UKRAINIAN WORLD CONGRESS

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DAY 204

Victory Chronicles
-DAY 204

September 15,2022

Special Boycott Ru Edition: Effect of Economic Isolation

Above: Merchandize ID from russia is 460-469. Image via 9GAG

BOYCOTT RUSSIA: SECRET INTERNAL REPORT PAINTS BLEAK PICTURE FOR RU ECONOMY

Above: After McDonald’s pulled out of ru, a rebranded rusky version called Tasty and Dot with a Marriot hotels type logo was introduced.  Photo via Food Business Africa

  • Bloomberg News obtained an internal analysis prepared by russian experts to assess the real impact of sanctions, economic isolation and the fall-on effects to internal manufacturing and R&D. While the propaganda machine paints a rosy picture – the tiny dictator famously said that russia has lost nothing through its aggression – even the report’s most optimistic scenario is devastating.
  • Ru Stopped Publishing Data: Early in the war, the kremlin stopped issuing public information on economic indicators and performance data.  While some russian officials have admitted a stage of “negative growth”, overall moscow claims that the impact of sanctions has been minor.  In a report issued at the end of June 2022, the ru ministry of statistics claimed that manufacturing was over 98% year on year, retail down by 10%, inflation at 16% and real incomes down by 0.8%. The ru central bank says that an economic downturn will peak early in 2023, then rebound.

Above: Chart via Consilium

  • Western Estimates: Therefore, Western analysts have been forced to estimate and extrapolate forecasts.  Current forecasts range from optimistic – that ru is resilient and able to quickly reorient away from interdependencies – to pessimistic as sanctions continue to take effect.  On Aug 16, CNBC published a “floundering, not drowning” outlook, asserting that, “Moscow is working to recalibrate its economy in the face of a barrage of international sanctions imposed by Western powers in response to the war.”
  • On the other hand, Yale University published a study calling the picture “catastrophically crippling”. “Russia’s strategic positioning as a commodities exporter has irrevocably deteriorated, as it now deals from a position of weakness with the loss of its erstwhile main markets, and faces steep challenges executing a ‘pivot to Asia’ with non-fungible exports such as piped gas,” said the report.
  • Sanctions Long Game: Experience shows that sanctions are a long game, often taking years to manifest full impacts.  Many analysts have been surprised at how quickly sanctions against the aggressor state have taken hold and how globally interdependent the ru economy actually is. For example, ru manufacturing of automobiles and modern weapons has likely been crippled by sanctions on Western electronics.
  • Mitigation: To mitigate sanctions impacts, ru is building economic relations with India, China and Turkey, among others, and undertaking so-called parallel imports –  importing goods through third parties, without the consent of the manufacturing countries. Future sanctions will be targeted at closing parallel import loopholes.

RU EXPERT INTERNAL REPORT FORECASTS

Above:  Charting three bad scenarios from the confidential internal report.  Chart via Bloomberg

  • The internal report obtained by Bloomberg gives three scenarios entitled stressful (worst), inertial (non-intervention) and targeted (strong intervention).  In the targeted scenario, the economy will fall by 8.3% in 2022 and 12% in 2023.  Bloomberg took a look at key sectors including:

Above: Chart via Consilium

  • Imports And Exports: The report goes as far to say that commodity exports like fossil fuels, metals and chemicals – currently the backbone of the russian economy – will cease to be economic drivers.  Imports will be hit with the inability to procure raw materials and components that will eventually permanently limit manufacturing growth.
  • Technology: ru struggles to develop its own technological innovation and heavily depends on use of externally-developed high tech, for example, through cooperation with strategic Western partners.  “Restrictions on access to western technology may push Russia a generation or two behind current standards as it’s forced to rely on less advanced alternatives from China and Southeast Asia.”
  • Brain Drain: A mass exodus of talent is leaving ru,  which will especially impact the IT sector of the economy and put ru years if not decades behind.
  • Agriculture:  Ru is surprisingly dependent on the global economy for agricultural inputs, for example, almost all of poultry production depends on imports as well as seed for potatoes and beets.

Above: “Russia’s Plane-Making Ambition Exceeds Its Competence”. Ru’s first and last attempt to internally produce passenger aircraft went down in flames in 2019.  Photo via Moscow Times

  • Aviation: Ru is currently operating internal flights and one international flight to Minsk on foreign aircraft stolen from foreign leasing companies at the start of the war.  Spare parts and maintenance services are sanctioned, forcing ru to cannibalize spare parts from the existing fleet.  None of these craft will ever be allowed to fly in the civilized world and will eventually become dangerous without proper maintenance.

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