Economic war on Russia has failed. Now what?
The Russian economy was supposed to collapse in 2022 because of our sanctions. After all, we illegally seized more than $300 Billion and plan on using it to rebuild Ukraine, while NATO bankrupts Russia in its war against Ukraine.. This was supposed to crush Russia and bring it to heel.
What has happened instead is Russia's trade surplus has grown larger, thus Russia has no immediate need for that $300 Billion.
Meanwhile, instead of Russia's economy being crushed, Russia's economy has grown (although slowly).
(Reuters) - Russia's economy ministry revised higher on Friday its 2023 gross domestic product (GDP) forecast to 1.2% growth from a 0.8% contraction, but lowered its forecast for 2024, mirroring a wider trend that envisages more sluggish longer term prospects.
The economy ministry forecast GDP growth of 2% in 2024, down from 2.6% when it last provided macroeconomic forecasts in the autumn.
Russia's economy defied early expectations for a double-digit economic contraction in 2022, in forecasts made soon after Moscow sent troops into Ukraine in February of that year, but a return to prosperity remains a long way off as the government directs more spending towards the military.
But probably the biggest surprise is that Russia has managed to make war on Ukraine on the cheap.
ussia's invasion of Ukraine has come at a steep geopolitical price and tens of thousands of people have died, but a new analysis by the Economist suggests the country is actually spending a small amount on the war effort.
The direct fiscal cost of the war — spending on soldiers and machines — is estimated to be about 3% of Russia's GDP, or roughly $67 billion a year, according to the report. That figure comes from a comparison of Moscow's pre-invasion spending forecasts for defense and security with what it actually spent.
By historical standards, the current war pales in comparison. The Soviet Union during World War II, for example, spent about 61% of GDP, and the US at the same time put about 50% of its GDP toward the conflict.
This is amazing, considering that the U.S. is still on pace to go bankrupt from military spending but Russia isn't.
Unless NATO can somehow get China and India to magically start to comply with the sanctions, this is unlikely too change.
So what does this all mean?
Well, don't think that the significance of the U.S. simply seizing more than $300 Billion and spending it as we wish. While Britain has nothing to worry about, countries like China have plenty of reasons to be concerned when it comes to the fate of their dollar holdings. Even nations like India, Vietnam, Mexico and Brazil should be concerned. This puts a lot of pressure on a reserve currency.
Another lesson being taught is that it IS possible to stand up to America.