Russian economy to be saved by ‘gas-guzzling Europe’ as sanctions fail | world | news

Despite severe economic sanctions imposed by the West after the invasion of Ukraine, the Russian economy has so far managed to escape economic collapse. Currency expert Patrick Reid told that no matter how severely sanctioned the dictatorship is, “the bottom line is gas”, stressing Germany’s special role in keeping Russia’s economy afloat.

He said: “I think they’ve held up remarkably well. I had my doubts that the Central Bank of Russia (CBR) would support them, but they did so successfully – without releasing any real coffers numbers.”

“But higher oil prices and gas-guzzling countries in Europe will always lag behind the macro picture in Russia.”

Last year, Russia delivered 40 percent of its gas to Europe, with Germany exporting the most. The EU says it will cut gas imports from Russia by two-thirds within a year but has missed a full ban.

Member States have agreed to reduce gas consumption by 15 percent over the next seven months.

In March Andriy Kobolyev, former head of the Energy Center of Ukraine, accused Germany of “just waiting for Ukraine to go under”. The country had also increased the Russian share of its energy after annexing Crimea and signed a contract to build the Nord Stream 2 pipeline.

In 2021, Russia exported natural gas stocks which, based on prices at the time, brought in an estimated £47 billion. The Russian state-owned company Gazprom, which has a monopoly on the Russian export market, accounts for at least 5 percent of Russia’s GDP.

The ruble plummeted to a record low against the US dollar earlier this year amid the invasion as the West froze about half of Russia’s £500 billion in foreign exchange reserves – but has since been at its strongest against the US dollar since returned in 2018. Other economic indicators are also suggesting the Russian economy is recovering, with inflation, which peaked at nearly 18 percent in April, slowing, according to the CBR.

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“And on the other hand you have, god, they have been so resilient to weathering a brutal collapse and surviving up until now. They still have the German gas and they still have the oil.

“Russia is equal to or could overtake Iran on sanctions, which is of huge importance. But the bottom line is gas.”

Mr Reid stressed that in order for the war to really take a toll on Russia’s economy, the West “needs to digest some cold, hard truths”.

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