In the early stages of the conflict in Ukraine, Russia’s ability to withstand sanctions astounded analysts. However, there are increasing indications that Russia’s economic situation will deteriorate due to its growing isolation, and its status as an energy giant would be significantly weakened.
Russia has mostly retaliated after taking the initial blows of western sanctions by cutting off trade with the west, trading only with “friendly” nations, and forging alliances with countries that can tolerate doing business with a pariah state.
Through the weaponization of the energy trade, it has had some success in sowing instability; most recently, it cut off gas supplies to Europe’s crucial Nord Stream 1 pipeline while selling the remaining fuel supplies to consumers in China and India. In only the first three months of the conflict, Russia made almost $24 billion from selling energy to those two nations.
According to Yuriy Gorodnichenko, a UC Berkeley economist, evidence are growing that Russia is going to pay a significant price for isolation in the long run beneath President Putin’s brazen display of defiance.
In reality, Russia’s isolation started in 2014 when its economic situation deteriorated before its invasion of Ukraine. In 2021, the GDP of the nation was $1.78 trillion, down from $2.06 trillion seven years earlier. The IMF predicts that this year’s GDP will decrease by an additional 6%.
The amount of goods that [Russia] can purchase is decreased as a result of [isolationism], according to Jay Zagorsky, a professor of markets at Boston University. “It can only purchase Chinese manufactured items, Indian agricultural products, and the like. And you sometimes don’t get the best quality or pricing when you restrict yourself to a single nation.”
