In 2022, record energy prices saved Russia's economy. However, in the near future, the consequences of sanctions will lead the aggressor country to an economic hole. After the coronavirus pandemic and the beginning of a full-scale war in Ukraine, the world economy is in a precarious state. It will find it difficult to cope with a new crisis, such as the political and military chaos in Russia.

Writes about it CNN.

According to Jeffrey Sonnenfeld, a professor at Yale University and an expert on Russia, Russian President Vladimir Putin is in real chaos in the Kremlin.

The publication writes that Russia has already fallen out of the 10 largest economies in the world, but it remains one of the largest suppliers of energy carriers to world markets, even taking into account Western sanctions.

According to journalists, analysts at Rystad Energy say that periods of geopolitical uncertainty in major oil-producing countries over the past 35 years have on average added 8% to the price of oil.

Any significant loss of Russian energy would force China and India to compete with Western countries for supplies from other producers. If political chaos restricts exports of other commodities such as grain or fertilizer, it could also disrupt supply and demand. And this can lead to higher prices for everyone.

Matt Smith, a leading U.S. oil analyst at Kpler, said Prigogine's military coup had introduced uncertainty that could affect the global economy.

"The kind of shocks and uncertainties we've seen in recent days could push prices up given potential supply disruptions — and fears of them. These factors were not considered until the weekend," he said.

Libya and Venezuela are instructive examples of how civil war and internal political divisions can negatively affect energy exports. According to the US Energy Information Agency, oil production in Libya fell from 1.7 million barrels per day to a record low of just 365,000 in 2020.

Russia is a much more important player. Producing just under 10 million barrels per day, it provides about 10% of global crude oil demand. And with total oil exports of almost 8 million barrels per day, Russia by a wide margin ranks second after Saudi Arabia in the alliance of leading energy producers OPEC+.

What is the situation with the economy of the Russian Federation

Since the end of last year, a hole of several trillion rubles has formed in the Russian budget, and revenues in January were not enough for half of the expenditures. And most importantly, Russia has lost its position as a key energy supplier to Europe, which, according to IEA estimates, will cost the aggressor $1 trillion by 2030.

As a result, negative trends are exacerbating, which Russia managed to compensate for at the expense of record exports last year. The trade balance has shrunk sharply, the ruble has fallen 35% in four months, and the budget deficit is turning into a big hole. To save the situation, Russia continues to spend oil money from the National Welfare Fund and increases borrowing on the domestic market.

Under such conditions, this year the Russian economy may shrink by 6% against 2.1% last year. Against the background of falling revenues from oil and gas from $350 billion to $170 billion, the budget deficit will increase to 6% of GDP.

According to Bloomberg Economics, the war in Ukraine will continue to devastate the Russian economy, and by 2026 it will lose $ 190 billion.

"During 2023, private sector growth may decrease by 0.5 percentage points. The reason is sending men from enterprises to war. An even stronger war will affect demographics: the working-age population in Russia could decrease by 6.5% over the next decade," the newspaper writes.

Read also:

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  • Germany almost completely stopped buying Russian oil after the embargo was imposed
  • The expert explained why Russia's economy will not collapse in the near future
  • Sanctions pressed: Russian oligarchs cannot spend billions earned - Bloomberg