“Even though the Russian economy will survive sanctions in the short term, it will not be able to sustain a national war effort and simultaneously maintain Russians’ quality of life over the long term,” writes k_sonin in a guest essay
stalemate in the Russia-Ukraine war poses huge challenges for Russia even as it offers opportunities to Ukraine. It gives the latter country time to revitalise its army, which could eventually force Russia out of its territories. That is because although Vladimir Putin is powerful politically, Russia’s economic system is impervious to reform.
Rather, the coming challenge for Mr Putin is that the war needs, and Western sanctions require, the economy to operate differently. Sanctions have squeezed Russian manufacturers. The Bank of Finland Institute for Emerging Economies reported that the value of Russian imports in June was 40% lower in machinery and mechanical appliances, 60% lower in electrical equipment and 65% lower in motor vehicles than on average in the three-month period between December 2021 and February 2022.
One economy-wide solution would be to rely on “parallel imports”—when goods acquired without the original manufacturer’s consent via intermediaries—as well as on trade with China and other non-Western countries. In March the government changed regulations to allow retailers to import products without the brand owner’s permission . In June the change became law.
Another, related, challenge for Mr Putin is that his regime is excessively expensive to run. For years he encouraged the blurring of the lines between the state and big business: many of his bureaucrats, including those in the armed forces, became rich by simultaneously running a government department and a private business. Denis Manturov, the newly appointed tsar of the defence industry, is the richest member of the cabinet.
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