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The International Working Group on Sanctions against Russia, headed by the Head ...

Sanctions on Russia work, but there are opportunities for their strengthening-researching the international expert group of Yermak-Macfola together with KSSE experts

The International Working Group on Sanctions against Russia, headed by the Head of the Presidential Office of Ukraine Andriy Yermak and Director of the Institute for International Research Frim-Pogli (FSI), Ambassador Michael McFol, together with experts of the Kiev School of Economics, published a study of the impact of sanctions on the Russian economy over the past year. The key conclusion that experts have reached are sanctions, but there are opportunities to strengthen them.

Researchers are one in the belief that the impact of a sanction burden on the Russian economy, in particular on its trade and public sector, continues to intensify. This is primarily due to the introduction of export restrictions on Russian energy, including oil and natural gas. Experts believe that 2023 can be a turning point in economic impact on the aggressor country.

“The sanction pressure on Russia inevitably affects its further possibilities of war, which is confirmed by the data of joint research. Even in the official sources of the Russian Federation recognize the deterioration of key macroeconomic indicators in 2022: drop in GDP, increase in inflation and unemployment, reduction of investment, etc. This proves the correctness of the strategy of influence on the aggressor chosen by Ukraine and its allies.

At the same time, opportunities for further pressure increase, ”Andrey Yermak said. According to the study, the effect of sanctions has significant inertia, and now has a significant effect on the Russian economy. The current payments surplus is significantly reduced (–60% for the period from II to IV quarter, and December - January data indicate an increase in this dynamics), and in 2023 it will be $ 63 billion. (compared to 227 billion in 2022) with the prospect of further fall.

There is also a fall in ruble and inflation: starting in November 2022, the ruble has lost 20% of the value, which creates preconditions for increasing consumer prices. As a result, the Russians are poorer and lose access to quality goods and services. Liquid resources are indicated and deficit: the war takes $ 8-9 billion from the Russian budget every month, covered by the National Welfare Fund (FND). At such a rate, the Kremlin will lose all the Liquid part of the FND by the end of 2023.

Revenues from oil and gas trade - a key Russian economy driver, including the military budget, will fall by about 50%this year. And in the long run, the situation for the oil and gas industry of Russia will look even more depressing.

The irreversible loss of the most stable and solvent markets, technological lags, a multiplicative effect that will affect the supply chain (tanker transportation, port services, pipe transport) - all this will only accelerate the collapse of the most important "wallet". “By applying pressure on the oil and gas sector, we beat the aggressor into the heart itself, we will bleed its potential. Statistics are quite clearly reflected in this impact.

If, in 2022, the sale of oil and gas ($ 350 billion from the total $ 540 billion of trade balance) was a key component of export revenues), we are now seeing a fall in revenues from oil and gas sales by 46%, ”Andrey Ermak added. At the same time, the sanction regime is far from exhausted and requires constant updating and improvement.

Further steps towards new sanctions restrictions should be applied on the principle of determination, completeness and comprehensiveness to ensure maximum effect and prevent them from avoiding. According to the Head of the Presidential Office of Ukraine, Russia still has a sufficient resource for the continuation of the war, so the speed of the resolution of hostilities depends on the capacity of the sanctions.