Isolated Putin left at the mercy of Beijing as its disastrous war backfires


“Russia will become like Iran”

“McDonald’s has a different name, but it tastes exactly the same,” says an analyst still based in Russia. The golden arches may have been taken down, but they’ve been replaced with a new venture: “Vkusno-i tochka” which roughly translates to “Delicious – that’s it”, in Russian.

Many people have already fled, including Gabuev. He says friends who are still there say life is “more or less normal right now. Prices have gone up a bit. Many western brands are gone.

“But people can still go to stores in Istanbul for Zara and H&M. For the middle class, nothing has really changed.”

While Russia has stopped releasing all but the most selective statistics, Capital Economics’ Jackson says today’s economy is also in better shape than some might have predicted. “Russia has dipped into its savings,” he says.

“They got back into the domestic bond market and they were helped in that regard by the fact that the ruble got stronger, which means inflation really came down a lot.”

This allowed the central bank to cut interest rates this week to 7.5%.

“That means borrowing costs for the government are lower than they were a few months ago,” Jackson adds.

“At the same time, we have seen a spike in energy prices. Russia is in a pretty strong position. So even though it has defaulted on its foreign bonds, there is no reason to s ‘worry on the budgetary side at the moment.’

Capital Economics also points out that Russia has not often issued debt in international markets anyway. Its outstanding foreign currency obligations stood at $37 billion, which it said is comparable to that of Chile and the Philippines.

Looking ahead, Goldman Sachs notes that Russia is also issuing more and more Chinese yuan debt. Liquidity in the yuan market has recently surpassed that of the dollar market, while some companies, including aluminum giant Rusal and Polyus, Russia’s largest gold producer, are already issuing yuan-denominated debt securities. .

“This will likely be followed by the sovereign,” Goldman said in a note.

But Gabuev says pain is coming, and so are fundamental shifts in the Russian economy.

“Sanctions will take time. The real pain is a year from now when the EU shuns Russian energy and a price cap comes into effect. We are now in the eighth month.

“A shortage of parts due to the sanctions is also expected to hit the economy harder. Russia is currently manufacturing cars without basic safety features like airbags and anti-lock braking systems in order to keep production local.

“You have to be a Formula 1 driver just to go to the shops,” says a Russian analyst.

Gabuev says these problems will get worse.

“Russia is behind in advanced semiconductor manufacturing by 10 to 15 years, according to some reports, but I think that’s optimistic. The lag could be more than 30 years. So either they smuggle them in or they wait for China to catch up. technology. Either way, it will take years.

So what does this mean for consumers and the wider economy? “Russia will become like Iran,” says Gabuev.

“Think of what technology was like in the 1990s, when cars and electronics were made before the age of modern chips. We’re going to see more disparate solutions. Maybe we’ll see more walkmans,” he jokes.

For Hess, the endgame is near. “Russia is moving from an autocratic market economy to autarky with the trappings of a market economy, but it is not one at all because the state will continue to dominate,” he said.

“It’s going to look more like North Korea or Turkmenistan, even though Russia is bigger and has more raw materials. I think the real economic indicator is household disposable income. It’s taken a hit since the annexation of Crimea by Putin in 2014 and I don’t think it will ever recover as long as Putin is in charge.”

Going forward, the Russian president may find that he spends a lot more time waiting for others to come to his aid.


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