Sanctions are working – whatever Putin says

Don’t believe Vladimir Putin’s hype. The Russian economy is not OK. With western sanctions jeopardising up to 40 per cent of the country’s GDP, Putin’s assurances of an economic pivot to the East are a sham. And his weaponising of gas supplies to Europe is the financial equivalent of strapping on a suicide vest.

That, roughly, is the message of a major new study published last week by the Yale School of Management about the impact of sanctions on Russia. Yale, working with a team of international economists, has looked past a wall of Russian obfuscation and used real-world data from retailers, energy traders and investors to reveal a picture very different from the rosy image presented by Putin at the St Petersburg Economic Forum in June. ‘The economic blitzkrieg against Russia never had any chances of success,’ he told an audience that included a delegation from the Taliban. ‘Like our ancestors, we will solve any problem; the entire thousand-year history of our country speaks of this… Gloomy predictions about the Russian economy’s future haven’t come true.’

The Yale study provides the first comprehensive set of data that proves Putin absolutely wrong. Let’s start with the outright lies. Many western commentators have latched on to the apparent stability of the rouble and the relative health of the stock market – the benchmark MOEX Russia Stock Index is down a mere 50 per cent – as evidence that Russia’s economy is riding out sanctions relatively unscathed.

In truth, both of those indicators have been deliberately manipulated. After the outbreak of war, any company in Russia receiving income in foreign currency has been forced to convert 80 per cent of it to roubles, skewing the market in the rouble’s favour. Only a fraction of pre-war volumes of roubles are actually traded, and then most are notional dollars, not real ones.