- The bulk of the military response to the Russian Invasion of Ukraine came in the form of arms, equipment and training for Ukrainian troops. This was to help them better resist the Russian invasion and largely prevent the direct involvement of armed forces in open combat with Russia to avoid escalating the conflict.
- The economic sanctions had to hit Russia’s economy hard to deter further aggression but preserve Russian oil and gas exports essential for global energy consumption. The Allies leveraged their economic strength of high-tech manufactured goods and international finance to cut Russia off from critical imports and sources of credit/liquidity.
- The strategy worked: Russian businesses and markets were roiled by the initial round of financial sanctions and Russian industrial output suffered. This year the Russian economy entered a significant recession with GDP dropping 3.7%.
- The squeeze on Russia’s industrial base is easing. Cut off from trade with high-income democracies, Russia has been making new friends and new trading partners which has resulted in an increase in total Russian imports.
- The rising Russia-China Trade Relationship was always the obvious first choice for Russia to turn to when the Allies began implementing sanctions. China can supply Russia with cars, phones, computers and machinery and Russia can supply China with oil and natural gas.
- Turkey is another source of Russian imports. Exports to Russia are up 120% in the last year, imports from Russia remain elevated and there is a surge in nonmonetary gold imports.
- To achieve a just peace, further sanctions may be necessary. This could include pressure on Turkey, a NATO member, and China, already a frequent target of sanctions, to limit their trade with Russia.
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Published February 18, 2023
Visit Apricitas Economics to read Joseph Politano’s original post Russia’s New Friends
