin Du Cane, radca prawny, Warsaw bar, Elon or Dmitry can sue me for libel.
Anyway back to the figures:
Russia has a massive current account surplus with imports collapsing but fossil prices up: “The increase in expenditures was financed by oil/gas revenues (25.1 percent up in real terms January–August, yoy), and a reduction”. Let’s thank the genocidal regime of the Saudi torturer murderer Jetsons sheikh crown prince bro whose initials I won’t bother remembering or checking because they make him seem like a bling rapper. Yeah they are supporting Russia because they’re also a thieving backward murder regime.
“The current account surplus reached US$183 billion over January to August 2022, triple its level the year before, as surging commodity prices and lower imports more than compensated for a fall in export volumes and discounts on Russian oil. Imports from some countries including Turkiye and India grew but did not offset the sharp drop in imports from sanctioning countries, resulting in an overall contraction of 22 percent in Q2”.
Fossil fuel prices won’t protect Russia in the long-term unless Scholz has a brain fart, which actually is quite likely.
“GDP is expected to decrease by 4.5 percent in 2022 and by a further 3.6 percent in 2023, as the economy continues to contract due to the impact of sanctions, including those coming into force at the end of this year (notably the EU partial oil ban and to a lesser extent the oil price cap). A declining economic base and higher expenditure are expected to turn the general government surplus into a 1.8 percent deficit in 2022.”
As to other Scholz brain farts - Hamburg is a vital NATO logistics hub. VITAL. You can’t firewall ownership and you can very much sabotage a port via root access to its systems. Lunacy.
Back to Russia:
“Poverty is expected to increase to nearly 4 percent (UMIC poverty rate) in 2023, while meager growth in 2024 will preclude poverty reduction. Russia is vulnerable to lower demand for, and prices of, energy and extractives commodities, which may manifest through weaker global growth. Additional risks arise from the partial mobilization announced in September, which could dampen domestic demand, and increase labor market and financial sector pressures.”
I don’t where these poverty figures come from. Where I come from, povery is not having an indoor toilet!
Russians are looting Ukrainian toilets! But even looting all the toilets in Ukraine won’t change Russia’s toilet crisis. The fact that oligarchs have gold toilets doesn’t change the crushing poverty in Russa… Where does the World Bank get its figures when the OECD has a 20% rate? The importance of the poverty figure is that the poor are most quickly affected by economic contraction and tend to react… as we have seen in Russian history that would be too tedious to repeat. Also French. Of course the middle classes hijack revolutions and movements but its the poor who provide the angry revolutionary mass.
Ukraine meanwhile is on economic and patriotic war life support. Genocide war makes economic issues less painful and more bearable - as the case of Russia in WW2 shows. Okay, let’s discuss the revolutions of 1905 and 1917 - the Russians (and Ukrainians and Belarussians) were losing wars but not threatened with extinction. The Nazis made it clear they would kill and enslave Russians. That was not the case with Imperial Russia or Meiji Japan. So Ukrainians will bear the pain. Russian media is trying to frame the war as existential in order to tap the mythical Russian spirt of resistance (which isn’t unique as the Poles, Belarussians and Ukrainians showed during WW2). For a sideways look at resistance get Phil’s Birds of Prey.
Ukraine so is fuelled with desperate patriotic fervour. And lots and lots of aid.
“In Q2 2022, Ukraine’s GDP shrank by 37.2 percent YoY, following an estimated 45 percent contraction in March. After the localization of the active combat in April, economic activity has shown signs of improvement, even though it remains much below the prewar level. Consumer price inflation has accelerated rapidly, reaching 23.8 percent YoY in August, with high food price inflation hurting families, particularly the poor.”
“The war, however, still affects about 20 percent of Ukraine’s territory. As of August, the government lost control over two oblasts (2.5 percent share in GDP), while active fighting continued within three other oblasts (15 percent in GDP). 7mn people have become refugees, and another 7mn displaced internally.”
Russia is making money on its exports but Ukraine is suffering from the Russian half blockade:
“The war generated immediate balance of payments pressures. Exports fell precipitously as the Black Sea ports have been completely closed until July”
Ukraine needs to join the EU almost more than it does NATO:
“The poverty and social impacts of the war will be massive. Under the baseline scenario, the population share with income below the national poverty line may reach nearly 60 percent in 2022, up from 18 percent in 2021. Based on the global line of US$6.85 a day (2017PPP), poverty is projected to increase from 5.5 percent in 2021 to 25 percent in 2022, with high downside risks if the war and energy security situations worsen.”
I would gladly accept Ukraine into the EU. They can replace Hungary as long as Orban is in power and has popular support. Maybe Italy and its fascist Putin loving new government. Ukraine would take almost all EU funds away from countries like Poland - but good, Poland is being robbed by PiS and family.
PS The magnificent Tooze a day later :)
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UPDATE 5 February 2024 - I have pretty much left Twitter. So find me on Bluesky for now.
We will be leaving Substack in the future because Nazis.