Despite Western sanctions, the Russian economy is stable and economic activity continues to grow, while Western economies are struggling. The euro continues to lose value with the European economy in ruins, rising unemployment and high inflation. The high cost of living in recent years, along with the current energy crisis in the EU and rising food prices, have fueled public anger across the region, leaving many people unaffordable to buy essentials. Oil and food prices have more than doubled in the past five years, while natural gas prices have tripled. The crisis in Ukraine represents a major challenge for the EU. Russia’s economy was not as badly damaged by sanctions as Western countries had hoped; Instead, it has become more stable, with foreign reserves rising and inflation falling. At the same time, oil exports increased and new market opportunities arose.
General economic activity is performing excellently. This short article will try to shed light on the reasons for a stable Russian economy amid the EU energy crisis, rising food prices and the conflict in Ukraine. There is no doubt that the Russian economy is strong and improving day by day. Since Russia annexed Crimea in 2014, the United States and its European allies have imposed a series of sanctions on the country that are still in effect. All major organizations have been targeted, including Russian officials, politicians, energy, import-export and defense sectors, including the Russian banking sector. The sanctions were intended to punish Russia for its actions in Crimea and to deter future aggression, but they have failed and have had the opposite effect. Russian GDP growth was 1.7 percent in 2017, 2.81 percent in 2018 and 2.2 percent in 2019. Although the Russian economy shrank by 2.68 percent in 2020, the following year grew by 4.82 in 2021. per cent.
Annual inflation in Russia fell to 15.1 percent in July 2022, down from 15.9 percent a month earlier. This was the lowest inflation since March. Russian exports also increased after the 2014 crisis. It rose from $405.5 billion in 2013 to $468.5 billion in 2015. In response to Western sanctions against the invasion of Ukraine, Russia has imposed export bans on more than 200 goods until the end of 2022, including telecommunications, medical equipment, vehicles. , agricultural and electrical equipment. That is, since 2014, the sanctions imposed on Russia by Western countries, including the United States, could not have any effect, but the door to opportunity was opened for the Russian economy.
Following the current crisis in Ukraine, the West has imposed maximum sanctions on Russia. These sanctions have hampered the ability of Russian companies to raise capital in international markets, leading to a decline in foreign investment in Russia. But even despite these sanctions, the Russian economy has proved surprisingly resilient, sustaining a certain level of growth and not collapsing as many Western scholars had predicted. The Russian ruble has remained quite stable, valued at around 57 against the US dollar in 2022. Everything is boomerang. There are several explanations for this strong and stable economic activity. First of all, one of the main reasons for the growth of the Russian economy is that the Russian government made several right decisions during the crisis to diversify the economy.
For example, the Russian government has invested more in new industries such as energy. In addition, the Russian government has also invested more in new technologies, such as the information technology industry. Second, the Russian government has taken a number of countermeasures, such as import substitution and currency devaluation, which have helped mitigate the impact of sanctions. For example, the Russian government has increased its trade with other countries, including China. Russia’s timely move to stabilize the ruble comes after more than 300 billion Russian foreign exchange reserves were frozen by the West.
Russia decides to pay for gas supplies to countries in rubles. The announcement means European countries that have imposed sanctions on Russia, including Britain, Canada, Japan, Switzerland, Ukraine and the United States, will have to buy rubles with euros or US dollars delivered from Russia at rates set by the Russian central bank to pay. for natural gas. This move immediately increased the demand for the ruble. Moreover, while Western countries have turned their backs on the Russian crude oil market, the Russian government has developed several new trading partners in a very short time, including India and Turkey. Russia has also expanded its trade with non-EU countries. During this crisis, the Russian people have also been able to adapt to the new economic reality and have shown their determination and mental strength to cope with the bad situation. Gave support to the Russian government.
The government has taken several measures to protect the economy from the effects of sanctions. As gradually foreign reserves have increased and dependence on the West has decreased. The government encouraged and provided financial support to domestic companies to increase their exports. These measures have played a very positive role in the stability of the Russian economy. Now let’s explain the causes of the Western energy crisis and why the sanctions against Russia are counterproductive. There are several reasons for the energy crisis in the EU and rising food prices. The rampant debt crisis in the eurozone is a primary cause. Investors worried about the stability of the eurozone as countries like Greece and Italy continue to look for ways to repay their debts. At one point it became very difficult for European banks to lend money.
As a result, borrowing money at a high interest rate becomes more expensive for businesses and consumers, which slows down economic growth. At the same time, the price of other products, including oil, has risen. This is partly due to increased demand from countries such as China and India, but in many cases also has the effect of unnecessary and excessive speculation by investors. EU countries were largely dependent on Russia for oil and gas and were able to meet their energy needs through imports. However, as a result of the recent crisis in Ukraine, many countries, including Russia, have imposed restrictions on energy exports to the EU. As a result, the EU has been forced to import fuel at higher prices from other sources, such as the US and Arab countries. Moreover, the sanctions against Russia have damaged the EU’s food production. As a result, food prices in the EU rose by about 12 percent.
The energy crisis in the EU and rising food prices are mainly due to the sanctions against Russia and the conflict in Ukraine. As a result of the sanctions, Russia has reduced its oil exports to the EU, causing oil prices to rise. Prices of food and other commodities rose as oil prices rose. Long before this current crisis, the Arab world was facing another West-led crisis: the Arab Spring. It has also seriously disrupted the flow of oil and gas to the EU. Since December 2010, there has been a violent movement of protests and anti-government uprisings in the Middle East and North Africa known as the Arab Spring, which has been supported by Western countries, including the United States. A series of incidents, including protests in Tunisia and Egypt, spread across the Arab world from December 2010.
In 2011. Protests followed the Tunisian incident in Algeria, Bahrain, Libya and Syria. All these countries are oil producers and food prices in these countries have risen abnormally in recent years. Oil prices have risen everywhere as demand for oil from countries like China and India has increased and inventories have been reduced as a result of the war in Iraq. In addition, the lack of investment in agricultural research and development has also contributed to the food crisis. Climate change has also affected food production in recent years. The recent increases in fuel and cost of living in the European Union are the result of the crisis in Ukraine. Since Russia’s special military operation in Ukraine, the European Union has sought to develop a common agricultural policy, including increasing the efficiency of the oil and gas sector, increasing investment in alternative resources, overcoming the crisis and reducing dependence on Russia. The energy crisis and rising food prices are currently the EU’s biggest challenges. This is mainly due to a number of bad decisions by the EU. They did not realize that the step-by-step sanctions against Russia because of the crisis in Ukraine would ultimately have such a negative impact on themselves.
Since EU countries mainly export large quantities of oil and gas from Russia, the decision to ban Russian oil exports until they find another reliable supplier was premature. Lack of foresight and EU arrogance are at work here. Another reason is the lack of investment in renewable energy. In addition, the European Union has not yet installed enough new cross-border energy infrastructure, creating bottlenecks in the system. These factors have contributed to the current energy crisis and food inflation in the European Union. The only way out of this crisis is to end the war through the implementation of peace proposals. Otherwise, the EU countries will face a terrible disaster if the war lasts longer.