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Russia’s Economic Crisis

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Russian Ministry of Finance By Ludvig14 – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=32446320

It’s probably worth noting that Evan Gershkovich’s last story before being arrested for espionage was on the Russian economy:

The opening months of Russia’s invasion of Ukraine last year drove an increase in oil and natural-gas prices that brought a windfall for Moscow. Those days are over.

As the war continues into its second year and Western sanctions bite harder, Russia’s government revenue is being squeezed and its economy has shifted to a lower-growth trajectory, likely for the long term.

The country’s biggest exports, gas and oil, have lost major customers. Government finances are strained. The ruble is down over 20% since November against the dollar. The labor force has shrunk as young people are sent to the front or flee the country over fears of being drafted. Uncertainty has curbed business investment.

“Russia’s economy is entering a long-term regression,” predicted Alexandra Prokopenko, a former Russian Central Bank official who left the country shortly after the invasion.

Long story short the Russian economy may not be starting to collapse but it’s certainly contracting in some ugly ways. The Russian budget situation is also dreadful, and there does not appear to be much light at the end of the tunnel unless the Chinese decide to fully bankroll the Russian war effort. It might not bring down the Putin regime (in the short term) and might not starve the war effort, but Russia absolutely is not doing well economically. I would not be at all surprised that detailing this situation is part of the reason that Gershkovich was detained.

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