The Hit to the Russian Economy, Internally Assessed

From Bloomberg “Russia Privately Warns of Deep and Prolonged Economic Damage”:

Russia may face a longer and deeper recession as the impact of US and European sanctions spreads, handicapping sectors that the country has relied on for years to power its economy, according to an internal report prepared for the government.

From the article:

Source: Bloomberg, 5 September 2022.

BOFIT (2 September 2022) reports:

Although retail sales and many branches of manufacturing experienced weaker growth in July, the Russian economy garnered support from oil production and construction activity. The preliminary assessment from Russia’s economic development ministry shows GDP contracted by 4.3 % y-o-y in July and 1.1 % y-o-y for the first seven months of this year.

The distribution of impact varies across sectors, as shown in the figure in the article. Retail has taken a big hit (as might be expected), as has manufacturing. In a previous BOFIT article, they note stripping out defense production results in a bigger drop in manufacturing.

Source: BOFIT (2 September 2022).


What about the near term forecasts. “Russia facing harsher economic outlook for the rest of this year” summarizes the outlook in a handy table showing various forecasts.

Source: BOFIT (2 September 2022).

See also Vox.




63 thoughts on “The Hit to the Russian Economy, Internally Assessed

  1. pgl

    “Two of the three scenarios in the report show the contraction accelerating next year, with the economy returning to the prewar level only at the end of the decade or later. The “inertial” one sees the economy bottoming out next year 8.3% below the 2021 level, while the “stress” scenario puts the low in 2024 at 11.9% under last year’s level.”

    The latter scenario would be a lot like Russia’s economy under Yeltsin. Now JohnH wants us to believe that if only Clinton had the US extend his recommended loan to Russia all would be fine. That is the spin his new hero Jeffrey Sachs is spitting out these days. But wait – they did get the loan from the IMF. JohnH tells us he hates the Washington/IMF consensus totally unaware that his hero Sachs was literally the architect of this consensus of shock therapy policies that Stiglitz rightfully criticized. Of course JohnH has never bothered to read Stiglitz’s Who Lost Russia.

    Of course JohnH is today employed by Putin so do expect him to blast these forecasts of Russia’s future. After all Putin has to be the fearless leader!

  2. Macroduck

    “…GDP contracted by 4.3 % y-o-y in July and 1.1 % y-o-y for the first seven months of this year.”

    That suggests an accelerated decline.

    Another recent look at Russia’s economy, this one from a bunch of Yalies, finds serious fault with the “Russia is managing under sanctions” story:

    Among the points made are that:

    – Foreign firms which withdrew from Russia in response to Russia’s attack on Ukraine account for 40% of Russian output. While domestic interests have taken over, foreign investment and expertise are gone.

    – Russian data are often accepted at face value. Alternative sources of data and Russian language reports (see above) suggest Russian official data mask weakness.

    – Current fiscal and monetary support to the economy are unsustainable.

    The prognosis is for continued deterioration of Russia’s economy under sanctions.

    Speaking of continued sanctions, limiting Russia’s access to technology has been particularly effective, though China is filling part of the gap:

    Here’s another recent tidbit – Chinese financial firms continue to shy away from Russia:

    1. pgl

      That Yalie paper is a must read. I have yet to read section V on the exodus of those 1000 multinationals but the sections on how Russian is so incredibly dependent on its commodity exports is very interesting and well done. And of course they note how Putin has pushed out the other oligarch owners he personally enrich himself. Now wonder Trump loves this guy.

    2. pgl

      Page 54: Russian revenue represented by these companies and the value of these companies’ investments in Russia together exceed $600 billion – a startling figure representing approximately 40% of Russia’s GDP. We further found that these companies, in total, employ
      Russian local staff of well over 1 million individuals. The value of these companies’ investment in Russia represents the lion’s share of all accumulated, active foreign investment in Russia since the fall of the Soviet Union – meaning the retreat of well over 1,000 companies in the span of three months has almost single-handedly reversed three decades’ worth of Russian economic integration with the rest of the world

      Like damn! Of course the next page talked about an offset that made me chuckle. You see the McDonald affiliate in Moscow has turned over its operations to locals. Your Big Mac will likely be subpar but the good news is that the new owners will not have to pay those pesky franchisee fees which are typically 5% of sales.

      1. AndrewG

        That’s the other thing. These foreign businesses don’t trust Russia, and for good reason. The Kremlin kept threatening to confiscate assets, as if that was some power move. More like Trumpy strategery. These guys at the Kremlin are kind of dumb.

        That line about “in the span of three months” was really chilling.

    3. pgl

      Western sanctions are crippling Russian industry, including its military producers. Russia will now try to use China, Iran, and India to fill the gap. Although Russia’s energy revenues allow the Kremlin to keep the population out of poverty, Western sanctions are scoring direct hits on its economy.

      The country’s largest car manufacturer AutoVAZ halted production in March due to a lack of components. Later, it was restored, but without essential parts such as airbags, anti-lock braking systems, or electronic stability control.

      The Yalies noted inflation in this sector has hit 60%!

      Russia’s war machine is reeling. Due to the lack of foreign components, two major tank plants — Uralvagonzavod Corporation and Chelyabinsk Tractor Plant — have stopped work. Missile factories are struggling to obtain chips to power guidance systems. The Russian army is left dependent on outdated if deadly, tanks and missiles. In response, the Kremlin has turned to China. Ever since the annexation of Crimea in 2014, Russia has opted to use Chinese instead of Western technology. In 2021, China accounted for 72% of imports of computers, 72% of telecommunications equipment, and 56% of semiconductors.

      Something tells me that this Chinese technology is going to be disappointed. We know how those Iranian military drones have been utter failures.

      1. Willie

        Considering how many of us use Chinese made computers and other electronic gadgets, I wonder how it will play out. The Chinese may step in to fill some of Russia’s needs. I certainly hope not. But never underestimate a foe.

      2. AndrewG

        “Although Russia’s energy revenues allow the Kremlin to keep the population out of poverty”

        That’s the thing. Foreign reserves are good for a) paying foreign debt, and b) buying foreign goods. (It doesn’t help that most of these revenues go directly to a massively corrupt, massively belligerent, massively wasteful government.)

        If local inflation is through the roof because you can’t buy foreign goods anymore, it doesn’t matter all that much if you’re accumulating foreign reserves. The inflation is what the average Russian experiences. And it’s only going to get worse, because there’s no alternative but to buy inferior goods from even poorer countries that aren’t joining the sanctions or to produce even worse goods domestically. These are the gains from trade, evaporated overnight. This is why we teach Ricardo in intro micro!

        And that’s saying nothing about the risk of a huge financial meltdown, potentially triggered by a fiscal crisis. Foreign reserves aren’t gonna save you in this situation. Oh yeah, and Western governments are making it hard to make any payments on foreign-denominated debt …

    4. AndrewG

      The Yale School of Management paper (I’ve only read the summary I admit) is excellent, and I have been recommending it to people since I first heard about it. The authors are a lot more careful in their thinking about these things than most. Really clarified my thinking.

      As you mention, the key is the combination of sanctions AND business flight (though surely there’s some causal relationship between them). All the supply side constraints add up big-time. No amount of sold energy is going to save them even if the foreign reserves successfully covered their foreign debts. Forget forex. The supply constraints are crippling their ability to have a modern economy.

      Of course, unless they do pay off most or all of their foreign-denominated debt, it could still result in a currency crisis (they’re apparently well on their way to a fiscal crisis as you mention). I don’t know exactly which category of crisis this is – maybe Krugman has to come up with a new one? 😀 Which reminds me – I wonder how their financial system is doing …

      I don’t want the average Russian to suffer, but we absolutely cannot tolerate a well-oiled economy trying to annex its neighbor and wipe their culture off the map.

  3. ltr

    September 5, 2022

    Chinese mainland records 349 new confirmed COVID-19 cases

    The Chinese mainland recorded 349 confirmed COVID-19 cases on Sunday, with 303 attributed to local transmissions and 46 from overseas, data from the National Health Commission showed on Monday.

    A total of 1,317 asymptomatic cases were also recorded on Sunday, and 24,250 asymptomatic patients remain under medical observation.

    The cumulative number of confirmed cases on the Chinese mainland is 245,057, with the death toll from COVID-19 standing at 5,226.

    Chinese mainland new locally transmitted cases

    Chinese mainland new imported cases

    Chinese mainland new asymptomatic cases

    1. pgl

      How corrupt is Gazprom? From that excellent discussion you provided:

      Within natural gas, the Russian political economy encouraged the creation of a highly corrupt and inefficient duopoly of Gazprom – the state-owned exporter of piped natural gas, derived from the legacy Soviet gas ministry; and Novatek – an oligarch-controlled nascent LNG exporter. The degree of bribery and value-extraction is legendary even by Russian standards, with Gazprom CEO Alexey Miller’s son-in-law managing two trillion dollars’ worth of government procurements and co-owning a penthouse worth about 800 million US dollars. The CEO himself got one of the largest bribes in Russian history – a rather dubious distinction – in the form of a palace built for him by one of the contractors of Gazprom. Gazprom’s own role clearly veers toward buttressing the political interests of the Kremlin rather than operating as a profit-making business, considering its heavily-subsidized gas prices for the domestic Russian population, aimed at garnering support for
      the Kremlin and mobilizing support away from energy efficiency and renewable energy measures – seen as a threat by the Kremlin – which contributes to Russia being one of the most energy intensive economies in the world per unit of GDP. Gazprom’s role as an appendage of the Kremlin is further reflected by its significant domestic obligations, as it only exports about a third of its 725 bcm of production capacity in 2018 – keeping the rest of the gas within Russia to sell at discounted rates for its own population, to the detriment of its profitability. Its societal responsibilities have long been a drag on profitability, and Gazprom has often used gas exports as a tool of the Kremlin’s
      geopolitical agenda

  4. ltr

    September 5, 2022

    Has Bidenomics Been Good for Workers?
    By Paul Krugman

    President Biden has presided over a huge employment boom that, according to Friday’s employment report, is still in progress. That’s simply a fact, although stating it (like pointing out that we aren’t in a recession at the moment) guarantees that I will receive a truckload of hate mail. By Biden’s second Labor Day, the U.S. economy had added substantially more jobs on his watch than it did in the Trump administration’s first 37 months — that is, before Covid-19 put the economy into a temporary coma.

    To be fair, many of the job gains under Biden probably reflected a natural recovery from lockdowns, and in general it’s easier to add many jobs when you start, as Biden did, from a position of depressed employment. On the other hand, employment has recovered faster than almost anyone expected. In late 2020, professional forecasters expected average unemployment in 2022 to be 5.2 percent; so far, it has averaged only 3.7 percent.

    But while the Biden boom was and is real, has it been good for U.S. workers? Ask many American workers, and they’d probably answer in the negative. After all, hasn’t inflation eaten up all their wage gains and then some? (Although their answers might be a bit different now that gas is back under $4 a gallon.)

    Well, inflation has definitely been a big problem. And if controlling inflation ends up requiring a long period of high unemployment — I don’t think it will, but I could be wrong — workers could end up worse off, despite the current employment boom.

    So far, however, Bidenomics has been good for American workers, whether they know it or not.

    There are two big conceptual issues you need to deal with when assessing the impacts of rising employment on American workers.

    First, do we look at the wages of only fully employed workers, or do we consider the gains to Americans who would have been unemployed or working reduced hours but for the Biden boom? Second, how much of the inflation the U.S. economy has suffered since Biden took office do we attribute to the boom, as opposed to things that would have happened whatever his policies had been? …

    1. ltr

      January 15, 2018

      Real Median Weekly Earnings for White, Black and Hispanic, * 2000-2022

      * Full time wage and salary workers

      January 15, 2018

      Real Median Weekly Earnings for White, Black and Hispanic, * 2000-2022

      * Full time wage and salary workers

      (Indexed to 2000)

      January 15, 2018

      Real Median Weekly Earnings for men and women, * 2000-2022

      * Full time wage and salary workers

      January 15, 2018

      Real Median Weekly Earnings for men and women, * 2000-2022

      * Full time wage and salary workers

      (Indexed to 2000)

  5. Moses Herzog

    I want to believe these BOFIT numbers, I want to believe them, but I have seen multiple reports on how Russia is using different things, black markets, shadow markets, “off the books” stuff to get around sanctions. And I have seen too many reports about nations still happily purchasing Russian oil/gas and as far as I have seen the American government doing nothing to punish those nations that are still purchasing things from Russia. Color me cynical on ALL of the above.

    To me, it matches the worst stereotypes of “bean counters” who are impervious to the fact there’s lot of trade and cash exchanging hands that isn’t on their little papers of tabulation.

    1. Macroduck


      I long ago heard an explanation of the behavior of the press and the pundits who end up being quoted in the press with refard to long-lasting stories. The idea is that they lose their audience ifhe story doesn’t change, so the change the story every few weeks. “Biden is down -Biden is up. Trump is clever – Trump is desperate. The Bucks can’t shoot – the Bucks are back, baby!” It pays the bills.

      That’s not what I think is going on here, but the effect is similar.

      An issue develops, and there is a first naive assessment. (Sanctions will crush Russia’s economy.) Soon, evidence appears which inevitably contradicts the initial assessment to some degree. (Russia’s economy is in wrenching decline, but not as wrenching as first estimates.) A new assessment (or varying assessments) is made which focuses on the shortcomings of the initial assessment. The focus on earlier shortcomings gives a skewed impression not just of reality, but ofthe extent of disagreement between assessments. (Here, fill in with anything Johnny or the various “anonymous” trolls have written about Russia.) The Yalie paper represents the next swing, when greater sophistication is needed to have anything useful to say.

      We readers cannot help but see the changing view as a contest, which sometimes it is, but not always.

      The BOFIT stuff is part of the process – information we didn’t have in earlier steps, but which we have now. Weighing new information against old is always going on, always tricky. If I may offer any comfort, it is that the BOFIT perspective is different than what we’ve had till now. Outsiders have less information than insiders. Insiders (in this case) lie to outsiders, but (to the extent honesty doesn’t become a health concern) tell the truth to insiders. We just got what insiders are telling insiders.

    2. w

      I think you are correct; there is a lot of evasion. Russia has been handicapped but it certainly does not seem to have been “crippled”.
      The fundamental story here, to me, is still that Putin blundered into allowing the western nations to engage him in a proxy war. They will bleed his military down until Putin loses or finds some way to quit while save face.
      Russia has economic power as a major supplier of commodity energy but their sway in their immediate sphere has always come because they are a bully with an unstoppable army. If they prove to be stoppable, everything changes.

      1. AndrewG

        “allowing the western nations to engage him in a proxy war”

        It’s a Russian war of conquest driven by imperial ambition. US policy is very clearly to prevent Russian aggression, not egg it on.

      2. pgl

        Are you BFF with JohnH or are you trying to replace him as Putin’s pet poodle? Unstoppable army? Dude – Putin’s war criminals are not nearly on par with Hitler’s war machine.

  6. Macroduck

    Russia’s invasions of Ukraine have increased Russia’s reliance on China. This has happened at a time when both Russia and China are trying to carve out hegemonic control of nearby regions. Both Putin and Xi have decided that militarization and oppression are preferable to constructive participation with the wider world – though for Xi, it’s more a question of degree. It’s natural that China and Russia have grown closer.

    For China, though, the calculation is very different than for Russia. China is a value-added exporter and commodity and technology importer. Russia is a commodity exporter and an importer of, well, lots of stuff. Prior to Russia’s renewed invasion of Ukraine, Russia only accounted for about 2% of China’s external trade. Both countries need the rest of the world, but for very different reasons. China doesn’t need Russia, but can exploit Russia’s current weak position. Russia needs China because China increasingly represents “the rest of the world” for Russia.

    If the choices of two elderly narcissists are binding on their countries after they die, then the world will return to a bipolar arrangement. “Non-alignment” will be back in our active vocabulary. Last time, Russia was in a much stronger position. This time, the world needs China and China needs the world. Nobody much needs Russia except as a source of dirty fuels.

    1. Willie

      Russia is likely to come out of this as a vassal state to China. If Russia survives as a single entity. I wouldn’t surprise me to see the Russian Federation break into several components when it’s all over and when Putin is gone. And he will be gone. That’s what happens to Russian tyrants when they lose wars. Russian tyrants have a historic record of losing wars, too.

  7. Moses Herzog

    Off topic, but very loosely related

    Give this link a try. Kind of interesting. Professor Chinn has talked before about how American politicians and even some American citizens have different standards for Russian misbehavior vs Mainland China Government misbehavior. Imagine if China had pulled this stunt, what we would be hearing in the media right now. Russia pulls this pretty wild stunt, and we’re not even “hearing crickets”. Just dead radio silence:

  8. pgl

    It looks like standing up for the rights of the people of Ukraine gets one banned from Russia:

    Russia imposed personal sanctions Monday on 25 Americans, including actors Sean Penn and Ben Stiller, in response to U.S. sanctions against Russians stemming from the conflict in Ukraine.

    Of course Putin still holds out the red carpet for Trump and for JohnH.

  9. ltr

    April 9, 2003

    The ruin of Russia
    No rewriting of history can change the fact that neo-liberal reform produced undiluted economic decline
    By Joseph Stiglitz – Guardian

    Ten years ago this month, Russia’s parliament, the duma, was seeking to impeach President Boris Yeltsin, initiating a time of stalemate and struggle that ended seven months later when Yeltsin ordered tanks to fire on the duma’s headquarters. Yeltsin’s victory settled who ruled Russia and who would determine economic policy. But were Yeltsin’s economic policy choices the right ones for Russia?

    The move from communism to capitalism in Russia after 1991 was supposed to bring unprecedented prosperity. It did not. By the time of the rouble crisis of August 1998, output had fallen by almost half and poverty had increased from 2% of the population to over 40%.

    Russia’s performance since then has been impressive, yet its gross domestic product remains almost 30% below what it was in 1990. At 4% growth per annum, it will take Russia’s economy another decade to get back to where it was when communism collapsed.

    A transition that lasts two decades, during which poverty and inequality increase enormously as a few become wealthy, cannot be called a victory for capitalism or democracy. Moreover, the longer-run prospects are far from rosy: with investment a mere 10% of what it was in 1990, even if that investment is better allocated, how can growth be sustained?

    IMF-style neo-liberals are now trotting out an interpretation that amounts to a belated declaration of victory. The pre-1998 period of economic decline, on their view, reflected a stalled transition process, whereas the rouble crisis finally jolted the authorities into action, with recovery following implementation of far-reaching reforms.

    But the real explanation lies elsewhere – and is much simpler. Until 1998, the rouble was overvalued, making it impossible for domestic producers to compete with imports. The IMF did not want Russia to devalue, and it provided billions of dollars to prop up the exchange rate. The IMF and the US Treasury worried that any change would restart inflation, because there was little or no excess productive capacity.

    This was a remarkable confession: these officials evidently believed that their policies had wrecked nearly half of Russia’s economic capacity in the space of just a few years. They shunted aside micro-level data that showed that there was in fact excess capacity, just as they ignored a World Bank analysis showing that fresh IMF loans would not restore economic growth, but would only leave the country deeper in debt….

    1. pgl

      IMF-style neo-liberals included Jeffrey Sachs. But for some reason JohnH thinks had we listened to Sachs, Russia would have flourished. We did listen to Sachs who is now trying to deny any responsibility. No wonder JohnH likes this slippery dude!

      “They shunted aside micro-level data that showed that there was in fact excess capacity, just as they ignored a World Bank analysis showing that fresh IMF loans would not restore economic growth, but would only leave the country deeper in debt”

      Sachs whined his recommendation for more loans went unheeded. But Stiglitz is right here.

      1. AndrewG

        Sachs’ story (IIRC) is that the US stepped in to prevent currency crises in other former Eastern Bloc nations, but not Russia. When the time was right, Congress balked. A bridge too far.

        I don’t have a high opinion of “shock therapy” but I don’t think Stiglitz is getting the whole story right here. Besides the currency crisis (financial panics cause damage, sometimes devastating damage, to economies all their own) I suspect some of what he’s is talking about is actually changes in measurement. I’d be happy to hear Barkley Rosser on this, or anyone else more familiar with the facts than me.

        1. pgl

          Maybe we should hear more about this alleged currency crisis but Stiglitz was clearly noting how the ruble became very overvalue by 1998:

          Think in terms of those southern European members of the Euro currency union. They needed a real devaluation but could not get the ECB to go along Russia in the 1990’s had an unfortunate real appreciation. Somehow I missed where Sachs ever addressed this issue.

          1. baffling

            this entire episode was kicked off by Johnh trying to deflect blame from Russia and onto the usa and western powers for the demise of Russia. let’s be clear, Russia failed on its own accord. there is nobody to blame but Russia. it is not western powers fault that Russia collapsed. it was a corrupt Russia that collapsed.

          2. AndrewG

            It’s been a while since I read it, but it’s in “The End of Poverty.” Don’t think the FRED graph goes back far enough though.

  10. ltr

    …Xi [has] decided that militarization and oppression are preferable to constructive participation with the wider world…

    [ This of course is false and malicious.

    There are 147 countries that are part of the Belt and Road Initiative (virtually all of Africa). There are about 3 billion people in BRICS countries. There are the countries of the expanding Shanghai Cooperation Organization. There are ASEAN and RCEP trade compacts: Association of Southeast Asian Nations and Regional Comprehensive Economic Partnership…. ]

    1. ltr

      July 27, 2022

      Croatia’s Chinese-built Peljesac Bridge opens for transport

      KOMARNA — Croatia’s Chinese-built Peljesac Bridge opened Tuesday for transport in the village of Komarna, connecting the two parts of the country’s coastline for the first time.

      Croatian President Zoran Milanovic, Prime Minister Andrej Plenkovic, government officials and Chinese Ambassador to Croatia Qi Qianjin attended the ceremony….

      July 31, 2022

      Belt and Road Initiative paves way for shared future via common development
      By Shi Xiaomeng

      BEIJING — For many years, commuters, merchants and tourists had to spend endless hours to travel by land from the Croatian mainland to the southern part of the eastern European country. A bridge recently inaugurated has made those exhausting experiences a thing of the past.

      Opening for traffic earlier this week, the 2.4-km-long bridge finally connects two parts of the nation facing each other across the blue waves. Now it just takes a breezy three-minute drive for local residents and travelers to cross the strait for their trips to Dubrovnik, a medieval city known as the “Pearl of the Adriatic.”

      Connectivity matters, not only for tourism, but also for the movement of goods and access to services. A much smoother flow of trade is expected to create thousands of local jobs. Another piece of good news for people living in the southernmost part of Croatia is that they now can enjoy easier access to educational and health facilities on the country’s mainland….

    2. Macroduck

      Don’t lie about what’s happening. It’s too important. China is developing it navy in order to dominate seaways from South Korea to Brunei:

      These claims are public and ignore widely accepted international rule. Beyond that, India is building up its own navy in response to China establishing naval outposts around the Indian Ocean. These are simple, widely published facts. Why do you think lying about them does you any good?

    3. baffling

      your comment, ltr, is of course false and malicious. why are you so rude to prof. chinn by continuing to post communist party propaganda on this site?

  11. Anonymous

    Ukraine winning the bot war, usa is seeing a result for the billions.


      3.1 Categorising accounts via national lean  

      ‘We found that 90.16% of accounts fell into the ‘ProUkraine’ category, while only 6.80% fell into the‘ProRussia’ category. The balanced category contained 3.04% of accounts, showing that accounts exhibiting mixed behaviour are present in the dataset’

    1. AndrewG

      Your quote is about accounts overall, not about bot accounts. The following section in the article is about categorizing accounts as bots.

      From the article’s abstract: “Pro-Russian non-bot accounts are most influential overall, with information flows to a variety of other account groups.”

      Seems like trolls tend to be human beings (in the technical sense).

      In other words, you purposely misinterpreted the results of the paper to fit your politics. More evidence that trolls are humans. But I guess we should write about what we know, amirite?

  12. rjs

    i observed PMIs from several countries this past week, from which you can draw your own conclusions (since i don’t think much of diffusion indices)

    Italy’s manufacturing PMI = 48.0
    Germany’s manufacturing PMI = 49.1
    UK manufacturing PMI = 47.3
    Russian manufacturing PMI = 51.7

    (all of the above for August, from S&P Global)

        1. AndrewG

          Shouldn’t we expect a high PMI in Russia under a sanction regime that induces import substitution and a shift towards labor inputs?

          Seems like you’re cherry picking data here. The total picture is much worse than one PMI comparison.


    1.Putin screwed up not taking the Ukraine’s modest land/peace deal at the end of March. He already had a flop, don’t make it worse. It wasn’t much, but continued his policy of incremental gains. I figure his continued overconfidence in his supply chains, Russian supporters in the Ukraine and cancer made him gamble. It didn’t pan out. He has wasted another 40000 Russians for nothing. Now it’s getting embarrassing.
    2.Russia’s economy is still producing with pmi’s due to oil, something many market elitists must chagrin(and maybe Putin as well). The fact it’s moving back West with little fanfare is pretty revealing. So the plan is a permanent consumption recession related to its oil revenue potential capping global prices. A uncomfortable war as body counts rise.The
    3. The end of the war brings only little normalization. When Russia turned down the peace offer, it damaged its credibility with China.

  14. pgl

    In France, meanwhile, she has been branded not the Iron Lady – which was former UK PM Margaret Thatcher’s nickname – but the Iron Weathercock. This is a reference to Ms Truss’s changing views on the UK leaving the European Union – she went from opponent before the 2016 referendum, to supporter afterwards

    Iron Weathercock – wish I had said that! She certainly has malleable views on the issue of trade protection, which was the point about my cheese comment. Of course, this went way over Rick Stryker’s head. Now I have asked him if he is for or against trade protection. For some reason this Pepperdine Ph.D. cannot answer this simple question.

  15. Bruce Hall

    It looks as if some economic “rearranging” will have to be done on both sides of the economic sanctions war.

    Appears that if you sanctions hammer is the only tool in your box, you should be careful about pounding on grenades. Ironically, the only effective action taken to help Ukraine has been the one that was delayed because of the reliance on economic sanctions: providing modern military equipment and weapons. The West didn’t want to “provoke” Russia.

    But many people felt that it was all about economics… and still do.

    1. pgl

      I know you like to link to Tyler Cowen but once again I think you failed to understand what your own link actually said. I get you want to take Putin’s side on this given you are a disgusting MAGA hat racist but please READ CAREFULLY what this blog post said as it suggests Putin really has no options.

      1. Bruce Hall

        Come on, man! (channeling Old Uncle Joe).

        Cowen was pointing out that there is uncertainty about the sanctions, but that this winter Europe is up the proverbial creek without a paddle if Russia keeps the gas off.

        Europe bears the full burden today, and rather soon in the winter to come. Over time, however, Europe will adjust and the Russian position and threat value will weaken each period.

        It would make sense as a strategy if Russia were about to start negotiating for peace, but that is not my prediction.

        It also would make sense if Russia thinks Europe is at the very end of its rope, and now will crack. That also does not seem correct for me.

        Dare I paraphrase? Europe takes it this winter, but gradually (“over time”) finds other reliable sources of energy (the North Sea?). Russia is going to be intransigent, but doesn’t expect Europe to buckle.

        He ends with…

        Which means…? How do we model this…?

        But since you, pgl, always have the answers, why don’t you answer Cowen’s questions?

        1. pgl

          No lying troll – this was the SUBSTANCE of his ending:

          Or maybe Russia can’t think of anything else to do, and so they do this rather than nothing. That would signal the Russian position is weaker than it looks. Maybe. In some accounts, the Kremlin has left itself a partial out. Still, from the point of view of public opinion, very few are aware of this out. So the Kremlin may have shot its negotiating wad.

          Gee Bruce – we know you lie a lot but damn!

    2. pgl

      On your second link this sounds about right:

      “I think air defense would have been a very smart move,” he said. “If we had put more out there sooner, we would not be where we are now.”

      Of course your boy Trump had four years to do this. Some on his team advocated doing more. Of course your boy Trump did not want to do this because he became President only because Putin made him President.

      Yes Brucie your boy is largely responsible for the issues raised in your 2nd link. But hey – you too are a Putin puppet.

        1. pgl

          I see – preparation takes a few weeks not years. You lies have gone from pathetic to the dumbest things man has ever seen.

  16. pgl

    An interesting issue is who will be the Special Master to review what DOJ got from Maro Lago. If I were DOJ I would put up Justice John Michael Luttig – a conservative Republican but a very honest person. Team Trump is likely going to nominate someone like Rudy Guiliani – a loyal member of their mob.

  17. pgl

    I bet Putin thought he had a game changer with his hypersonic missiles which have been deployed in his execution of war crimes in Ukraine. But wait a shortage of semiconductors has been something else that has plagued the incompetent Russian war machine:

    Russia is struggling to keep up its weaponry as sanctions have made it increasingly difficult for the country to acquire microchips that power some of its equipment, Ukrainian Prime Minister Denys Shmyhal told Politico. According to Shmyhal, Ukraine estimates Russia has already used up half of its arsenal and is down to four dozen hypersonic missiles. Shmyhal said it doesn’t look like the country will be able to restock that supply without the microchips that make the missiles accurate. “Because of sanctions imposed on Russia, the deliveries of this high-tech microchip equipment … have stopped and they have no way of replenishing these stocks,” Shmyhal told Politico. Instead, they’re using older and less sophisticated equipment to try to preserve the high-tech pieces, Diederik Cops, a senior researcher in arms exports and trade at the Flemish Peace Institute, told Politico. “More and more ‘dumb’ rockets are being found in Ukraine, demonstrating how Russia is battling supply chain shortages,” Cops said. A “shopping list” of technology Russia is looking to secure obtained by Politico shows the country’s desperate need for microchips, most of which are made by US companies, including AirBorn, Intel, and Texas Instruments. The country has even resorted to ripping microchips from dishwashers and fridges for military use, US Commerce Secretary Gina Raimondo said in May.

    1. Willie

      The price of vacuum tubes for guitar amps will probably rise as Russia has to repurpose those for aviation uses.

    1. pgl

      “Russia appears to be taking the West’s “cheap labor” approach to sourcing critical materials and products.”

      The West’s cheap labor approach? Why do you write such incredibly STUPID things? Oh right – you are an incredibly STUPID person. Got it.

      1. Bruce Hall

        pgl, oh sorry, I caught you after you imbibed a few bottles of cheap vin.

        Let me clarify in little words:

        Russia buys bombs from dictatorship Korea where they are made by people living on starvation wages; the US buy important stuff from fascist China like medicines from people earning 1/10th what US workers earn. You know, cheap labor strategy.

        1. pgl

          I get it – you have joined pretend Ph.D. in opposing free trade. I guess you hate the fact that Brits want to buy French cheese. Hey Bruce – tell your hero Tyler Cowen that he is wrong about international trade.

        2. pgl

          Bruce Hall has a brilliant strategy for cutting the high cost of drugs in half. Buy American which will raise the cost of production from 20% of the current price to 60% of the current price and at the same time increase the patent protection rules Big Pharma enjoys.

          I realize this may not make much sense but his buddy Dr. Rick Stryker can explain the calculus to us!

        3. pgl

          “Bruce Hall
          September 6, 2022 at 4:40 pm
          pgl, oh sorry, I caught you after you imbibed a few bottles of cheap vin.

          Let me clarify in little words:

          Russia buys bombs from dictatorship Korea where they are made by people living on starvation wages; the US buy important stuff from fascist China like medicines from people earning 1/10th what US workers earn. You know, cheap labor strategy.”

          Classic Bruce Hall – a racist comment devoid of a single fact. Yes Brucie is telling us that the Chinese cannot make quality drugs. But never mind the blatant racism. Which of our medicines are made in China. Not the Moderna vaccine which is made by Moderna in Massachusetts or by Lonza in Switzerland. Yes Brucie – I can read an Annual Report. Oh – you did not get the vaccine and your bleach is made in China!

          BTW – I checked reliable sources and it seems the average pharma worker in China makes $1500 a month while US workers in the same sector makes $6000 a month. That is 4X not 10X. Have your preK teacher explain it for Brucie boy.

          Now I think I know where you got that 1/10 claim. Back in 2000, apparel workers in China only made $0.70 an hour. Of course anyone who got international trade would know apparel wages in China have greatly increased over the last decade. But you never heard of the Factor Price Equalization theorem. And of course you are dumb enough to think making druges and making clothing is the same thing.

        4. AndrewG

          Bruce, you continue to be a completely ignorant mercantilist. Labor costs are only one part of why a country might specialize in any given industry – and it may not be in the direction your MAGA-addled mind assumes.

          By the way, here’s the product of my ten-second Google search:

          Value of U.S. imports of pharmaceuticals and medical equipment, products, and supplies in 2019, by country(in billion U.S. dollars)

          China’s the #3 supplier of US medical goods; the rest of the top 10 suppliers are rich countries except India and Mexico. The imports – about 1/6 of the US health sector – are spread across dozens of supplier countries.

          This of course *ignores exports*.

          And since when is Mr. “my T-cells didn’t go up and that proves the vaccine doesn’t work” care about N95 face masks anyway? You can get horse antiparasitics made in Canada (you can just assume it was by white people, that’ll make you feel better).

          1. pgl

            “China’s the #3 supplier of US medical goods; the rest of the top 10 suppliers are rich countries except India and Mexico.”

            Brucie is so stupid that he claimed Chinese wages are 1/10 of US wages in this sector even though the data shows they are closer to 1/4 of US wages. Now wages in India may be that low but Trump and his racist minions such as Bruce don’t mind working with India even if they run and hide any time someone who is Chinese shows up.

  18. Macroduck

    A few guesses can be made, based on the BOFIT information, the Yalies and Brucie’s link.

    From BOFIT, manufacturing is down because Russian manufacturers depend heavily in foreign inputs. Retail is down because retail depends on imports and domestic manufacturs whih require imports, and because real incomes are down. Construction relies less on imports, so is still able to grow.

    From the Yalies, economic policy is unsustainable, which suggests Putin wants to limit domestic opposition to the war he won’t call a war by avoiding belt-tightening. Unsustainable policies adopted to limit domestic opposition means Putin’s war faces time limits. Unless the war ends before policy options turn bad, Putin will eventually have to put the economy on a war footing, and expects to lose support if he does.

    Sourcing munitions from North Korea allows Putin to devote more resources to domestic consumption, at a cost. I would guess he’s paying for munitions with oil and grain, but that’s just a guess. In any case, buying munitions abroad delays increasing domestic capacity for war production.

    We already knew that Putin faces a time crunch because of the damage to his economy from sanctions and war costs; the sooner fighting stops, the sooner he can try to shake off sanctions. It also appears that time crunch is exacerbated by the fear that domestic support will fade if he puts his economy on a war footing, shifting resources away from consumption to war.

    Have we also seen efforts to avoid loss of public support in Putin’s reliance on mercenaries?

    It’s clear Europe faces its own time limits. Well, so do Middle Eastern and African grain-importing countries, but that’s not much strategic help to Russia. It’s a contest to see which side can maintain public support for the war longest – nothing new in that. But it does seem that those of us trying to guess the outcome need to objectively assess the staying power of Russia and of countries aiding Ukraine. This post is a step in that direction so many thanks to Menzie. Carping from anonymous/Johnny/ltr/… is meant to distract from any objective effort to make such assessments.

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