The Russia sanctions bite
Sanctions have been effective at crippling the Russian economy. That's the conclusion of a new 118-page paper from Yale's Jeffrey Sonnenfeld and 18 c0-authors.
Why it matters: The big question about Russia sanctions is whether they have teeth, if they exclude Russian oil and gas. While official Russian statistics suggest the economy is using its oil and gas revenues to withstand the effects of sanctions, Sonnenfeld's paper says that the official Russian statistics are lies.
What they found: The paper's results include sobering facts about the Russian economy.
- "Russian imports have largely collapsed," the paper says — creating massive supply shortages and denying the country crucial parts and technologies.
- "Russian domestic production has come to a complete standstill."
- Foreign companies that have left Russia account for 40% of Russian GDP, the author wrote, almost none of which is going to come back any time soon.
The conclusion: "Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure."
Driving the news: Russia has announced further cuts in its supply of natural gas to Europe. But the paper makes the case that Russia needs Europe to buy its natural gas more than Europe needs Russian natural gas to buy.
- Because natural gas is "a highly non-fungible commodity," delivered through pipes that take decades to build, Russia has very few alternative export markets for its gas, and 83% of its natural gas exports go to Europe.
- Europe, on the other hand, imports just 46% of its natural gas from Russia.
The bottom line: The economic repercussions of Russia's war of aggression in Ukraine are being felt in all countries. But they're particularly devastating in Russia — with little, if any, future upside so long as sanctions remain in place.