Russian economy withstands sanctions that were meant to collapse it

The Russian economy that withstands sanctions meant to collapse it

Sanctions were supposed to suffocate Russia within months. It has been more than two years of war, and the promised scenario has not arrived. This economic resistance, which seems inexplicable to the West, has shattered all forecasts, and the confusion is not just about balances: it is about the narrative. Those who predicted a collapse in the summer of 2022 now face a front that has not moved where it was promised.

It is not magic. Russia sells what the world still needs — oil, gas, grain, minerals — and places it, directly or indirectly, with those unwilling to give up buying it. This is the starting point that much Western analysis ignores when speaking of a miracle.

Why does the Russian economy withstand sanctions?

The first factor is structural: a country exporting raw materials and food has guaranteed demand even if partners change. India and China still need huge amounts of energy and minerals, and sanctions have not closed that door, only made it more expensive and longer. Russia exports and imports through intermediary countries, with surcharges, but it exports.

The second is reconversion. Russia has been preparing for this scenario for years and has poured its industry into military production. Mass-producing weapons and ammunition boosts GDP, especially in terms of purchasing power parity. This is the core of the mirage: a war economy produces high figures and low quality of life.

The third is control. The State has intervened in the ruble, erected a de facto exchange control, and inflated wages in sectors linked to the war. With unemployment at lows and real wages rising, the macro picture looks bright. The small print is paid by the rest of civil society.

GDP rises while half the country burns

Here lies the most repeated trap. GDP measures spending, not real wealth. If an entire country builds stone pyramids, GDP rises and people continue eating the same. The same applies to war: destroying refineries, tanks, and ships can add to the accounting while impoverishing the country that loses them.

An intervention in the debate cited by Russian press states that Russia is now a gasoline importer and that antidepressant sales are breaking records. The detail matters: a crude exporter that buys fuel abroad has a refining problem, not a reservoir problem.

On the ground, Allianz analysts place Russian inflation around 6.5% on average this year, after 7.4% year-on-year in December and January, and anticipate that the Central Bank of Russia will maintain a restrictive monetary policy. With real wages growing nearly 8% in 2023, the cocktail is predictable: high rates and an economy running on public debt of 17% of GDP, the envy of average Europe.

Prices that actually match the Russian basket

What is disconcerting is comparing the basic basket. In the 2024 price ranking, Russia appears with the lowest values for several products, well below Spain and much of the West:

• Cooking oil: $1.40 in Russia vs. $3.36 in Spain and $7.14 in Hong Kong
• Flour: $0.55 in Russia, $1.71 in Spain, and $3.62 in the United States
• Chicken: $1.90 per kilo in Russia, $4.77 in Spain, and $11.80 in Germany
• Tomatoes: $2.23 in Russia, $3.78 in Spain, and $6.24 in the United States

The containment of the Russian basket explains why a part of the population does not perceive the war as an immediate economic disaster. The other reading is the opposite: if the State manufactures and buys, GDP rises even if the country burns from within.

The loser no one wanted to name

There is a current holding that the real collateral damage is not Russian. Europe is paying the bill: more expensive energy, industry shutting down, and a Germany that is no longer the formidable rival it was. The circulating thesis is that Washington sought precisely this: to break the industrial entente between Europe and Russia before it became unstoppable. There is no proof of such a plan; there is a result.

The other flank is Spain. It falls less, rebounds sooner, and presents data that do not fit with those of France or Germany. It is argued that the key lies in having sunk GDP during the pandemic to later sell the rebound as growth, and that whoever falls less hits the ceiling sooner.

What the GDP of a country at war truly measures

The underlying discussion is methodological. GDP ceased to be a good thermometer of real wealth in economies with permanent public deficits and a hypertrophied State, because it accounts for spending as if it were value creation. A country spending more on weapons may show growth while its citizens lose purchasing power.

Hence the uncomfortable conclusion: Russian figures may be debatable, but the fact that sanctions have not toppled the economy is verifiable on the street. And that, in terms of narrative, weighs more than any report.

The ruble remains no safe haven, the yuan does not displace the dollar, and Russia depends increasingly on China. But two years later, the question many ask is no longer when Russia falls, but how long Europe can hold out before.