February 22, 2024 • 16 mins
Two years after the Kremlin's forces invaded Ukraine, US-led sanctions have certainly changed Russia's economy – but they haven’t stopped the war.
The US Treasury’s chief sanctions economist contends the effort is working. But an analyst who worked at Russia’s central bank before fleeing in 2022 counters that the economy is very much alive. In this episode of the Big Take DC, we find out about Russia’s “brain drain,” how an economy that was shrinking is projected to beat earlier expectations in 2024 and whether Russia will ever regain global prestige.
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Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
In February twenty twenty two, Russian forces stormed across the
border into Ukraine and triggered one of the greatest military
crises in Europe in nearly eight decades. America, in over
thirty of its allies, joined together to impose the harshest
economic sanctions any nation has ever experienced. The goal was
to punish President Vladimir Putin and to drain the resources
(00:32):
that kept his war going in those first few months
of the war, those sanctions aimed at Russia also hit
the wallets of Americans. When the US banned Russian oil imports,
gasoline costs jumped twenty percent. President Joe Biden told the
American public at the time that this was the price
they had to pay to combat Russia's aggression.
Speaker 3 (00:51):
The decision today is not without cost here at home.
Putin's war has already hurting American families of the gash pop.
Speaker 2 (00:58):
Back then, polls showed that most Americans said it was
worth it. They were willing to pay more for gas
if it meant stopping the war. But two years have
passed and the war is still going on, and while
gasoline prizes have fallen. America has spent tens of billions
of dollars on aid to Ukraine and is debating more,
and the White House is promising substantial sanctions tied to
(01:20):
the anniversary of the war. Today on the show, as
US lawmakers debate more aid to Ukraine and as the
White House promises new sanctions tied to the death of
Alexei Navalni and the anniversary of the war, we take
stock of US led sanctions on Russia. Two years out,
we'll hear from the US Treasury Department's first ever Chief
(01:41):
Sanctions economist.
Speaker 4 (01:42):
Sanctions have been very effective and gomming things up, making
this very painful.
Speaker 3 (01:47):
Process for Russia.
Speaker 4 (01:49):
It's ultimately changed the structure of the Russian economy.
Speaker 2 (01:53):
And another economist, one who was working at Russia's Central
Bank when the invasion happened.
Speaker 1 (01:57):
I remember how Jenatiellen said in marched Manutetoo's as the
sanctions will devastates Russian economy. But well, two years later,
I can definitely say that the Russian economy is very
much alife.
Speaker 2 (02:11):
What did all of these sanctions add up to and
where do they leave the US and Russia Now from
Bloomberg's Washington Bureau. This is the Big Take DC podcast.
I'm Salaia Moosien. Let's go back to February twenty fourth,
twenty twenty two, those first hours after Russia invaded Ukraine.
Speaker 5 (02:35):
I can remember walking around seeing, you know, pictures of
Ukrainian men, women, children, huddling in underground platforms. Bombs were falling,
Kiev was supposed to fall in days, and I think
the world had never seen anything like this since World
War Two. You know, this was a land war on
(02:55):
the European continent.
Speaker 2 (02:57):
That was Bloomberg's Dan Flatley. He covers US sanctions. Just
days after the invasion, the US, European allies and others
announced sweeping financial restrictions on Russia.
Speaker 4 (03:08):
As an outside observer, I'd say kind of very important
moment and the history of imposition of sanctions, just in
terms of how coordinated and multilateral a lot of the
activity was and how swift it was imposed.
Speaker 2 (03:23):
That's Rachel Lingos. At the time Russia invaded Ukraine, she
was an outside observer, but now she works inside Treasury
as its chief sanctions economists. Her job is to analyze
whether American sanctions are working, which is a tough thing
to measure. Data from targeted countries is often unreliable, so
she has to piece together information from tons of different sources.
(03:44):
But she told me that the key to measuring the
efficacy of sanctions is identifying their goals. Back in February
twenty twenty two, two prongs.
Speaker 4 (03:52):
One is to deny Russia the ability to acquire weapons
and technology they need to prosecute this war in Ukraine,
and number two, to reduce the revenues made available to
President Putin to fund this war.
Speaker 2 (04:09):
One of the first things America and its allies did
was to cut Russia off from a body called SWIFT.
It stands for the Society for Worldwide inter Bank Financial Telecommunications,
but it's easier just to think of it like the
GMAIL of the banking system. It's a way that banks
around the world transfer money in a secure way.
Speaker 5 (04:27):
Cutting Russia off of SWIFT was seen as something that
would never ever happen because the financial system is dependent
on transparency and making sure that everybody's talking to each other.
So it was sort of seen as kind of one
of the red lines that the US ended up crossing
along with its allies.
Speaker 2 (04:44):
And what did it mean for Russia.
Speaker 5 (04:45):
For Russia, it basically meant no access to the worldwide
financial system, at least no easy access.
Speaker 2 (04:51):
It was one of the first indicators of just how
much these policies that were meant to squeeze Putin would
involve the rest of the world. Another one of those
signs was that pain at the pump that Biden described.
The US and its allies sanctioned countless Russian individuals, businesses,
and even yachts, and banned imports of Russian oil that
limited gasoline supply and hiked up prices in the US.
(05:15):
But the interconnected nature of the global economy also worked
to America's favor. Countries like Russia don't keep all their
money in local banks or national currency. They saw a
good chunk of it.
Speaker 5 (05:25):
Abroad, and essentially because it's in dollars, and because it's
in euros, the Japanese yen and other currencies, the G
Seven was able to basically say we're locking this down
and you don't have access to it anymore, which is
really almost without precedent in the modern era.
Speaker 2 (05:43):
In other words, the US and its allies that make
up the Group of Seven essentially cut the Russian government
off from hundreds of billions of dollars of its own money.
Speaker 4 (05:52):
I believe it was the Sunday after the invasion actually
that nearly half abound three hundred billion of these foreign
exchange reserves were suddenly immobilized.
Speaker 2 (06:03):
So in those first few days, the US led the
world at immobilizing Russia's reserves, cutting it off from SWIFT,
and sanctioning hundreds of people, businesses, and entities.
Speaker 4 (06:14):
I think all in all, thirty countries fifty percent of
global GDP had some measures that they imposed on Russian.
Speaker 2 (06:22):
So what did all of this do to the Russian economy?
Speaker 4 (06:24):
I think it's important to kind of take a look
at the framing of where the Russian economy was kind
of prior to that moment in February twenty twenty two,
the Russians had built up a really sizable fiscal buffer
over many years of fiscal discipline. They were coming out
of COVID, and the expectations was that their economy would
grow anywhere between two point five to three point five
(06:46):
percent that year. And then you have a steady drum
beat of sanctions and different sectors, you know, different financial institutions,
not just the United States, but other allies and partners.
Is the impact on the Russian economy, Well, I think
we can immediately point to the collapse and imports around
(07:08):
eleven percent overall for that year, and then there were.
Speaker 3 (07:11):
Massive capital outflows as well, and.
Speaker 4 (07:13):
I think that according to the IMF's latest projections published
earlier this month, there's ultimately a contraction of about one
point two percent of GDP that year.
Speaker 2 (07:23):
So Russia's economy shrunk. But as Lingus told me, that
doesn't mean Russia and its citizens weren't able to find
ways around the sanctions.
Speaker 4 (07:31):
It's kind of like analogous to having a rock and
like putting it in a stream of water. You know,
over time, like water is going to find a way
around the rock. So in terms of how the authorities respond,
while they were able to stem some of that bleeding
by imposing a set of very draconian capital controls to
try and prevent money from continuing to leave the country.
Speaker 2 (07:52):
Like raising interest rates to stabilize the plummeting ruble and
limiting bank withdrawals in Western currencies.
Speaker 4 (07:58):
And they provided capital from the Central Bank to support
the financial sector and use their National Wealth Fund, which
is their sovereign wealth fund to also help support their economy.
Speaker 5 (08:09):
I think the reality is that Putin has found a
way around the sanctions.
Speaker 2 (08:15):
My colleague Dan Flatley, again, it's.
Speaker 5 (08:17):
Not as though the entire Russian financial system has been
cut off from the world. There are loopholes. Putin's able
to get a lot of the technology into the country
through the help of allies like China. He's able to
get weapons from Iran and North Korea, and he's able
to basically get his oil out still under the price cap.
Speaker 2 (08:38):
Wealthy Russians found loopholes too. They started buying up Bulgari
watches and other luxury items as a way to maintain
their savings, even as the ruble rapidly lost its value.
I wanted to talk to someone who'd seen the impact
of sanctions from inside Russia, so I caught up Dennis Kostenschuk.
He's an economics editor for an independent Russian media outlet
called The Bell from where he's crunching the numbers in
(09:01):
Russia's economy. Costinchuk isn't so impressed by US sanctions two
years into the war.
Speaker 1 (09:06):
Honestly, it seems to me that sanctions have run their course.
It's just hard to say that Rasian economy is devastated
at this moment because a week ago the Russian Statistical
Agency dropped its numbers about the growth of Russian economy.
So in twenty twenty three, is the Russian economy grew
by three point six percent.
Speaker 2 (09:28):
Russian factories were able to keep up manufacturing. They just
got their raw materials from new sources.
Speaker 1 (09:34):
Last year, I made a research and found that Russia
increased imports from neighbor countries by almost forty percent in
the first half of twenty twenty three compared to the
same period in twenty twenty two. So Russian companies just
by all the components they needed from the neighbor countries
like Armenia, Kazakhstan, Uzbekistan, Georgia, and so on.
Speaker 2 (09:55):
Bloomberg has reported that Russia actually managed to import over
a billion dollars of American and European microchips last year
for use in war technology. That's because the chips went
through neighbor countries, so they weren't blocked by sanctions that
would require additional export controls. But Treasury's Lingo says it's
not so simple. Just because the Russian economy is growing
(10:16):
does not mean that all GDP growth is created equal.
Speaker 4 (10:20):
The initial reactions like, oh, things are looking so resilient,
But I think for when you start to get into
the data and kind of like what's driving GDP, these
are where these distortions really start to emerge.
Speaker 2 (10:34):
Coming up. We dive into the data to see how
these sanctions have reshaped the Russian economy and find out
how America and its allies feel about the sanctions now.
In January, the International Monetary Fund revised its projections for
Russia's economic growth this year. It said, actually, we think
(10:58):
it's going to be more than double what we predicted
back in October. That may make Russia sound strong and
US led sanctions weak, but Rachel Lingos, the chief sanctions
economist at Treasury, says that Russia's GDP growth last year
was driven by military production.
Speaker 4 (11:14):
There's been this fundamental shift in the whole structure of
the economy. It's very much driven now by military spending.
Speaker 3 (11:21):
This is a third.
Speaker 4 (11:23):
Of Putin's proposed budget now for this year, one hundred
billion dollars. That's a seventy percent increase over the prior year.
Speaker 2 (11:31):
That comes at the expense of investing in social welfare.
Speaker 4 (11:34):
Things that make people's quality of life better.
Speaker 1 (11:37):
Russia's a lot of money.
Speaker 2 (11:38):
Russian economic analyst Dennis Costenschuk again, in.
Speaker 1 (11:42):
The ideal world with els of war, as a state
could invest this money to build a civilian and infrastructure,
to invest this money in science, to invest this money
in healthcare. But in this case Russia had a lot
of money just to invest this money into the war.
Speaker 2 (11:58):
All that investment in war at the expense of investing
in people, It's taken a toll.
Speaker 4 (12:03):
There's been this severe brain drain. Not only is there.
Speaker 3 (12:07):
This horrible loss of life.
Speaker 4 (12:09):
Of kind of prime age workers that have been drafted
and are just dying. On the other hand, you have
a massive amount of emigration. My team and I looked
at figures just coming from the Central Russian Bank to
come up with about seven hundred thousand people bless the country.
Speaker 3 (12:25):
But I've seen.
Speaker 4 (12:26):
Estimates that range around one million. That's a huge percentage
of the population.
Speaker 2 (12:32):
Costinschuk is one of those people. Before the war, he
was working as an analyst at Russia's Central Bank.
Speaker 1 (12:38):
After the word started, I decided with my wife to
lave Russia, and it goes My wife is Spanish. We
had a chance to move to Spain.
Speaker 2 (12:45):
If you asked Lingos the impact of losing people like Costinchuk,
this brain drain, It's going to compound over time.
Speaker 4 (12:52):
This is painful for them because these are the future
growth potential of the society.
Speaker 3 (12:57):
Like that's where all the innovation comes from.
Speaker 4 (12:59):
An aging society, especially post communist society, where huge chunk
of the budget is kind of social protections, social welfare pensions.
This is kind of where you're able to generate the
future income.
Speaker 3 (13:13):
To finance some of those pensions.
Speaker 4 (13:15):
Is more and more people retire, but those people leaving
the less innovation. I think in the long term, the
prospects look very dim.
Speaker 2 (13:22):
Part of what makes Lingos's job so hard is measuring
the less tangible effects of sanctions, and she says one
of those effects that shouldn't be ignored is Russia's injured
status on the world stage.
Speaker 4 (13:33):
There's an incalculable reputation lost. There is something toxic, if
you will, And this kind of comes from my conversations
with private sector, business community, financial institutions start just being.
Speaker 3 (13:46):
Associated with Russia.
Speaker 4 (13:48):
Right, So those are some of the incalculable loss of prestige,
the ability to project power, overseas.
Speaker 2 (13:55):
Two years out, it's easy to jump to conclusions. One
common one is that sanctions failed to end the war.
But Lingos and I were reflecting on those first moments
after Russia's invasion back in twenty twenty two. At that time,
the fear that I heard from sources that I spoke
to before the sanctions came down are right as they did,
(14:16):
was that we need to do it now. We need
to move fast, go through the weekend to get this done,
because it's possible that Kiev could fall in seventy two
hours and it's actually over, and that has not happened.
Speaker 4 (14:28):
And I guess on the flip side, if you look
at the perspective of like Russia's leaders and Putin also
thought that Kiev was going to fall in a matter
of days and this would be over. But now things
are very different for them. They're ultimately in a situation
where they're facing very painful trade offs.
Speaker 3 (14:45):
There's fractures in.
Speaker 4 (14:47):
The system, there's a lot of tension in the economic
policy making apparatus, and those things aren't going to go away.
Speaker 2 (14:53):
Is Russia just changed forever now?
Speaker 4 (14:55):
I think policy makers in Russia, like if I put
myself in their shoes. They're backed into a very uncomfortable corner.
A lot is being subsumed in these goals of expansionists
acquiring more territory in Ukraine, and that comes at the
expense of like general welfare of the population. So is
Russia forever changed. I think that as long as Putin's
(15:20):
current leaderships prioritizes those goals above all others, then inevitably
they're sacrifices right that that society is making. And there's
very increasingly, very painful trade us And yes, I do
think they were at the point now where being able
to reverse that would be I think impossible.
Speaker 2 (15:46):
Thanks for listening to The Big Take DC podcast from
Bloomberg News. I'm Salaiah Mosen. This episode was produced by
Julia Press and Naomi Shaven. It was fact checked by
Stacy Renee. Blake Maples is our mix engineer. Our story
editors are Michael Shephard, Wendy Benjaminson, and Caitlyn Kenny. Nicole
deemster Boer is our executive producer. Stage Bauman is our
(16:08):
head of podcasts. Thanks for tuning in. I'll be back
next week.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
In February twenty twenty two, Russian forces stormed across the
border into Ukraine and triggered one of the greatest military
crises in Europe in nearly eight decades. America, in over
thirty of its allies, joined together to impose the harshest
economic sanctions any nation has ever experienced. The goal was
to punish President Vladimir Putin and to drain the resources
(00:32):
that kept his war going in those first few months
of the war, those sanctions aimed at Russia also hit
the wallets of Americans. When the US banned Russian oil imports,
gasoline costs jumped twenty percent. President Joe Biden told the
American public at the time that this was the price
they had to pay to combat Russia's aggression.
Speaker 3 (00:51):
The decision today is not without cost here at home.
Putin's war has already hurting American families of the gash pop.
Speaker 2 (00:58):
Back then, polls showed that most Americans said it was
worth it. They were willing to pay more for gas
if it meant stopping the war. But two years have
passed and the war is still going on, and while
gasoline prizes have fallen. America has spent tens of billions
of dollars on aid to Ukraine and is debating more,
and the White House is promising substantial sanctions tied to
(01:20):
the anniversary of the war. Today on the show, as
US lawmakers debate more aid to Ukraine and as the
White House promises new sanctions tied to the death of
Alexei Navalni and the anniversary of the war, we take
stock of US led sanctions on Russia. Two years out,
we'll hear from the US Treasury Department's first ever Chief
(01:41):
Sanctions economist.
Speaker 4 (01:42):
Sanctions have been very effective and gomming things up, making
this very painful.
Speaker 3 (01:47):
Process for Russia.
Speaker 4 (01:49):
It's ultimately changed the structure of the Russian economy.
Speaker 2 (01:53):
And another economist, one who was working at Russia's Central
Bank when the invasion happened.
Speaker 1 (01:57):
I remember how Jenatiellen said in marched Manutetoo's as the
sanctions will devastates Russian economy. But well, two years later,
I can definitely say that the Russian economy is very
much alife.
Speaker 2 (02:11):
What did all of these sanctions add up to and
where do they leave the US and Russia Now from
Bloomberg's Washington Bureau. This is the Big Take DC podcast.
I'm Salaia Moosien. Let's go back to February twenty fourth,
twenty twenty two, those first hours after Russia invaded Ukraine.
Speaker 5 (02:35):
I can remember walking around seeing, you know, pictures of
Ukrainian men, women, children, huddling in underground platforms. Bombs were falling,
Kiev was supposed to fall in days, and I think
the world had never seen anything like this since World
War Two. You know, this was a land war on
(02:55):
the European continent.
Speaker 2 (02:57):
That was Bloomberg's Dan Flatley. He covers US sanctions. Just
days after the invasion, the US, European allies and others
announced sweeping financial restrictions on Russia.
Speaker 4 (03:08):
As an outside observer, I'd say kind of very important
moment and the history of imposition of sanctions, just in
terms of how coordinated and multilateral a lot of the
activity was and how swift it was imposed.
Speaker 2 (03:23):
That's Rachel Lingos. At the time Russia invaded Ukraine, she
was an outside observer, but now she works inside Treasury
as its chief sanctions economists. Her job is to analyze
whether American sanctions are working, which is a tough thing
to measure. Data from targeted countries is often unreliable, so
she has to piece together information from tons of different sources.
(03:44):
But she told me that the key to measuring the
efficacy of sanctions is identifying their goals. Back in February
twenty twenty two, two prongs.
Speaker 4 (03:52):
One is to deny Russia the ability to acquire weapons
and technology they need to prosecute this war in Ukraine,
and number two, to reduce the revenues made available to
President Putin to fund this war.
Speaker 2 (04:09):
One of the first things America and its allies did
was to cut Russia off from a body called SWIFT.
It stands for the Society for Worldwide inter Bank Financial Telecommunications,
but it's easier just to think of it like the
GMAIL of the banking system. It's a way that banks
around the world transfer money in a secure way.
Speaker 5 (04:27):
Cutting Russia off of SWIFT was seen as something that
would never ever happen because the financial system is dependent
on transparency and making sure that everybody's talking to each other.
So it was sort of seen as kind of one
of the red lines that the US ended up crossing
along with its allies.
Speaker 2 (04:44):
And what did it mean for Russia.
Speaker 5 (04:45):
For Russia, it basically meant no access to the worldwide
financial system, at least no easy access.
Speaker 2 (04:51):
It was one of the first indicators of just how
much these policies that were meant to squeeze Putin would
involve the rest of the world. Another one of those
signs was that pain at the pump that Biden described.
The US and its allies sanctioned countless Russian individuals, businesses,
and even yachts, and banned imports of Russian oil that
limited gasoline supply and hiked up prices in the US.
(05:15):
But the interconnected nature of the global economy also worked
to America's favor. Countries like Russia don't keep all their
money in local banks or national currency. They saw a
good chunk of it.
Speaker 5 (05:25):
Abroad, and essentially because it's in dollars, and because it's
in euros, the Japanese yen and other currencies, the G
Seven was able to basically say we're locking this down
and you don't have access to it anymore, which is
really almost without precedent in the modern era.
Speaker 2 (05:43):
In other words, the US and its allies that make
up the Group of Seven essentially cut the Russian government
off from hundreds of billions of dollars of its own money.
Speaker 4 (05:52):
I believe it was the Sunday after the invasion actually
that nearly half abound three hundred billion of these foreign
exchange reserves were suddenly immobilized.
Speaker 2 (06:03):
So in those first few days, the US led the
world at immobilizing Russia's reserves, cutting it off from SWIFT,
and sanctioning hundreds of people, businesses, and entities.
Speaker 4 (06:14):
I think all in all, thirty countries fifty percent of
global GDP had some measures that they imposed on Russian.
Speaker 2 (06:22):
So what did all of this do to the Russian economy?
Speaker 4 (06:24):
I think it's important to kind of take a look
at the framing of where the Russian economy was kind
of prior to that moment in February twenty twenty two,
the Russians had built up a really sizable fiscal buffer
over many years of fiscal discipline. They were coming out
of COVID, and the expectations was that their economy would
grow anywhere between two point five to three point five
(06:46):
percent that year. And then you have a steady drum
beat of sanctions and different sectors, you know, different financial institutions,
not just the United States, but other allies and partners.
Is the impact on the Russian economy, Well, I think
we can immediately point to the collapse and imports around
(07:08):
eleven percent overall for that year, and then there were.
Speaker 3 (07:11):
Massive capital outflows as well, and.
Speaker 4 (07:13):
I think that according to the IMF's latest projections published
earlier this month, there's ultimately a contraction of about one
point two percent of GDP that year.
Speaker 2 (07:23):
So Russia's economy shrunk. But as Lingus told me, that
doesn't mean Russia and its citizens weren't able to find
ways around the sanctions.
Speaker 4 (07:31):
It's kind of like analogous to having a rock and
like putting it in a stream of water. You know,
over time, like water is going to find a way
around the rock. So in terms of how the authorities respond,
while they were able to stem some of that bleeding
by imposing a set of very draconian capital controls to
try and prevent money from continuing to leave the country.
Speaker 2 (07:52):
Like raising interest rates to stabilize the plummeting ruble and
limiting bank withdrawals in Western currencies.
Speaker 4 (07:58):
And they provided capital from the Central Bank to support
the financial sector and use their National Wealth Fund, which
is their sovereign wealth fund to also help support their economy.
Speaker 5 (08:09):
I think the reality is that Putin has found a
way around the sanctions.
Speaker 2 (08:15):
My colleague Dan Flatley, again, it's.
Speaker 5 (08:17):
Not as though the entire Russian financial system has been
cut off from the world. There are loopholes. Putin's able
to get a lot of the technology into the country
through the help of allies like China. He's able to
get weapons from Iran and North Korea, and he's able
to basically get his oil out still under the price cap.
Speaker 2 (08:38):
Wealthy Russians found loopholes too. They started buying up Bulgari
watches and other luxury items as a way to maintain
their savings, even as the ruble rapidly lost its value.
I wanted to talk to someone who'd seen the impact
of sanctions from inside Russia, so I caught up Dennis Kostenschuk.
He's an economics editor for an independent Russian media outlet
called The Bell from where he's crunching the numbers in
(09:01):
Russia's economy. Costinchuk isn't so impressed by US sanctions two
years into the war.
Speaker 1 (09:06):
Honestly, it seems to me that sanctions have run their course.
It's just hard to say that Rasian economy is devastated
at this moment because a week ago the Russian Statistical
Agency dropped its numbers about the growth of Russian economy.
So in twenty twenty three, is the Russian economy grew
by three point six percent.
Speaker 2 (09:28):
Russian factories were able to keep up manufacturing. They just
got their raw materials from new sources.
Speaker 1 (09:34):
Last year, I made a research and found that Russia
increased imports from neighbor countries by almost forty percent in
the first half of twenty twenty three compared to the
same period in twenty twenty two. So Russian companies just
by all the components they needed from the neighbor countries
like Armenia, Kazakhstan, Uzbekistan, Georgia, and so on.
Speaker 2 (09:55):
Bloomberg has reported that Russia actually managed to import over
a billion dollars of American and European microchips last year
for use in war technology. That's because the chips went
through neighbor countries, so they weren't blocked by sanctions that
would require additional export controls. But Treasury's Lingo says it's
not so simple. Just because the Russian economy is growing
(10:16):
does not mean that all GDP growth is created equal.
Speaker 4 (10:20):
The initial reactions like, oh, things are looking so resilient,
But I think for when you start to get into
the data and kind of like what's driving GDP, these
are where these distortions really start to emerge.
Speaker 2 (10:34):
Coming up. We dive into the data to see how
these sanctions have reshaped the Russian economy and find out
how America and its allies feel about the sanctions now.
In January, the International Monetary Fund revised its projections for
Russia's economic growth this year. It said, actually, we think
(10:58):
it's going to be more than double what we predicted
back in October. That may make Russia sound strong and
US led sanctions weak, but Rachel Lingos, the chief sanctions
economist at Treasury, says that Russia's GDP growth last year
was driven by military production.
Speaker 4 (11:14):
There's been this fundamental shift in the whole structure of
the economy. It's very much driven now by military spending.
Speaker 3 (11:21):
This is a third.
Speaker 4 (11:23):
Of Putin's proposed budget now for this year, one hundred
billion dollars. That's a seventy percent increase over the prior year.
Speaker 2 (11:31):
That comes at the expense of investing in social welfare.
Speaker 4 (11:34):
Things that make people's quality of life better.
Speaker 1 (11:37):
Russia's a lot of money.
Speaker 2 (11:38):
Russian economic analyst Dennis Costenschuk again, in.
Speaker 1 (11:42):
The ideal world with els of war, as a state
could invest this money to build a civilian and infrastructure,
to invest this money in science, to invest this money
in healthcare. But in this case Russia had a lot
of money just to invest this money into the war.
Speaker 2 (11:58):
All that investment in war at the expense of investing
in people, It's taken a toll.
Speaker 4 (12:03):
There's been this severe brain drain. Not only is there.
Speaker 3 (12:07):
This horrible loss of life.
Speaker 4 (12:09):
Of kind of prime age workers that have been drafted
and are just dying. On the other hand, you have
a massive amount of emigration. My team and I looked
at figures just coming from the Central Russian Bank to
come up with about seven hundred thousand people bless the country.
Speaker 3 (12:25):
But I've seen.
Speaker 4 (12:26):
Estimates that range around one million. That's a huge percentage
of the population.
Speaker 2 (12:32):
Costinschuk is one of those people. Before the war, he
was working as an analyst at Russia's Central Bank.
Speaker 1 (12:38):
After the word started, I decided with my wife to
lave Russia, and it goes My wife is Spanish. We
had a chance to move to Spain.
Speaker 2 (12:45):
If you asked Lingos the impact of losing people like Costinchuk,
this brain drain, It's going to compound over time.
Speaker 4 (12:52):
This is painful for them because these are the future
growth potential of the society.
Speaker 3 (12:57):
Like that's where all the innovation comes from.
Speaker 4 (12:59):
An aging society, especially post communist society, where huge chunk
of the budget is kind of social protections, social welfare pensions.
This is kind of where you're able to generate the
future income.
Speaker 3 (13:13):
To finance some of those pensions.
Speaker 4 (13:15):
Is more and more people retire, but those people leaving
the less innovation. I think in the long term, the
prospects look very dim.
Speaker 2 (13:22):
Part of what makes Lingos's job so hard is measuring
the less tangible effects of sanctions, and she says one
of those effects that shouldn't be ignored is Russia's injured
status on the world stage.
Speaker 4 (13:33):
There's an incalculable reputation lost. There is something toxic, if
you will, And this kind of comes from my conversations
with private sector, business community, financial institutions start just being.
Speaker 3 (13:46):
Associated with Russia.
Speaker 4 (13:48):
Right, So those are some of the incalculable loss of prestige,
the ability to project power, overseas.
Speaker 2 (13:55):
Two years out, it's easy to jump to conclusions. One
common one is that sanctions failed to end the war.
But Lingos and I were reflecting on those first moments
after Russia's invasion back in twenty twenty two. At that time,
the fear that I heard from sources that I spoke
to before the sanctions came down are right as they did,
(14:16):
was that we need to do it now. We need
to move fast, go through the weekend to get this done,
because it's possible that Kiev could fall in seventy two
hours and it's actually over, and that has not happened.
Speaker 4 (14:28):
And I guess on the flip side, if you look
at the perspective of like Russia's leaders and Putin also
thought that Kiev was going to fall in a matter
of days and this would be over. But now things
are very different for them. They're ultimately in a situation
where they're facing very painful trade offs.
Speaker 3 (14:45):
There's fractures in.
Speaker 4 (14:47):
The system, there's a lot of tension in the economic
policy making apparatus, and those things aren't going to go away.
Speaker 2 (14:53):
Is Russia just changed forever now?
Speaker 4 (14:55):
I think policy makers in Russia, like if I put
myself in their shoes. They're backed into a very uncomfortable corner.
A lot is being subsumed in these goals of expansionists
acquiring more territory in Ukraine, and that comes at the
expense of like general welfare of the population. So is
Russia forever changed. I think that as long as Putin's
(15:20):
current leaderships prioritizes those goals above all others, then inevitably
they're sacrifices right that that society is making. And there's
very increasingly, very painful trade us And yes, I do
think they were at the point now where being able
to reverse that would be I think impossible.
Speaker 2 (15:46):
Thanks for listening to The Big Take DC podcast from
Bloomberg News. I'm Salaiah Mosen. This episode was produced by
Julia Press and Naomi Shaven. It was fact checked by
Stacy Renee. Blake Maples is our mix engineer. Our story
editors are Michael Shephard, Wendy Benjaminson, and Caitlyn Kenny. Nicole
deemster Boer is our executive producer. Stage Bauman is our
(16:08):
head of podcasts. Thanks for tuning in. I'll be back
next week.
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