Do sanctions even matter? Why Russia’s economy is still growing
so since Russia invaded Ukraine a whole bunch of countries have imposed sanctions to crack down on Russia’s ability to bring in money cracking down an oil a huge part of that but here’s the thing Russia is still making money enough money to fund the war and it turns out the world’s markets might just be enabling that war so let’s break it down cbc’s business correspondent Peter Armstrong is here as a cbc’s Brier Stewart in London Brier of course was our Russia correspondent until Russia kick CBC out so thanks for being with us here’s a clue to how all this works this right here is the Andromeda star it’s a ship that carries crude oil from Russia now if we look over here at the GPS tracking all these colored marks these are ships right here is the Andromeda star it is docked in India so India is getting Russian oil Peter why is anyone getting oil from Russia yeah look it it’s important to sort of remember where we’re at here right because at the end of the day the the Taps to Russian energy were never turned completely off the West tried to strike this kind of weird compromise they worried that a a full-blown Embargo of Russian Energy Products would simply drive up prices way too high so what they did instead was they set this price cap and they were hoping that that would let some oil flow but make it so Russia couldn’t really make any money it was at best a flawed Theory it was definitely a thing the Russians could exploit and what we’re seeing there Adrien is that Russia is exploiting it Russia’s pulling in anywhere between half a billion and a billion dollars every single day selling oil largely as you say to India and China so if I pull back the idea was right that the price cap would mean Russia is losing money on its oil sales losing enough that Russians felt it like a a type of punishment that was the intention yeah the the cap kind of meant that Russia could continue to sell oil it could continue to use conventional shipping get insurance for that so long as it sold that oil for less than $60 a barrel so essentially at a loss but China and India were more than happy to gobble up oil at prices well below the international market level but it also it kind of opened the door to this pretty easy workaround to that price cap that the Russians just bought up a bunch of old tankers created whatever been calling this Shadow Fleet that ship you mentioned the Andromeda that’s just one example and at first they were really kind of clandestine about it right secretive about how they were doing this Bloomberg had this amazing piece where they found one registered ship pumping oil offshore onto another unregistered ship but increasingly Adrien it’s become pretty Brazen right there are now hundreds of these vessels shipping oil and all of that sells well above that $60 cap one analyst I spoke with said quote they’re rubbing it in our face and laughing at us on that note let’s have a look at the graph here because I think it it sort of makes your point Peter um this shows Russia’s oil shipments to Europe as you can see over time once the war started they declined a bit right since the War Began but if you have a look at another Market over here this is Russian oil shipments trade to Asia look at that it’s just been growing Brier you you have been looking closely at at at numbers like this you’ve been looking at what’s been happening in Moscow based on what Peter is saying what these numbers are telling us looks to me like the Russian economy is doing just fine despite the war well that’s it Adrian I mean Russia’s economy has adjusted and the population has adjusted too I mean certainly some prices have gone up for certain products I mean take Apple for instance it’s no longer operating in Russia but you can still get the iPhone it’s just more expensive now because it has to come into Russia via another country but shelves are full products are available and I think that really goes a long way in influencing public sentiment because if people were having a hard time getting a hold of groceries or feeding their families you could see how they could be more upset about the current political situation but that’s not the case for the most part Russians are managing I mean it is more difficult for a lot of them certainly to go on vacation in Europe but for those who can afford to they can still go to places like Egypt and Dubai where they’re warmly welcomed and the other thing is interesting to point out is that wages in Russia are actually going up and that’s because there’s a labor shortage I mean Russian factories are working 24/7 churning out military equipment on top of that you have hundreds of thousands of men who have been drafted into the army so they’re out of the labor market and this whole labor shortage is a real concern for Russian economists going forward but right now the Russian economy is on track to grow by about 3.2% this year which is more than Canada and the rest of the G7 well that that won’t impress Joe Biden uh you know the Energy caps that we’ve been talking about they aren’t the only sanctions that were put in place to try to curb Russia’s access to cash and and hinder its war machine so so what else is being done now and I guess more importantly what needs to be done still to to try to slow Russia’s cash flow I think what we’re starting to see is more of an effort to close these loopholes and workarounds that Russia has been using to not only fund the war but secure the technology that it needs to produce weapons and the US really has stepped up pressure quite recently on countries like turkey and China which have really increased their trade with Russia in fact the US Treasury has even introduced sanctions against Chinese companies which it accuses of of helping Russia produce drones so that’s one area I mean the other discussion which continues to go on is just what to do with the money owned by Russia’s Central Bank that is currently Frozen in offshore accounts now this is about $300 billion US what the the United States wants to do is basically take that money and give it to Ukraine so it can use it to help defend it self Europe is talking about more along the lines of taking the profits from that money and this is an ongoing debate that’s been going on for for months and I bring this up because I really think it highlights the fact that even among Ukraine’s partners and allies when there’s a desire to take more measures there’s not always agreement right so many loopholes Russia’s finding Peter I suppose the bottom line here is do sanctions even matter if Putin still has what he needs to fight this war Adrian if you kind of zoom out there’s a broader story here that begins to emerge and you know you think about for what 80 years now the Western block of countries the international globalized trade block that emerged out of World War II it was able to impose its weight on countries that they felt were breaking the rules and and slowly over the last 10 or 15 years that system of globalization is coming apart so in a lot of ways this has been a test of that order and so far the test isn’t going that well for the west and if it fails outright you have to wonder if it’s going to be the last time those Western countries ban together like this and just on one last note Brier and I were just talking about the next big development in this is going to be a summit between the presidents of China and Russia be really interesting to see how they frame that meeting in light of the western push to change the way Russia’s behaving and the war chugs on all right Peter Armstrong Brier Stewart thank you both so much for being with us you bet welcome so
After Putin launched his full-scale invasion of Ukraine, the West vowed to sanction Russia into submission, but that hasn’t happened. The National breaks down how a global dependence on cheap fuel and financial loopholes are helping to enable the war.
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