In an internal report prepared for the Russian government and obtained by Bloomberg, analysts warn that the impact of the Ukraine war and Western sanctions will spread through the economy, leading to a longer, deeper recession than there is already and gradually hobbling sectors that now underpin the nation’s economy.

The report presents three scenarios.

In two, the economic contraction worsens in 2023, with the country’s GDP returning to 2021 levels, before Russia invaded Ukraine, no sooner than the end of this decade.

One scenario sees the economic damage leveling next year at 8.3 percent below 2021’s GDP. Another puts off the economy’s low into 2024, falling 11.9 percent below pre-invasion levels.

All three scenarios predict that more countries are likely to join in the sanctions, putting more pressure on the country’s economy. 

Western sanctions have “affected practically all forms of transport,” with embargoes on financial transactions and technology further undermining Russia’s productive and economic capacity.  

The metals industry is losing $5.7 billion a year in revenue to the sanctions, the report said.

As many as 200,000 technically trained workers may exit the country by 2025, the report says, double the number already known to have left.

Also, Europe’s effort to shun Russian oil and gas could slash Russia’s revenue enough to keep it from being able to afford to fully maintain its petroleum production infrastructure, the report pointed out. 

Europe bought about 55 percent of Russia’s exported oil products last year.

A complete loss of Europe as a gas market could cost Russia as much as the equivalent of $6.6 billion annually, an amount that cannot be offset by opening replacement markets, even in the medium term, according to the study.

Through 2024, the report foresees “reduced production volumes in a range of export-oriented sectors,” including chemicals, metals, natural gas, oil, and wood products. These industries may rebound later, but “these sectors will cease to be the drivers of the economy,” the report predicts.

“With diminished access to Western technologies, a wave of foreign corporate divestment, and demographic headwinds ahead, the country’s potential growth is set to shrink to 0.5 percent to 1 percent in the next decade,” Russian economist Alexander Isakov told Bloomberg. 

“Thereafter, it will shrink further still, down to just above zero by 2050. Russia will also be increasingly vulnerable to a decline in global commodity prices,” he added.

The overall damage will be done not only by the loss of export markets, but equally by the loss of imports now largely embargoed from the West, the study noted.

  • Virtually all poultry production and Holstein dairy cattle depend on imports.
  • Seeds for a range of crops, including potatoes, are imports, as is feed for farmed fish.
  • More than 90 percent of Russia’s airline passengers fly on foreign-made planes; the embargo on spare parts will gradually put more and more of the planes out of service.
  • Russia imports 70 percent of its machine tools.
  • Russia’s pharmaceutical industry depends on imported raw materials.
  • Sanctions ban exporting SIM cards to Russia, which will create a shortage by 2025.
  • Russia’s telecommunications industry is likely to fall five years behind global standards within three years.

“There are simply no alternative suppliers for some critical imports,” according to the study.

The internal report is “the result of months of work by officials and experts trying to assess the true impact of Russia’s economic isolation due to President Vladimir Putin’s invasion of Ukraine” and “paints a far more dire picture than officials usually do in their upbeat public pronouncements,” Bloomberg said. 

Bloomberg also said that “people familiar with the deliberations” confirmed the authenticity of the copy Bloomberg obtained.

The report was prepared for a private 30 August meeting of Russia’s top government officials, Bloomberg said. People familiar with the deliberations confirmed its authenticity.

When Bloomberg asked economy minister Maxim Reshetnikov about the report, he said it was an “analytical estimate that we used to calculate what would happen if we don’t do anything” to change the economy’s trajectory, Russian news service Tass reported. 

TREND FORECAST: Russia, having far advanced over the past three decades from its old Soviet model, is in a key position to become a Self-Sufficient Economy, aligned with our Top 2022 Trend. 

Rich in human and natural resources, Moscow will fight against the sanctions being imposed upon it. Indeed, prior to the Ukraine War Russia had bolstered itself over a long period of time in preparation for the assault by creating as much of a self-sufficient economy as possible.

And while there is doubt being expressed in the major media, politicians, and “experts” that Russia will be unable to fill its tech-void and the U.S. and NATO chip void, we forecast they will be able to sustain combat operations, high-tech advancements and solid economic growth since they have prepared for such sanctions and as we have been reporting, they are working to become self-sufficient.

Also, it will continue to use its wealth in grains, petroleum, and other strategic minerals to trade with a much-reduced number of nations, primarily China, India and African nations to secure what it can.

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