Russia has experienced economic growth in 2023, but BBC economics editor Faisal Islam warns that the Kremlin will face a systemic collapse in the long term. The Russian state has significantly increased its spending, particularly in military and security sectors, at the expense of support for other areas of the population. Despite facing oil sanctions, Russia has managed to sustain its economy by using a “shadow fleet” to transport oil to India and China.
While Western leaders have expressed skepticism about Russia’s economic situation, Russia’s petroleum taxes have exceeded pre-war levels, and the ongoing foreign exchange flow from oil, gas, and diamonds has helped alleviate pressure on the value of the ruble. However, looking ahead, the demand for oil and gas is expected to peak, and Russia’s competitors will increase production, posing a challenge to the Russian economy. Additionally, the production of tanks and munitions is seen as an unproductive aspect of the economy.
In conclusion, while Russia’s war economy has provided a temporary boost, it is not sustainable in the long term.