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https://finance.yahoo.com/news/putins-getting-nervous-about-russias-sinking-economy-201143630.html

Putin’s getting nervous about Russia’s sinking economy
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Rick Newman
Rick Newman·Senior Columnist
Thu, March 30, 2023 at 1:11 PM PDT·6 min read

Kremlinologists think it’s no coincidence that Russian authorities
seized Wall Street Journal reporter Evan Gershkovich just a day after he
co-authored a Journal story on how Russia’s economy is “starting to come
undone.”

Russia says Gershkovich was spying, which the Journal adamantly denies.
It’s safe to believe the Journal because Russia passed a law last year
that basically criminalizes what journalists do: ask questions about
things the government doesn’t want anybody to know about.

Stay ahead of the market
That law focuses on anybody spreading information about the Russian
military, which may apply to Gershkovich because he was reportedly
researching a story on the Wagner paramilitary group that’s part of
Russia’s invasion force in Ukraine. But that’s just a pretext for
Russian President Vladimir Putin to punish and silence one voice
highlighting the economic price Russians are starting to pay for Putin’s
disastrous invasion of Ukraine.

A picture taken on July 24, 2021 shows journalist Evan Gershkovich. - A
US reporter for The Wall Street Journal newspaper has been detained in
Russia for espionage, Russian news agencies reported Thursday, citing
the FSB security services.

A picture taken on July 24, 2021 shows journalist Evan Gershkovich. - A
US reporter for The Wall Street Journal newspaper has been detained in
Russia for espionage, Russian news agencies reported Thursday, citing
the FSB security services. "The FSB halted the illegal activities of US
citizen Evan Gershkovich... a correspondent of the Moscow bureau of the
American newspaper The Wall Street Journal, accredited with the Russian
foreign ministry," the FSB was quoted as saying. He is "suspected of
spying in the interests of the American government" and of collecting
information "on an enterprise of the Russian military-industrial
complex," agencies reported. (Photo by Dimitar DILKOFF / AFP) (Photo by
DIMITAR DILKOFF/AFP via Getty Images)
More
For several months after Russian forces invaded Ukraine last February,
the Russian economy seemed resilient. A spike in energy prices boosted
Russia’s oil and gas revenue, its largest source of funds. Deft
maneuvers by the Russian Central Bank helped the country withstand tough
sanctions imposed by the United States and other allies of Ukraine.
Russian forces floundered in Ukraine, but that was due to poor military
planning and execution, not sanctions.

Now, however, sanctions are finally beginning to strangle the Russian
economy in ways that could set it back for years. Laura Solanko of the
Bank of Finland recently described how Russia is undergoing “reverse
industrialization” in which the military-industrial complex driven by
war needs crowds out the consumer economy, as in Soviet times. “Russia
is stuck ineluctably on a path to lower potential growth and a bleak
economic future,” Solanko wrote on March 27.

[Drop Rick Newman a note, follow him on Twitter, or sign up for his
newsletter.]

On paper, Russia seems to be surviving. Official data show its economy
shrank by 2.2% in 2022, with the International Monetary Fund (IMF)
forecasting flat GDP growth in 2023. But Russia, never the most
trustworthy data purveyor, has stopped publishing a variety of economic
statistics, and some IMF critics have blasted the agency’s Russia
forecast as naïve and wrong. The wonky debate matters because it gets to
the question of whether sanctions are accomplishing anything or not.

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Rick Newman
Rick Newman·Senior Columnist
Thu, March 30, 2023 at 1:11 PM PDT·6 min read
Kremlinologists think it’s no coincidence that Russian authorities
seized Wall Street Journal reporter Evan Gershkovich just a day after he
co-authored a Journal story on how Russia’s economy is “starting to come
undone.”

Russia says Gershkovich was spying, which the Journal adamantly denies.
It’s safe to believe the Journal because Russia passed a law last year
that basically criminalizes what journalists do: ask questions about
things the government doesn’t want anybody to know about.

Stay ahead of the market
That law focuses on anybody spreading information about the Russian
military, which may apply to Gershkovich because he was reportedly
researching a story on the Wagner paramilitary group that’s part of
Russia’s invasion force in Ukraine. But that’s just a pretext for
Russian President Vladimir Putin to punish and silence one voice
highlighting the economic price Russians are starting to pay for Putin’s
disastrous invasion of Ukraine.

A picture taken on July 24, 2021 shows journalist Evan Gershkovich. - A
US reporter for The Wall Street Journal newspaper has been detained in
Russia for espionage, Russian news agencies reported Thursday, citing
the FSB security services.
A picture taken on July 24, 2021 shows journalist Evan Gershkovich. - A
US reporter for The Wall Street Journal newspaper has been detained in
Russia for espionage, Russian news agencies reported Thursday, citing
the FSB security services. "The FSB halted the illegal activities of US
citizen Evan Gershkovich... a correspondent of the Moscow bureau of the
American newspaper The Wall Street Journal, accredited with the Russian
foreign ministry," the FSB was quoted as saying. He is "suspected of
spying in the interests of the American government" and of collecting
information "on an enterprise of the Russian military-industrial
complex," agencies reported. (Photo by Dimitar DILKOFF / AFP) (Photo by
DIMITAR DILKOFF/AFP via Getty Images)
More
For several months after Russian forces invaded Ukraine last February,
the Russian economy seemed resilient. A spike in energy prices boosted
Russia’s oil and gas revenue, its largest source of funds. Deft
maneuvers by the Russian Central Bank helped the country withstand tough
sanctions imposed by the United States and other allies of Ukraine.
Russian forces floundered in Ukraine, but that was due to poor military
planning and execution, not sanctions.

Now, however, sanctions are finally beginning to strangle the Russian
economy in ways that could set it back for years. Laura Solanko of the
Bank of Finland recently described how Russia is undergoing “reverse
industrialization” in which the military-industrial complex driven by
war needs crowds out the consumer economy, as in Soviet times. “Russia
is stuck ineluctably on a path to lower potential growth and a bleak
economic future,” Solanko wrote on March 27.

[Drop Rick Newman a note, follow him on Twitter, or sign up for his
newsletter.]

On paper, Russia seems to be surviving. Official data show its economy
shrank by 2.2% in 2022, with the International Monetary Fund (IMF)
forecasting flat GDP growth in 2023. But Russia, never the most
trustworthy data purveyor, has stopped publishing a variety of economic
statistics, and some IMF critics have blasted the agency’s Russia
forecast as naïve and wrong. The wonky debate matters because it gets to
the question of whether sanctions are accomplishing anything or not.

Russian President Vladimir Putin takes part in a ceremony via video link
at the Kremlin in Moscow, Russia March 30, 2023. Sputnik/Gavriil
Grigorov/Pool via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY
A THIRD PARTY.
Russian President Vladimir Putin takes part in a ceremony via video link
at the Kremlin in Moscow, Russia March 30, 2023. Sputnik/Gavriil
Grigorov/Pool via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY
A THIRD PARTY.
In early March, Russian journalist Boris Grozovsky detailed a new
Russian economy in which “all resources go to war” and “household goods
are sacrificed.” Spending on consumption, he reported, fell by 49% in
2022, largely because there was nothing to buy. There’s been explosive
growth in sectors related to defense production, but cars, furniture,
and appliances have grown scarce as imports disappeared and the Russian
economy pivoted toward materiel needed for the war.

Murmurs of discontent are seeping out of Russia itself. Aluminum magnate
Oleg Deripaska said at a recent conference in Siberia that Russia will
run out of money by 2024. He complained about new taxes on Russian
businesses to help finance the war effort. Even Putin has acknowledged
that “restrictions imposed on the Russian economy may indeed have a
negative impact.”

Sanctions imposed after Russia invaded Ukraine in February 2022 aimed to
isolate its financial system and restrict trade while leaving Russia’s
energy exports more or less intact. Since Russia is one of the world’s
largest exporters of oil and natural gas, the goal was to hurt Russia
without causing a global energy shortage that would send prices soaring.
That largely worked, but the scheme allowed Russia to continue earning
huge amounts of energy revenue that helped finance the war.