Russian Economy Shows Resilience 6 Months After Ukraine Invasion; Challenges Persist

Russian President Vladimir Putin attends a meeting via teleconference call, in Moscow, Russia, on Aug. 22, 2022. (Pavel Byrkin/Sputnik/Kremlin Pool Photo via AP)

The Russian Federation’s economy has shown some measure of resilience in the face of Western sanctions as Russia’s invasion of Ukraine is now in its seventh month, although the future remains uncertain for the federation, as the sanctions take their toll on the lives of ordinary Russians.

The nations of North America and Western Europe responded in the days and months that followed the invasion on Feb. 24, with a series of economic sanctions intended to incapacitate the Russian economy. While these sanctions have indisputably had an effect, some experts say that the economy has proven somewhat resistant to economic isolation, suggesting that Russia may be in a better fiscal position than many expected when the sanctions went into effect.

“The Russian economy has proven surprisingly resilient,” geopolitical consultant Matthew Easton said in a statement to The Epoch Times. “To the extent sanctions have affected the economy, the Russian people seem largely willing to accept the sacrifice.”

In a stark reversal of the perestroika policy of the late Mikhail Gorbachev, Western capital has fled the Russian Federation. Among those companies exiting or ramping down business in Russia are many of the world’s top financial institutions, including American Express, Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Mastercard, Visa, and Western Union, all of which have taken major steps to sever ties with the Russian Federation—as well as multitudes of food, clothing, and tech companies.

Taking the place of these multinational corporations are local alternatives that have emerged to fill the void left by U.S. and European companies. While these local alternatives may not possess the same prestige or international reach of the Western brands they replace, they have allowed Russians to maintain some sense of normalcy amid the exodus of foreign commerce.

Immediately following the invasion, the value of the ruble plummeted to an all-time low, suggesting to many analysts that Russia’s economy would soon be in shambles. However, by late March, the ruble had rebounded to pre-invasion levels, and as of Sept. 1, its exchange rate to the U.S. dollar on Sept. 1 is 0.02 (for reference, the ruble was at 0.013 U.S. dollars on Feb. 1).

Some analysts have claimed that the apparent rebound of the ruble is the result of artificial market manipulation. However, the currency’s strength has persisted for longer than many of these analysts initially predicted; some experts assert that conditions may only become more favorable over time for Russia’s fiat currency.

“It’s very unlikely the ruble will get weaker as economic conditions generally will only get better as European countries lose their will to maintain the sanctions as the war drags on,” Easton continues.

In addition, Russian citizens have benefited from low energy prices as the country’s natural gas is barred from foreign markets. While that deprives Russia of revenue with which to wage war, it has the benefit of easing the economic burden on the Russian people, who can now power their homes for less, even as parts of Western Europe prepare for the possibility of gas shortages in the upcoming winter. Russia has even taken to burning its excess natural gas, which is more difficult to store than petroleum.

These mixed signs in the Russian economy have surprised those experts who expected far greater devastation from the loss of Western capital and also frustrated Western leaders who had hoped to thwart President Vladimir Putin’s ambitions by undermining Russia’s fiscal solvency.