Russia’s economy collapses, more than 400 companies abandon Russia, Putin only cares about taking over Ukraine and Russian oil is sold at a reduced price – This is how experts describe Russia

How Will the domestic policy of Russia, which started the war, develop in the next few years? And what happens to the country’s economy? Answers to these and many other questions were sought on Monday in the Bank of Finland’s Emerging Economies Research Institute (Bofit) Russia Fact Sheet.

Bank of Finland director general Olli Rehn stated in his opening remarks that the Kremlin has clearly surprised the United States’ unified front line.

“Russia’s own corrective measures have been relatively modest compared to the size of the ongoing economic crisis,” he said.

According to Rehn, a modern iron curtain has landed between Russia and the rest of the world. It is mainly passed by Russian energy products.

Finland The bank estimates that the Russian economy will shrink and will not recover very easily, unlike in Russia’s previous recessions.

According to the Bank of Finland’s forecast, Russia’s gross domestic product will fall by 10 per cent this year.

GDP would be falling to about ten years ago.

The Bank of Finland does not expect the Russian economy to recover next year. In the past, the Russian economy has been shaken by the price of oil, but now the situation is different, said Bofit’s senior economist Vesa Korhonen.

The Bank of Finland anticipates that inventories in Russia will fall sharply.

Import will fall by 50 per cent in Russia this year, the Bank of Finland predicts. In previous recessions, imports have fallen by a maximum of 30 percent.

Sanctions and voluntary corporate boycotts by Russia are collapsing imports.

Exports are also falling.

Vesa Korhonen states that although the ruble has weakened and devaluation tends to improve exports, the impact in Russia has so far been limited.

Major export products in Russia are raw materials, the price of which is determined by world market prices.

According to the Bank of Finland’s forecast, domestic demand in Russia will contract by 22 per cent.

Private consumption in Russia has accounted for 55 percent of GDP, and inflation is eating up 20 percent of it.

For example, according to Korhonen, consumer lending in Russia will come to a halt after being well underway last year.

Russia’s budget revenues will rise this year. The depreciation of the ruble will greatly increase the revenue in rubles from dollar-denominated production taxes and messaging duties in the oil and gas sector.

Russian The Institute for Foreign Policy commented on internal developments Jussi Lassila noted that 64 percent of the Russian population received their primary information about the war on television.

Most television viewers received their information from government TV channels.

“The general rule of thumb is that Russian society is divided into thirds. One third is in favor, one third is opposed and one third is something in between, ”Lassila said.

According to a study by the independent research center Levada, the president of Russia Vladimir Putin in October 2021, only 30 percent of Russians trusted.

In another survey, as many as 44 percent of Russians thought last fall that Russia should be seen as a Western ally.

In Levada’s latest survey, 56 percent of Russians fear World War II. 53 percent feared arbitrariness or illegality by the authorities.

According to Lassila, investigations have shown that the Russians widely recognize the falsehood of state propaganda, but it reinforces suspicions about all political speech.

The result is political cynicism that contributes to the stability of authoritarian rule.

Also the corona crisis has had an impact on Putin’s support. In Russia, the mortality rate has been higher than usual in the last two years, and it has been suggested that almost a million people have died in the country.

Confidence in Putin has weakened in investigations during the pandemic, Jussi Lassila said in response to a public question about the impact of the corona on Putin’s support.

He mentioned that on some occasions, talking about Korona has aroused aggression in Putin, “that he could not be less interested in Korona.”

“The ambitions are somewhere in the conquest of Ukraine,” says Lassila.

Sanction decisions The most significant has been the ban on banks from entering into transactions with the Central Bank of Russia, said the Bank of Finland’s Bofit unit. Iikka Korhonen.

Voluntary boycotts of companies by Russia have also had a big impact. According to Korhonen, more than 400 companies have left Russia.

Many Russian companies have reported production interruptions. For example, Avtovaz, which manufactures barns, has announced the postponement of summer holidays to April.

Korhonen mentions that even if the components of the Russian arms industry are domestic or come from China, for example, the tools can be German, Italian or French. If spare parts are not available and cannot be serviced, production will stop.

“There have been various rumors about how the production of tanks has ended. But I don’t know if they are true or not, ”Korhonen said.

Sanctions will also have a major impact on Russian air traffic. In mid-March, Putin signed a law allowing the registration of foreign aircraft leased to Russian airlines as airline property.

Foreign companies have leased more than 500 aircraft to Russia, and only a small number of them have been returned. The value of the machines left in Russia has previously been estimated at more than $ 10 billion, or more than nine billion euros.

According to Korhonen’s assessment, it is clear that the safety of air traffic in Russia will decrease significantly in the future.

“Maintaining the machines will be challenging because there are no spare parts. Even today, service manuals come electronically from machine manufacturers, which means that they can no longer be updated. In practice, if you want to fly, you have to cannibalize existing planes, ie take spare parts from other planes to planes that are still flying. It is very effective in weakening flight safety and reducing flights in Russia, ”Korhonen said.

Finland Bank Senior Adviser at the Bofit Research Institute Laura Solanko said Russia is a major importer of hydrocarbons into the EU.

About 70% of EU energy consumption is hydrocarbons and the majority is imported from the rest of the world. Almost one hundred percent of the oil used by EU countries, 70 percent of natural gas and 40 percent of coal is imported from Russia.

“It’s not a coincidence but a geography,” Solanko says.

Up to half of Russia’s federal budget comes from oil and gas revenues. Last year it was about a third. The variation is due to the variation in energy prices.

Of Russia’s export earnings, gas is much less important than oil.

The quality of Urals oil in Russia is usually a few dollars cheaper than the quality of Brent in the North Sea. Since the start of the war in Ukraine, the price difference has risen to twenty dollars a barrel.

“It’s a wild discount sale,” Solanko says.

China is the largest single buyer of Russian oil, but the EU is the largest region. Solanko says natural gas is less economically significant for Russia than oil, but for some reason the energy sanctions debate is focused specifically on natural gas.

Bofitin Director Iikka Korhonen says that Russia’s economic growth cannot be optimistic in the foreseeable future.

Korhonen points out that hundreds of thousands of people have left Russia and the year is not even halfway through. They are people of working age whose emigration is undermining Russia’s economic growth potential.

Investments in Russia are also declining, and Korhonen estimates that this will continue for at least a few years.