Russian exports and revenues have fallen drastically.
They sell oil to a lot more places than Europe!
Russia's economy isn't crushed but it has now a massive budget deficit that isn't sustainable without some extreme adaptations.
Of course the sanctions are important to me.
But the original question was Does the war in Ukraine affect global prices for seemingly unrelated things.
When I say the purpose of the sanctions aren't important to me I feel it's obvious that I mean only within the context of answering this question.
Natural gas exports to Europe was Russia's big thing. The value of their oil and natural gas exports to the rest of world has failed make up for this loss.
Even for Russian oil your own link says there has been a 43% drop in revenue and a 21% drop in income.
The sanctions absolutely did something. Though I think it’s reasonable to ask if they caused a net increase in the cost of oil after the initial shock given how big a discount Russian oil buyers are getting. Though even if exports stabilized it’s possible the market is paying a risk premium.
As for oil prices, it's important to remember that oil prices before the war were very high, and they got even higher in the early parts of it. In February 21, 2022 (the invasion was on the 24th) prices were at $90/barrel. They hadn't been that high since 2014. [2] So it's easy to be somewhat misled just considering before/after scenarios.
I think it’s an entirely different thing to suggest it did “nothing”.
Oil revenues are off 45%. Its GDP was down 2% in 2022 while the thing it exports was up. Saudi Arabia’s and the UAE GDP set a record over the same time period as a point of reference. The OECD and World Bank anticipate GDP shrinkage this year as well.
The ruble is at its lowest point in 20 years (if you remove the war shock). Thats even with the heroic activity of their central bank last year and current capital flight restrictions. Their sovereign wealth fund holds 16% less today than it did before the sanctions, because its being used to backstop the currency.
This paper gives a more correct view on the dire state of the Russian economy:
A fair part of Russian economic 'growth' is in military supplies. When you are attacking another country and looking at almost no gains in the end this is a disaster of epic levels. If you have a gain in the end you can justify the expense in the revenue from the spoils you captured.
At it's current rate Russia is looking like it will get none of that. It will not gain any new territory. It will lose massive amounts of equipment and personnel directly. It has lost massive numbers of better off people that left the country. This is a demographic and economic nightmare, that keeps getting worse when you look at the preconditions.
Before the war Russia was making huge amounts selling natural resources, but was already running into problems funding its retirement (something Putin said he'd never touch when he was first elected). Well in the past few years Putin did have to raise the retirement age and tried to reduce the retirement benefits which was causing massive problems internally. Now that problem is even worse and puts Russia at risk of complete internal collapse.
As for the war, look at the leaks; you're expected to. That's why they're not being given the Twitter Files treatment. There was a conscious decision to cover them and regularly emphasize points such as the predictions for Ukraine's counter offensive. Watch how the media narrative on Ukraine is (and will continue to) suddenly shift. We seem to be hitting that 'lab leak' "messaging" inflection point with Ukraine. The Washington Post is now even running an opinion piece suggesting NATO could bypass Ukraine and directly negotiate with Russia, making some substantial concessions, in an effort to try to end the war.
The problem with pensions is mostly about fertility. Like most of the developed world, Russia's fertility rate is abysmal. So you have an ever-growing group of older individuals who are supposed to be supported by an ever smaller group of younger individuals. It's the reason retirement ages are going up everywhere. Russia increased theirs from 60 to 65. In the US and Norway full retirement is 67, France just bumped theirs from 62 to 64, and so on. In low fertility countries, rich and poor alike, expect retirement age to gradually approach life expectancy. A sub-replacement fertility means there is no equilibrium point. Your youth population is constantly shrinking, and trending towards zero. Of course bloody wars aren't helping on this front.
[1] - https://www.youtube.com/watch?v=9tD1crjaeYQ
[2] - https://www.washingtonpost.com/opinions/2023/04/19/nato-coul...
So, exactly as you describe. But all of this should add costs even if the crude oil prices are at the proposed ceiling.
Who lost? Russia and the EU. But who said that wasn’t the plan.
271,000! That's over double their goal of 100k! They explicitly got rid of refugee restrictions put in place at the start of the pandemic so they could let in Ukraine refugees.
It’s about the local laws put in place. The EU takes refugees with almost no preconditions. Maybe that’s why the EU leaders try to come up with a peace plan once in a while, unlike UK or US.
could you elaborate on what role you're speaking of, and why you personally think it makes the admittances below your standards?
https://tradingeconomics.com/russia/stock-market
https://www.consilium.europa.eu/en/infographics/impact-sanct...
> What is the point of them now?
I mean, I think they still impose cost and hinder Russia's war-making ability. So it's good to keep them if you like that impact?
You have also moved the goalposts some from upthread[1]:
> The sanctions have failed to do anything.
Easing sanctions would greatly increase the rate at which they could produce military equipment, particularly high tech guided munitions. That would equal more dead Ukrainians.
Whaaa? Russia is sending T-55s to their front to deal with massive material losses. The losses are closer to the numbers we'd expect in WWII, not a local border war where they are the attacker.
You are watching Putin fight to keep alive (note, not keep Russia alive) at this point. Bakmut will go down in history has Putin's mad king moment.
Do you really think Russia can't afford to insure oil tankers if the West refuses to do it?
Russia is a major player in the oil world. It has the relationships and experience to manage this.
China had invested a lot in Russia in the Belt and Roads initiative to extract natural resources, and it is looking like Russia will default on those loans.
I believe Russia is also a major fertilizer exporter and nitrogen fertilizers have more or less doubled in price
(More precisely, the natural gas is a cheap source of hydrogen atoms that get combined with nitrogen in the air to produce the fertilizer.)
The West has stood up to a blatant land-grab invasion and has armed Ukrainians with the means to defend themselves effectively. Decimating the Russian military without firing a shot is objectively a NATO victory, regardless of the ultimate outcome.
China's competitor to SWIFT has doubled in transaction volume since the sanctions and is growing fast - https://www.ft.com/content/6d5bbdbc-9f5d-41b2-ba80-7d8ac3973...
Cutting them off from SWIFT isn’t a nuke in the new financial Cold War. It’s the consequence of the path Russia chose when they started this incredibly stupid invasion.
Framing western reactions to Russian stupidity as “the real mistake” shows that you aren’t paying enough attention. The US threw down the gauntlet against an unimportant Russian invasion to ensure China gets the message that the United States is ready for economic warfare over Taiwan. If that action decreases the likelihood of invasion by just 10-20%, it’s certainly worthwhile.
China just paid for their first boat of yuan settled LG on the open market 20 days ago. After 6 years of offering it on their exchange. Their meeting with the Saudi’s last month came with non-committal statements, again, 6 years after they first started.
I think the yuan becoming more involved in the energy trade is inevitable, they are the largest energy importer in the world and a major economy. It may have even been accelerated by the sanctions on Iran and Russia. But to say that “no one is paying for oil in dollars anymore” is a ludicrous statement (probably one that comes from the posters hopes not the facts).
And adding the petroyuan to the mix is more dangerous to the Chinese currency than to the dollar. It immediately becomes imminently arbitrage-able in ways it can’t be currently due to currency controls. The Chinese government has been de-liberalizing their currency because they are worried what the markets will do to it.
That’s not to mention their treasury exposure, trade surpluses and the Middle Eastern states currency pegs.
A de-dollarization of the energy market will make it less efficient and may cause some rebalancing of currency reserves, but it will drive all settlement currencies to free market parity which is good for western currencies and bad for Chinese and Russian ones.
While the mainstream media keeps it all super positive, I think the US did a lot of miscalculations within the past several years. And honestly, something tells me that Putin will outplay them all. The guy is extremely smart and it's foolish to downplay him and say he is not. We shall see.
I’ve seen everything from Nixon in China to the current Russian sanctions being used as reasons for it. I suspect the real reason it will happen is that people can make more money trading in yuan (or rupee) than in usd. Sadly, Russia and Ukraine just aren’t important enough to make a dent.
My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons. It spends all over the world. It isn’t debased frequently and it isn’t volatile.
China could introduce a currency that had all those properties tomorrow. That they haven’t is an indictment of using the yuan as a reserve currency. It would take a significant change to Chinese economics to make that true.
But! If China did that it wouldn’t save Russia. Modern currencies hate autocracy and despotism because it runs counter to their premise. It doesn’t help Russia for China to liberalize, the only thing that helps them is their own liberalization.
> My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons.
Agreed. There is zero conspiracy around that, which is why I believe the US loosing the natural power of the Dollar is a logical fear.
> It would take a significant change to Chinese economics to make that true.
..which is what BRICS aiming for? If that is one of their goals, nothing is going to stop them. And honestly, that's a good goal to have. Putting all the negative narrative around Russia/China aside and abstracting away from the US, why should a single country's currency dominate over the entire world? That's simply not fair.
> If China did that it wouldn’t save Russia
I somewhat disagree. Russia is not looking to be saved by anyone. Putin's interest is a mutually beneficial partnership. He's a businessman. He's cool with yuan (or any other currency) being the new reserve currency. On the other hand, he is not cool with the US pushing to be the superpower dictating the rules, which obviously goes against the United States' goals and ambitions. I could be wrong, but that's my understanding of things.
That is to say they each want their own currency to be as valuable as USD but haven’t done the things it would take to make that happen.
I don’t think it is “fair” that the USD is dominant but I think that oil settlement in other currencies is much less detrimental to USD than many people think. Again, if you can settle oil in your currency, you’ve effectively put it in competition with USD. The Chinese government has been fighting that outcome for as long as there has been modern Chinese currency, and frankly every other currency besides INR doesn’t matter for this conversation and INR also has been very controlled.
People seem to have it backwards. Global trade attaches to liberal currencies because that’s good for global trade. The US has the most liberal currency of all time (and the most liberal currency currently even with Russian sanctions) and that makes it the petro currency. If the yuan or the rupee liberalize enough to take over the petro trade then there won’t be much impact on usd but if they don’t then market forces will hurt them more than the US.
The thing that might cause a USD fall is a default on usd debt or the us becoming more conservative on their currency controls but there is so far to go on that compared to their comps it’s hard to extrapolate.
I don’t have opinions on Putins desires, it’s outside of my understanding. But picking the Chinese in a relationship where they have more powers than the previous relationship with Europe seems crazy to me. But international politics is not my sphere.
Off-topic: the link in your profile is no longer available.
There is zero threat to the dollar. Demand for dollars is higher than ever, and it's still the primary currency for the oil trade, and pretty much any international trade. The recent economic instability has, as always happens, lead investors to flee to stability. That's the dollar, which is why it's up 6.6% over the last year.
What we have to show for the last year is utterly humiliating the Russian military, successfully helping Ukraine repel an assault on their capital, and push back the Russian army twice since in significant territorial losses. The west has never been more united, NATO is stronger than ever. The AUKUS pact and US-European alignment on Taiwan has solidified, despite typical French squirming, but they'll come around. They always do.
It's not like the economic picture is all roses, far from it, but that was happening already. The main achievement is that the fantasies Putin had of rolling back NATO are dead in a ditch, and I think the chances of a Chinese attack on Taiwan in the coming decade are half or less what they were a year ago.
This has worked, the prices Russia is getting for their oil are single digit dollars above their production costs, which are going up due to sanctions, while global oil prices remained fairly stable.
India and such buying cheap Russian oil is an intended outcome, not a problem. Good for them. It also helps that India is processing this oil into value-add exports that are pricing out Russian alternatives.
A lot of breathless headlines got published early on by non-specialist journalists that have never had to cover anything like this, but nobody who actually understands the history and practice of sanctions in the modern era believed they would actually bring Russia to their knees any time soon. Read any of the coverage of these sanctions in The Economist from last year.
North Korea has been under far more severe sanctions for generations and has even managed to develop nuclear weapons. Iran came under similarly severe sanctions and they're still a credible regional threat. The idea that Russia, a nuclear state with massive foreign reserves to draw on, even aside from the ones frozen in the west, would be beggared in a matter of months was always absurd. Sanctions have never in the modern era actually forced a state to capitulate.
Wiping out on the order of 85% of Russia's oil profits while maintaining global prices is a major success. Yes Russian oil is still flowing, but the profits are now disproportionately going to countries outside Russia, like India. They're not suffering from the sanctions, they're making a killing Good for them. Even if you don't believe that this was the stated goal, though as you can see from the quote I opened with it was the actual stated goal, it's still obviously what's actually happened.