Russia complains “we can’t buy what we need” as sanctions bite

A Kremlin propagandist has complained about the impact of sanctions imposed on Moscow following its invasion of Ukraine. The comments by TV anchor Ivan Trushkin came as one economic expert told Newsweek that the financial pain Russia is feeling will become “even more pronounced” in 2023.

During a segment on the show Mesto Vstrechi (Meeting Place) on Russia’s NTV channel, Trushkin despondently asked a guest why Russia had access to different currencies such as dollars and euros “but we cannot spend them on what we want because of those very sanctions.”

His guest responded: “we can spend it on what we want,” prompting Trushkin to interrupt “I mean on what we need,” before adding, “I don’t understand anything.”

The clip was tweeted by Ukrainian interior affairs adviser Anton Geraschenko, who wrote “We can buy what we want. We can’t buy what we need,” in referring to Russia’s predicament, before adding, “sanctions are working.”

Since Vladimir Putin’s full-scale invasion, the EU, the U.S. and other allies have isolated Russian from the global financial system. As part of the punishment, they have frozen Moscow’s access to some of its foreign reserves and kicked it out of the SWIFT global banking system.

In the early stages of the war, forecasters anticipated Russia’s GDP in 2022 could fall by up to 15 percent. However, that the figure is closer to 3 percent, as the economy has been buoyed in part by higher prices for its main exports of gas and oil.

“Nevertheless, sanctions, oil and gas embargoes, high inflation, capital outflows, and lower business investment have dragged Russia into a recession,” Olga Bychkova, an economist at Moody’s Analytics, told Newsweek.

“Sanctions imposed by the West on the Russian financial sector have made it impossible to conduct payment and insurance transactions as before,” she said.

Sanctions have also restricted access of Russian companies to foreign markets and caused disruptions in technological, production and logistics chains.

The measures have impacted exporters which cannot sell their products in certain countries and Russian companies which use imported components, causing a decline in manufacturing output.

“Russia is in for a sizable recession in 2022, which will continue in 2023 without a rebound as sanctions deepen their bite into the economy,” Bychkova said. “The effect of sanctions adopted in mid-2022 with their effective periods postponed to late 2022 and early 2023 will become more pronounced.”

Earlier in December, Russia’s private Alfa-Bank warned of a “deeper contraction” of Russia’s economy next year of as much as 6 percent, although other assessments put it lower. Analysts polled by Reuters predicted inflation to hit 12.1 percent, up from 8.4 percent in 2021.

Meanwhile, western countries have imposed a $60 cap on the price of seaborne Russian oil in a measure aimed at curbing Putin’s financing of his war effort.

In response, Russia has reportedly assembled a fleet of tankers aimed at circumventing the cap, although experts have said that the move would not be enough to make up the shortfall.

“If Russian oil exports plummet, this will provoke inflationary pressure due to a contracting balance of trade and a weaker ruble,” Bychkova said. “A lot will depend on how much oil the country will be able to redirect to other markets as well as the extent to which the slump in oil exports will be offset by price.”

Moody’s Analytics estimated that around 4 million of Russia’s 7.5 million barrels per day of oil exports will be displaced by the end of the first quarter of 2023, but almost half will be rerouted to non-Western countries.

Energy exports will continue to generate a trade surplus for Russia but its economy is expected to become “much more insular”, according to Bychkova.

“Even as high oil prices cushion the hit in the short term, the loss of foreign technology, financing and knowledge exchange will take a significant toll on Russia’s energy market in the medium term, especially on LNG projects, which are still in their infancy.”