Why Putin’s War Is Ruining Russia So Quickly

Russian President Vladimir Putin . (Mikhail Metzel, Sputnik, Kremlin Pool Photo via AP) (Mikhail Metzel/)

The russian economy is going through a serious crisis, as a result of the success of the sanctions applied by West after the start of the invasion Ukraine.

And it is that, beyond the closure of bank accounts of the kremlin abroad and the cessation of operations of multiple companies in Russian territory, a factor that has been decisive in leaving Moscow without resources, in its eagerness to continue besieging Ukraine, has been the gradual decrease in the purchase and consumption of Russian gas and oil by Europe.

“Without firing a shot, the president’s team Joe Biden and US allies are successfully waging an economic war against Russia,” said an article published by The Soapbox.

“The European Union it has reduced imports of Russian oil from about 750,000 barrels per day to almost zero. Europe’s replacement oil comes largely from the Middle Easta blessing for the dictators there, but an ever-widening hole in the Kremlin’s pocket,” the publication adds.

If a comparison of oil prices is made taking into consideration three of the most important international references, the income problem that is currently going through could be illustrated. putin.

US President Joe Biden.  EFE/EPA/SHAWN THEW

The American West Texas Intermediateused to set benchmark prices, plunged more than 44 percent from its 2022 high of $123.68 to $69.20 last week.

Brent crude is selling at 73 dollars below the 114 of last June. While the price of Russian oil fell from $92.20 a barrel a year ago to $49.50 this month. That’s a 46 percent decrease. Those figures come from the Kremlin’s own finance ministry.

This clearly translates into one of Putin’s few economic muscles withering away fast.

Russia has an economy that depends on exports of fossil fuels. More than 75 percent of Russian exports depend on it, as well as other chemical products and products made from the same raw material.

“That lack of diversity makes Russia vulnerable to Western economic sanctions, intelligently designed and rigorously applied. The sophisticated sanctions crafted by the Biden administration are proving much more effective than the sanctions imposed by previous administrations against various countries that misbehave, sanctions that were mostly cosmetic and easily circumvented. The Soapbox.

RN Polaris tanker near the Russian port of Nakhodka.  REUTERS/Tatiana Meel
RN Polaris tanker near the Russian port of Nakhodka. REUTERS/Tatiana Meel (TATIANA MEEL/)

Thanks to the sanctions, Russian oil transported by tanker trucks has a price limit of $60 a barrel, well below the two benchmarks for crude.

The West can cap the price at $60 because offshore tankers rely on marine insurance companies that Western governments can enforce with their sanctions on Russia.

However, media like Bloomberg, CNN and The Washington PostThey have reported that the Kremlin has been making titanic efforts to try to evade these measures, through the acquisition of old oil tankers.

The only oil buyers Russia has left are Cuba, Egypt, North Korea and Sri Lanka, all countries with little capacity to pay in cash for imported oil.

“The only bright spot for Putin is the oil that he transports by pipeline to China and other neighbors where maritime sanctions have no effect. That is almost certainly one of the issues that Putin raised when the Chinese president, Xi Jinpingvisited Moscow last week,” says The Soapbox.

Russian President Vladimir Putin shakes hands with Chinese President Xi Jinping during a signing ceremony following their talks at the Kremlin in Moscow, Russia, March 21, 2023. Sputnik/Mikhail Tereshchenko/Pool via REUTERS
Russian President Vladimir Putin shakes hands with Chinese President Xi Jinping during a signing ceremony following their talks at the Kremlin in Moscow, Russia, March 21, 2023. Sputnik/Mikhail Tereshchenko/Pool via REUTERS (SPUTNIK/)

Another important factor to take into consideration is that the mismanagement of oil fields and equipment in Russia makes it difficult to improve its production.

“Because Western companies will not sell spare parts to Russia, its internal air travel network is shrinking. Many Russian passenger planes were seized abroad. The airplanes Airbus and Boeing they are being cannibalized for parts, which runs the risk of compromising the safety of flights,” he says. The Soapbox.

The publication ensures that the gross domestic product (GDP) of Russia, was less than 1.8 trillion dollars, compared to 23.3 trillion of the United States.

It’s just the state of California it has a $3.4 trillion economy, almost twice the size of Russia’s, but with only a quarter of the population.

“Russia’s economy is $4 trillion when measured using purchasing power parity, the most favorable way to compare Russia to the rest of the world. That is still not much more economic output than California, which if it were a nation would have the fourth largest economy in the world.” The Soapbox.

The analysis shows that Russian spending in the first two months of 2023 was 59% higher than in the same period last year and 90% higher than in 2021. That clearly indicates that Russian economic activity has shifted towards war .

But if we also see that Kremlin revenue fell 28 percent and oil income stands at 46 percent. This only shows us that the Russian economy is in deep trouble.

The increase in spending and the fall in income are not sustainableespecially for a country when it borrows, it must do so in foreign currency, unlike the US, which has no problem refinancing its debts and assuming new ones.

Putin is having a great tax mismatch, which is evident in the fall of the ruble and which leaves him increasingly cornered to sustain his warlike ambition.

Keep reading:

Putin’s cyberwarriors failed to save him the millions he saved in Switzerland

Russia assumes the presidency of the UN Security Council despite criticism from Ukraine: “It’s a bad joke”

Belarus enters Vladimir Putin’s plans again

Ukraine claimed that the Russian army achieves only marginal results in Bakhmut, but is still not able to take the city