You can’t push us into the poorhouse, Putin tells the West

As its soldiers killed and tortured Ukrainians in 2022, the Kremlin made $227bn from energy exports. Russia’s economy is still standing.

Russian President Vladimir Putin has boasted about the resilience of his nation’s economy. Picture: AFP

A week after President Putin ordered tanks into Ukraine, a visibly shocked Russian financial analyst pulled out a bottle of mineral water on live television in Moscow and drank to the death of his country’s stock market.

“Rest in peace, dear comrade,” Alexander Butmanov said. His comments came as the rouble plunged to record lows, western companies started closing their operations in Moscow and supermarket shelves began to empty.

As Russian missiles fell on Kyiv, the Kremlin lost access to $300bn worth of international reserves under western sanctions.

A logo of Russia's energy giant Gazprom at a petrol station in Moscow. Picture: AFP

Annual inflation jumped to 18 per cent and older Russians feared a return to the grim deprivations of the post-Soviet years.

Yet more than a year later the Russian economy is still on its feet. Supermarkets are relatively well stocked. For ordinary Russians the cost of living has risen, but not excessively. Inflation has slowed to under 8 per cent and is likely to fall further. Wealthier Russians can still get western products imported from Asia.

Olga, who works in the arts in Moscow, said: “Prices have risen, but they went up every year anyway. At first I was shocked at how expensive western imports had become but now I’ve got used to that.”

Putin boasted on Tuesday that Russia had proved its economy could withstand the worst the West could throw at it. “What did our adversary count on?” he told workers in Buryatia, eastern Siberia. “That we would collapse in weeks or in a month?”

He said western countries had expected Russia’s financial system to shut down and factories to stop working, resulting in mass unemployment and huge protests.

“This did not happen,” Putin said. “The fundamental foundations of Russia’s stability are much stronger than anyone thought.”

A woman crosses a bridge over the Moskva River this week with the Kremlin in the background. Picture: AFP

The Russian economy was shored up by an oil and gas bonanza as prices rocketed and European countries scrambled to reduce their dependence on the Kremlin’s energy supplies. As its soldiers killed and tortured Ukrainian civilians last year, the Kremlin raked in $227bn from energy exports.

Bloomberg, the financial analyst, said $80bn of that windfall was stashed in overseas holdings of cash, property and investments.

The Kremlin has increased oil exports to China and India, albeit at steep discounts. Neither country has imposed sanctions on Moscow.

The Kremlin has dug into its national wealth fund, spending $38bn to cover a record budget deficit in January and help struggling state companies.

The war in Ukraine has allowed Putin to wean the economy off its dependence on the West. He has told the oligarchs they should grasp the war as an opportunity to boost their investments within Russia.

A Russian-flagged cargo ship Zhibek Zholy in the Black Sea. Picture: AFP

His optimism is not widely shared. Oleg Deripaska, an energy and metals tycoon who was once Russia’s richest man, said two weeks ago the economy could “run out” of money next year.

Putin’s obsession with the war means, however, that the economy has taken a back seat. Alexandra Prokopenko, an independent analyst and former adviser to the Bank of Russia, said as long as Russia had enough money to get by Putin would continue trying to achieve his military objectives in Ukraine.

“I don’t think Putin has any mid-term or long-term vision,” she said. “He knows that for [the] short term he has enough money. And so he’s playing short-term. But in terms of development, Russia will be left far behind.”

The Times