The Russian Economy at War (2024) - Sanctions, growth, inflation & mounting risks

Since 2022, there have been wildly divergent predictions made about the way the Russian economy would hold up under pressure.

Now, deep into Q3 2024 I want to have a closer look at the Russian economy, sanctions, and the risks it faces. And for a change in perspective, we will do it primarily using Russian data.

Patreon:

Reading and Sourcing (please be mindful with links as always):

Bank of Russia Annual Report 2023

Rosstat - on industrial production in H1 2024

Featured interview with Belousov

Russia stops disclosing oil product data

Russian claim of potential 6.8% manufacturing increase in 2024

featured commentary on Russian economy featuring Russian data

Russian economic reporting

Reporting on payment issues

Russian gas flows per Reuters

The Houthi tanker story

UK vs the Shadow Fleet

US announces new sanctions

Russia ends subsidised mortgage program

Bond rates per

Western components in Russian systems:

Signing bonuses

Samantha Gross and Constanze Stelzenmüller - Europe’s messy Russian gas divorce

Included, referenced or relevant reporting examples

Vitaly Yermakov on Russian oil revenues

Caveats & Comments:
All normal caveats and comments apply. In particular – I would like to note as always that this material has been created for entertainment purposes and is not intended to be a complete or comprehensive examination of the topic in question and should not be relied upon to inform financial or other similar decisions.

Also note that I have not independently verified any of the data or reporting presented in this piece, and would particularly note that significant amounts of data released by the Russian Government or related figures has been used which has not been subject to verification or significant scrutiny.

Timestamps:

00:00:00 — Opening Words
00:01:49 — What Am I Talking About?
00:04:09 — The Russian Economy At A Glance
00:09:20 — Investment And Military Production
00:11:24 — Three Drivers
00:14:41 — Rostec And The Russian DIB
00:23:05 — Wartime Expenses
00:28:48 — Hydrocarbons
00:35:12 — Sanctions Pain
00:47:14 — An Economy Overheating
00:58:32 — What Does This Mean?
01:00:27 — The Danger Of Peacetime
01:04:12 — Channel Update

[PerunAU]

As noted in the episode, for this piece I've tried as far as is possible to use as much Russian data as possible with the goal of providing a soft 'ceiling' for the health and performance of the Russian economy. Please keep that in mind when interpreting the content and evaluate its reliability accordingly.

There will likely be a companion piece on the Ukrainian economy in 2024 (including the impacts of Russia's long-range strike campaign) in the near future.

Hope you enjoy, and I'll see you again next week.

[michaelmorley]

"If your mate Bazer goes out and buys custom rims for his Toyota, that's consumption. If he sets up a workshop so he can make them and sell them to his mates, that's investment--and if the government gives his mates money to buy them, that's probably an election year." Excellent illustration.

[TheMouseMasterYT]

43:59 "...Uganda drops off the list..."

... dammit, I was relying on this channel for my deep and unbiased reporting of Ugandan finance.

[mrreziik]

I love that this community is full of interesting people and the comments are always amazing, cause ordinary people would never listen to a 1h PowerPoint presentation every sunday for almost 3 years straight

[iliaponomarev]

There was a joke in Russia that if Nabiullina were in charge of the army and Shoygu in charge of economy, Russia would have taken Kiev in 3 days and Lvov in a week, but it would have been like 1000 rubles per dollar.

[saltmerchant]

That line about Bazza and the Toyota custom rims was responsible for me soaking my desk in my drink, I hope you're proud of yourself Perun.

[WWFanatic]

Being an economist by training the discourse around sanctions has always been frustrating and this channel has always been a breath of fresh air. People look at what happens, not what could or would have happened had things been different. Without sanctions Russia would more easily get access to vital components, advanced machine tools, high quality metal products, and have a better fiscal and monetary situation. People will look at it and say "oh but Russia increased output of munitions by X" and ignore that without sanctions they either could have increased it by >X or increased it by X at a lower cost. Counterfactuals are hard and estimating the impact of sanctions is a tough task even if you assume Russia is being honest. The idea that they have no impact is idiotic though.

As an aside the fact that GDP growth has been as low as it is in Russia is curious. Wars often increase GDP by a considerable amount. It might not be "productive" GDP, munitions and tanks don't make your life better (unless there's a serious industry for people to rent hardware and blow stuff up as a day of entertainment) but the numbers tend to go up. Real US GDP doubled during WWII. A more apt comparison is Korea where US spending averaged about 10% per year. That is roughly in the ballpark for what Russia spends, particularly considering what it will cost even if official budgets don't say that. During that period the US was closer to 6.5% growth, not 1.5-3.5% growth. In both cases though, it was the aftermath of the war that was costly as there were recessions in both cases as spending dropped and the economy readjusted to a more civilian footing.

[youngrhop]

Just another point regarding the 6% fee for using middlemen to bypass sanctions.

There is no guarantee that the middlemen will not simply take the money and run; this happens quite frequently to Iran by the sanctions runners in Dubai.

Comments such as the Chinese not paying could be due to sanctions, but they could also simply be scamming their Russian counter part.

[m.streicher]

"consuming the past and future" is such a good description of Russia's strategy

[MrLalabai]

I'm an accountant and I've read Gazprom's financial statement. Specifically Russian version (РСБУ) for 2023. I've found that their profits from selling gas were pretty much halved compared to 2022.
Thought this might be an interesting addition.

[kevinmccaughey]

Groundnews take note that this is the rare--or first--sponsor section I didn't skip, because Perun made it worthy info.

[VorbildRoß]

"Peace isn't the absence of hostility and battle. Peace is the absence of Danger" Well said

[rayzerot]

"As Russia's ruble became rapidly rubble-ized"

This man has a way with words!

[fien]

Ever single video Perun has discussing the Russian economy can basically be summed up as "It's holding together and supporting the war, and will do so for at least the near-to-medium term, but is doing literally all the things you don't ever want an economy to do, all at once, at levels that make the average African nation with banknotes issued in scientific notation start to break out in a nervous sweat."

[cpeteman]

“Graphs and stats special”

If people can’t handle you at your data they don’t deserve you at your meme. Keep doing you.

[jwt]

India brought a lot of support to Russia during the war, helped Russia export oil, and imported industrial equipment from the West and exported it to Russia.

[vinsarrow]

A video about Russia's economy is quite a good choice of topic, considering the war has become one of attrition & Putin appointed an economist into a key position for the war effort.

[ashvandal]

One of the things that has always amazed me about Perun’s weekly PPP is the low/nonexistent presence of Russian propagandist incursion in the comment section.

[Farewell]

Doing straight up defense economics directly?
This is going to be a good one.

[casbot]

Disclaimer....
*_"This is not professional financial advice and should not be treated as such."_*