Russia's economy defies Western sanctions

Russia's economy defies Western sanctions

The Western sanctions were intended to bring belligerent Russia to its knees economically, but contrary to expectations, gross domestic product experienced a significant increase. In response to the Russian army's invasion of Ukraine two years ago, the United States and its allies imposed extensive economic sanctions that, according to forecasts by the International Monetary Fund (IMF), were expected to lead to a drastic collapse in the Russian economy. However, despite a brief decline in 2022, gross domestic product recorded strong growth and current forecasts show a positive development for the current year.

The Ministry of Economy in Moscow forecasts gross domestic product growth of 2.8 percent for 2024, compared to previous expectations of 2.3 percent. Both the IMF and the Austrian Economic Research Institute have raised their forecasts, indicating robust economic development. Domestic demand, boosted by Moscow's support and war spending, is a major contributor to growth. The population's increased purchasing power due to higher real wages and government support measures is driving private consumption, while industry is benefiting from government orders.

Despite the collapse in trade between the EU and Russia, other countries such as China, India, Turkey and CIS countries in Central Asia have filled the resulting gaps. Sino-Russian trade hit a record high, and China is now Russia's largest trading partner. Evading Western sanctions through Russian business through China is less common, but Chinese exports to Central Asia have increased, indicating that these goods ultimately end up in Russia. Russia has increasing control over the world market by expanding trade relations with various countries outside the Western sphere of influence.

To continue to maintain trade, Russia has found innovative ways to circumvent Western restrictions. The export of energy is no longer carried out through European addresses, and companies from the Middle and Far East play an important role. Despite the secondary sanctions imposed by the West against third countries such as China or Turkey, there is a risk that Russia could be missing important machines and components in the near future, especially if supply relationships are disrupted. Overall, the consequences of these developments for both the countries involved and for the global market are being watched with excitement.