Two years of sanctions have failed to weaken the Russian economy enough to stop it waging war against Ukraine. If anything, the opposite has happened: Russia's economy grew by 3.6% in 2023.
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00:00 The defence industry is currently the most important pillar of the Russian economy.
00:04 Thanks to significantly increased government spending, the defence industry accounts for 10% of GDP.
00:10 Other sectors such as the steel industry are also benefiting.
00:14 After the slump in 2022, the Russian economy is now growing, according to data from Moscow.
00:23 Growth is also forecast for 2024.
00:28 What's happening is that Russia is actually, ironically, becoming more like the Soviet Union,
00:35 in that it has high spending on the military and in some cases heavy industry,
00:41 and at the same time the level of consumption is falling for the population.
00:46 But industrial production is also doing surprisingly well, for example in the automotive sector.
00:56 Components are increasingly coming from China, after the Europeans withdrew from Russia.
01:02 Thanks to Chinese imports, the Russian economy is being kept afloat.
01:06 China is of course not officially participating in the sanctions,
01:11 so it is not a partner, so to speak, of Western states when it comes to sanctions.
01:16 To finance imports, Russia needs export income from gas sales.
01:22 These have fallen dramatically at times.
01:25 The EU's extensive import ban seems to have had an effect.
01:29 Tapping into new customers with new pipelines is only a partial substitute.
01:34 The volumes involved with the pipelines are very, very different
01:41 when you compare them for what the pipelines can transport to the EU or can transport to China.
01:49 Even the new infrastructural projects, like Power of Siberia 2, are still in the infant state.
01:56 However, oil sales, Russia's second most important source of export revenue,
02:02 are almost as good as before the war in Ukraine.
02:05 This is despite EU sanctions aimed at enforcing a price cap of 60 US dollars a barrel.
02:12 Transportation of oil probably is violating the cap.
02:17 So there is weak enforcement on the side of authorities.
02:22 There is also shadow trading where oil is discharged and charged on another vessel overseas.
02:33 More and more, oil is ending up in India.
02:37 Its most important oil supplier is now Russia.
02:40 Nevertheless, Russia's growth is partly financed on credit, including military spending.
02:46 How long can Putin actually afford to do this?
02:50 You can ride that for quite a while.
02:53 Russia had a very low debt level at the beginning of the war.
02:56 It still has a low debt level even now.
03:00 Russia does not look set to run out of money to finance the war in Ukraine any time soon.