Russian economy imploding

 From Business Insider

Russia's economy is collapsing as exports to the sanctioned country plummet in the face of President Vladimir Putin's ongoing, unprovoked war in Ukraine, trade experts suggest.

The "economy is imploding. We forecast a GDP collapse of -30% by end-2022," Robin Brooks, the chief economist at the Institute of International Finance trade group, tweeted on Sunday.

Brooks added that data compiled with help from Jonathan Pingle, an IIF researcher, indicated that exports from 20 countries to Russia were down 50% in April compared to the same time a year prior.

But monthly exports from Russia to other countries were up 64% in April compared to the same time a year prior, Brooks said on Monday, as oil and gas sales become a bigger part of Moscow's revenue.

Brooks said the country's account surpluses were "massive," which meant Russia was exporting far more than it was importing.

Russia stopped publishing its trade data after invading Ukraine in late February, so Brooks said the data was compiled using 20 of the country's top trading partners.

The Observatory of Economic Complexity said Russia's top trading partners include China and Germany.

Since the invasion, European and Western countries have unveiled a slew of sanctions packages aimed at crippling Russia's economy.

Ukraine's government has routinely lobbied for harsher sanctions and led a push to try to redirect European Union countries away from Russian gas and oil — a main source of Moscow's federal revenue

I'm not convinced by the argument that collapsing imports implies an imploding economy, if the imports are not collapsing because of demand but because of sanctions.  (Imports are usually strongly correlated with domestic economic activity)  Of course, the cessation of imports of vital technologies will eventually lead to economic collapse.   And exports are surging as the oil and gas prices zoom.  

Two things will cut Russian exports: the ever tightening embargo on Russian oil and gas exports by Europe; and the fact that global recession in 2023 will reduce oil demand and with it the oil price.   But even though these forces will eventually be devastating for the Russian economy, so far the downturn has been mild, though I don't doubt it will intensify.   The stock market has rallied, as has the rouble, and though Russia's PMI has fallen, it rebounded in May.  

However, by the end of 2022, the Russian economy will be in dire straits, and it will only fall deeper into recession in 2023.  To date, however, that process has only just begun.

EU finally embargoes Russian oil

From The Guardian

The European Union has agreed to a partial embargo on Russian oil after late-night talks at a summit in Brussels.

Volodymyr Zelenskiy had earlier appealed to EU leaders to show unity against Vladimir Putin, as the bloc edges towards a watered-down embargo of Russian oil.

At a summit in Brussels, EU leaders had been attempting to find a way to placate the Hungarian prime minister, Viktor Orbán, who has been holding up a deal on the latest sanctions against Putin’s war machine.

Under a compromise plan that was discussed at the summit, Russian oil transported through the Soviet-era Druzhba pipeline for Hungary, the Czech Republic and Slovakia would be exempt from the EU embargo.

The president of the European Council, Charles Michel, tweeted on Monday night that the deal “immediately covers more than two-thirds of oil imports from Russia, cutting a huge source of financing for its war machine”.

He added that the package also included removing access to Swift payments for Russia’s largest bank, Sberbank; banning three more Russian state-owned broadcasters; and further sanctions against “individuals responsible for war crimes in Ukraine”.

Ursula von der Leyen, the president of the European Commission, said the bloc had agreed a “massive investment in renewable energy” in order to compensate for the diversifying away from Russian oil.

The EU had stalled over its latest sanctions against Russia for nearly four weeks since the Von der Leyen, proposed a complete ban on Russian oil by the end of the year.

Arriving at the summit, Orbán said “the pipeline solution is not bad” but insisted his country needed guarantees it could get oil from other sources if there was an “accident” at the Druzhba pipeline, which runs through war-torn Ukraine. In typically pugnacious style, Orbán attacked the commission for what he called its “irresponsible behaviour” and blamed it for creating a “difficult situation”.

The bloc has come under increasing criticism for slow progress in agreeing the latest sanctions package, the sixth, including from Zelenskiy, who addressed the gathering on Monday by video link.

Ukraine’s president called on leaders to end their disputes, which “only encourage Russia to put more pressure on you”, according to an extract of his speech published on Telegram.

The German chancellor, Olaf Scholz, said earlier he was confident there was a “good solution” on the oil embargo. Germany, along with Poland, has pledged to phase out Russian oil by the end of the year. Officials close to the talks say the decision of these two large economies to forgo oil from the northern leg of the Druzhba pipeline means the EU oil embargo would cover 93% of Russian oil supply by the end of the year.

As yet there is no end date on the exemption for the southern leg of Druzhba, covering Hungary, Slovakia and the Czech Republic, landlocked countries that are heavily dependent on Russian oil.

Latvia’s prime minister, Krišjānis Kariņš, said he intended to warn his fellow leaders not to get “bogged down” in details. “The big picture is that we have to starve Russia, Moscow, of the funds to continue the war,” he said. “If each European country only thinks about itself then we will never move forward.”

 

Source: Research Gate

So the 2/3rds cut is immediate, but by end-year, with Poland and Germany imposing their own bans, it will reach 93%.  Oil and gas make up most of Russia's exports.  This embargo will lead to the Russian economy collapsing.

Vultures

 Germany and France pay billions a year to Russia for oil and gas, and then give their widow's mite to Ukraine to support her.   Embargo Russian fossil fuel exports now.