Russian economic prospects ‘foggy’ as sanctions cut deep
The resilience of Russia's economy has over the past year surprised many observers as Moscow adjusts to unprecedented Western sanctions over its assault on Ukraine.
But in a rare public admission, President Vladimir Putin late last month warned of possible economic troubles ahead and urged the government to act quickly.
"The sanctions imposed against the Russian economy in the medium term could really have a negative impact," Putin said at a televised meeting.
It was a major change of tone after Putin earlier said the worst was over, praising the benefits of "economic sovereignty" and insisting that the West's sanctions strategy has backfired.
What exactly is Putin's message?
"Mr. Putin's observation is quite simply realistic," said Arnaud Dubien, director of the Franco-Russian Observatory think tank in Moscow.
Dubien, a veteran Russia expert, said Putin is seeking to further mobilise companies and government officials as Russia is cutting ties with the West.
"The situation is better than expected but do not relax, continue to find alternatives," he said, describing the Kremlin chief's logic.
Alexandra Prokopenko, a former Russian central bank official, suggested that Putin's message primarily targeted companies that have been hit hard by sanctions.
"It's a message to businesses," said Prokopenko, who worked at the central bank between 2017 and 2022 and quit after the start of Moscow's assault on Ukraine.
"You're only safe in Russia under my charge, there's no way back," she said, referring to his possible thinking.
More than a year into Moscow's offensive in Ukraine, the Russian economy finds itself ever more dependent on energy exports to Asia and slipping further behind in many high-value sectors. An exodus of hundreds of thousands of Russians and the Kremlin's mobilisation drive have led to labour force shortages.
Dubien pointed to particular problems in the car industry, which thrived when leading foreign carmakers set up shop in Russia in the early 2000s.
"The sectors most affected by the sanctions such as automotive production is those that were most open to investment and international cooperation," he said.
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