Six Myths About the Effects of Sanctions

The sanctions imposed on Russia after the invasion of Ukraine have put tremendous pressure on the Russian economy. It should be acknowledged that official economic data offered by the Kremlin cannot be trusted, so we adopt a different approach using information from non-public outside analyses by global banks, consultancies, business leaders and experts from our wide network with unique access to Russian evidence. We also draw from cross-channel big data sources, including institutions such as the World Bank, IEA and OPEC. The analysis of economic data is framed to contravene seven common myths about the effects of sanctions on Russia. We observe a significant rise in inflation with salaries lagging and note that real wage pressures will bolster inflationary pressures. The Bank of Russia has followed an aggressive monetary easing with significant interest rate cuts and a surge in money supply that created short-term demand to dampen the fall in GDP; however, that will also boost inflation and reduce future investment prospects. It is reported that many Russian industrial companies are vulnerable and face bankruptcy, which, combined with an unstable banking sector, paints a gloomy economic outlook. We conclude that the Russian economy is severely damaged, although the economic sanctions and retreats of international companies are incomplete. Russia continues to gain oil and gas revenues despite the sanctions where additional measures are warranted. Yet, Russia cannot escape economic oblivion if the allied countries retain the pressure of economic sanctions.