Reoriented Trade Ties Helped Russia Weather Sanctions Challenges, Experts Say
People at Red Square in Moscow
On January 10, the World Bank amended its 2023 global economy growth outlook to 1.7 percent for 2023 from its earlier projection of 3 percent amid soaring inflation and subdued investment. Output in Russia was projected to decline not by 3.6 percent, as previously forecast, but by 3.3 percent, with growth set to resume to 1.6 percent a year on.The World Bank warned on January 10 that global growth had slowed to the extent that the world economy was “perilously close to falling into recession.” In its latest report, Global Economic Prospects, the institution slashed its economy growth outlook to 1.7 percent for 2023 from its mid-2022 projection of 3 percent. The downgraded forecast came amid surging inflation and global monetary policy tightening by central banks and reduced investment. At the same time, Russia appeared to be weathering the challenges foisted upon it.
"Output in Russia in 2023 is projected to decline again, by 3.3 percent, as EU oil embargos are fully implemented and natural gas exports are reduced by Russia’s shutoff of deliveries to the EU via the Nord Stream 1 pipeline. Growth is projected to resume in 2024, at a rate of 1.6 percent, with modest consumption growth and a marginal recovery in exports as Russia reorientates its trading relationships," the report stated.
The so-called collective West was on a sanctions rampage targeting Russia throughout 2022, with the trend showing no signs of abating this year. Restrictions set in place against Moscow over its special military operation in Ukraine and aiming to cripple its economy and financial operations have generated a “boomerang” effect. Disrupting established supply chains and facilitating an energy and food crisis, the punitive measures have become self-harming for Western countries, while not yielding the desured results regarding Russia’s economy.
Galvanized Mobilization of Resources
The world economy will indeed face the problem of disruption of the existing system of trade in resources, underscored Ivan Petrov, first deputy dean of the Faculty of Economics and Business, professor of Industry Markets at the Financial University under the Government of the Russian Federation, in an interview with Sputnik.This, in turn, will lead to price surges and tumbles, provoking crises, and potentially triggering technical defaults of states. The Russian economy in 2023 will enter a protracted period of galvanized mobilization of its own resources and use of markets of friendly countries for further development, the professor stated.Several factors have been at play, helping Russia endure the restrictions, added Professor Andrey Kolganov, Dr. of Science, Faculty of Economics, Moscow State University.
"Firstly, Russia was not isolated from the world economy, and many supply chains that were severed due to sanctions were restored with other economic partners that did not join these sanctions… Or they find a way to circumvent these sanctions through a chain of intermediaries. And thus, on many positions, Russia manages to keep the supply of necessary equipment, tools, materials, and so on, which could fall under sanctions."
The second factor, according to Andrey Kolganov, is import substitution: development of national production inside Russia by boosting domestic technologies. This is the main impetus for prospective growth, he stated. Russia has been able to enhance its domestic production to replace those goods that it previously purchased abroad.Moscow has retained significant potential in the field of fundamental and applied science. It boasts a number of high-tech production facilities, based on which it can develop new production facilities. So here, the Russian economy turned out to be quite stable, Kolganov said.However, this is not to say that the sanctions are not making themselves felt, he conceded.
“For example, we are experiencing difficulties with the supply of components and spare parts for imported cars – we cannot provide the necessary volumes – as well as the repair of these vehicles; but, nevertheless, in most cases we manage to provide both import substitution and, in parallel, import and replacement of interrupted supplies from other suppliers. And on top of that, we have very good internal technological support potential, which we can capitalize on to develop our own businesses," the scholar said.
In his opinion, it is vital for Russia to create the most favorable economic conditions for new projects based on domestic scientific developments and domestic technologies. This is the most important thing that will strengthen the country’s position both at home and abroad, because it is able to produce high-tech products, and, in some areas, can already compete on par with the most advanced Western companies. 
RussiaRussia Warns New EU Sanctions Against Moscow Will Add to Europe’s Woes17 December 2022, 11:48 GMT
Reoriented Trading Relationships
Russia managed to stay afloat despite the sweeping sanctions pressure targeting it due to the prompt development of government support measures for the affected sectors of the economy, as well as due to increased oil and gas budget revenues, believes Olga Borisova, associate professor at the Department of Corporate Finance and Governance at the Financial University. While Borisova acknowledged that the situation in the country in 2023 would be more difficult, she clarified that the Russian economy is being held back from collapse by surging energy prices, which makes it possible to fulfill budget obligations in full, despite the income decline suffered by a number of industries, Professor Borisova stated.Indeed, those who drummed up the sanctions targeting Moscow miscalculated the reaction of the world market to the prices of Russia’s main export commodities: fuel and raw materials. It turned out that the imposition of sanctions did not lower the prices of these goods, but on the contrary, led to their growth, Professor Kolganov pointed out.The upward revision of the 2023 forecast for Russia by the World Bank came with an acknowledgement of how Russia had “reorientated its trading relationships.”Certainly, prospects for interaction can be found with China, India, as well as other Asian countries, which today have begun to actively acquire Russia’s energy resources, Olga Borisova stated. Furthermore, amid the departure of European and American brands, such a reorientation has opened up new opportunities for organizing joint businesses, not only in the processing industry, but also in mechanical engineering, electronics, aircraft manufacturing, trade, and other sectors.
"Plans of setting up such hubs on the territory of China and India are in the active discussion stage, with a number of joint startups set to enter the market in the near future," Borisova pointed out.
EconomyCEO: Russia’s Gazprom Advances to New Level of Gas Supplies to China in January 20232 January, 12:43 GMTSome Russian businesses have embarked upon the process of changing jurisdiction and registration to Asian countries, which will allow them to bypass Western sanctions restrictions, while at the same time having an overall positive impact on the development of the Asian economy, Borisova stressed.Many countries continue to cooperate with us, and moreover, they help us in some cases bypass the sanctions that were imposed by Western countries, Andrey Kolganov agreed. The prospects of enhancing Russia’s cooperation with, for example, China, India, or African countries are very good, according to the expert. One the one hand, many of these countries are consumers of Russian fuel and raw materials, and they are very interested in purchasing fuel and raw materials from Moscow. Moreover, in the current conditions they manage to obtain certain discounts, which is profitable for them, so they are expanding these purchases, he clarified. While Russia may lose out a little on these discounts, it stands to gain in volumes.Many of these countries are not averse to supplying us with Western-made goods in circumvention of sanctions, he added. In particular, Turkey is very actively playing the role of an intermediary in such supplies. As for China, the situation plays out in two ways: on the one hand, a number of large Chinese companies focused on the Western market, fearing sanctions, have slowed down cooperation with Russia. Small and medium-sized companies, on the contrary, took advantage of the situation in order to expand their presence on the Russian market. So, in general, our trade with China is growing, Kolganov remarked.
Energy Crisis in EuropeUS Has ‘Maneuvered Itself Into Position to Suck Investment Out of Europe,’ Top EU Observer Grumbles27 November 2022, 11:21 GMTAs far as Washington’s stance on the Ukraine crisis and subsequent sanctions targeting Russia is concerned, there is no point in waiting for a compromise with the United States in the near future, said Olga Borisova. She pointed out that the current situation allows the US to revel in the high revenues they are getting from the European market.Looking at the worsening cost of living crisis in Europe, in large part resulting from the backfiring sanctions, sabotage or circumvention of these restrictions by European countries is possible, according to her. High energy prices have had a hugely detrimental effect on the EU economies, hiking up inflation and decimating business efficiency, she added.Any effective new sanctions could be introduced only if the West decides to go for a complete trade and economic blockade of Russia, added Professor Kolganov. So far, each new package of sanctions, in general, looks quite small compared to the previous one, he told Sputnik. Much will depend on whether the anti-Russia coalition will go for a complete rupture of trade and economic relations, along with strong pressure on all other countries to follow suit.Moscow should be prepared for such a scenario, according to Kolganov. The only answer to such a scenario is a speedy boost of domestic production in those industries in which Russia has become dependent on Western supplies, he added.
EconomySanctions Failed to Crack Russia, German Media Says29 December 2022, 19:32 GMTAs for a compromise on sanctions on the part of the United States, Kolganov concurred with Borisova that Russia need not build up any hopes for that. The most that can be expected is that Washington will display caution regarding the choice of “instruments of pressure.”
"I have no doubt that they will not give up pressure on Russia, they will try to harm us in a variety of ways. It’s another matter that they are displaying a certain hesitation in choosing the means of exerting such pressure. They don't want to go too far, realizing that this is a very risky gamble," Professor Kolganov concluded.
