Russia “far from victory” – militarily and economically

Putin recently said that Western sanctions would fizzle out, that the financial system and industry are functioning stably, effectively and according to plan. Is that your impression too?

Oleg Buklemishev: I’ve read a lot of articles lately about how the Russian economy is far more resilient than most expected. Nevertheless, of course we know that some negative trends will continue. This also has to do with the departure of western companies. And these sanctions will certainly become even tougher, which could have dramatic effects.

It would not be the first decision that is not made rationally.

Oleg Buklemishev, economics expert from Moscow

Apart from that, the key interest rate was lowered in the last week and the ruble is also stable. However, inflation is still high and the supply situation is critical in some cases. Many citizens have to take unpaid leave to prevent thousands of people from being made redundant.

Hardly any data is published on all these developments – unemployment, imports and exports and much more. There is no reliable material that could show us how Russia is doing economically. What does that mean for your work?

Oleg Buklemishev: You’re right. There are, of course, ways of estimating that. For example, in Soviet times there were two indicators that Western economists looked at when they didn’t trust the data. These were the energy consumption and the turnover of the railway. Now we are seeing that both indicators are deteriorating significantly in terms of numbers.

As far as unemployment is concerned, there is always an attempt not to make people redundant. They are given leave or less work to do. This is how the numbers are “corrected”. But when it comes to skilled workers, there are deficits. Take pilots. There are hardly any flights anymore and people are drawn to other countries. That’s how it is in many areas and it can become a problem for a very long time.

The governor of the Russian central bank, Elvira Nabiullina, warns of a long-term loss of productivity and a severe recession with a drop in economic output of eight to ten percent this year. Do you share this assessment?

Oleg Buklemishev: I think it can go in that direction given all the circumstances that are going on right now. And that means difficult times are coming. The governor announced this at a press conference last week and has already prepared the people for what she called “structural adjustments”. This is not only problematic from a military point of view, but also when it comes to economic development.

From Putin’s perspective, can there still be a “narrative of victory” even under these circumstances? Does he get out of this number somehow?

Oleg Buklemishev: It all depends on how you’re going to explain to people why and what they’re suffering for. I have told you what the Russian economy must be prepared for. Despite this, many people still believe that normality will return. You have to explain to them that this will not happen for many years. Of course, the government still conveys that there will be a victory, the military press officer for example. This is repeated day after day. But there is no sign of victory. If one were to realistically assess the situation between February 24th and today, one would come to the conclusion that the situation has simply gotten worse.

Plans for a European oil embargo have become more concrete in recent days. How are business and politics reacting to this in Russia?

Oleg Buklemishev: Of course, this is discussed a lot and the main message is that we can compensate for this through prices if demand in Europe falls. As of now, according to the data, Russia is earning even more from this trade than last year.

If one were to realistically assess the situation between February 24th and today, one would come to the conclusion that the situation has simply gotten worse.

Oleg Buklemishev, economics expert from Moscow

Of course, there is still discussion about diverting exports. But the diversion in the direction of Asian markets is not easy from a logistical point of view, it will quickly reach the limits of capacity. The fact that in the Soviet era almost all trade was oriented towards Europe makes this interesting.

One last question: You keep reading about protests – including digital ones. How do you perceive that?

Oleg Buklemishev: You can’t really rely on the polls, of course, but even they’re noticing a shift towards more negative attitudes among the population the longer this all goes on. Of course, this also has to do with the higher cost of living. So maybe I wouldn’t speak of protests, but people are becoming more skeptical, also when it comes to official statements.