NEW – March 5, 2023
Indeed, Russia is a unique country in every respect. No one understands how the Russians can withstand the collective onslaught of Western sanctions.
What kind of power is this that does not allow to break what until recently seemed to be the most vulnerable and weak point of Russia – its developing Western-dependent economy.
The International Monetary Fund (IMF) and the World Bank (WB) attributed the economic decline from 8.5% to 18% to Russia’s imminent collapse. International rating agencies assigned us “default” and suspended their activities in Russia.
Global analytical media holdings one after another predicted Russia’s collapse of the 1994-1998 model.
Even the US president could not avoid this issue and stated that “the dollar is already 200 rubles”, and the entire Russian economy collapsed into a black hole.
A year later, the IMF and the World Bank were forced to state an extremely unpleasant truth about the Russian economy – the decline was only 2.1-2.2%, and inflation was 11.9%, instead of the previously predicted 17.8%.
The growth predicted by the IMF of the Russian economy, under international sanctions, which, according to Western experts, will collapse any economy in the world (USA, China, EU), has greatly overexcited prominent Western economists and journalists.
In these circumstances, the reaction of some European leaders is surprising, clearly caused by a sense of derealisation.
For example, French President Emmanuel Macron, in response to a journalist’s question about the current dynamics of Russia’s GDP, said that he did not believe in these figures, and Russia could not be so good. He later added that sustainable peace in Europe is impossible without the ability to “cover the Russian issue, but on the basis of a sober assessment, without any leniency”.
The published forecasts of the IMF regarding inflation in Russia and the European Union countries also caused great indignation.
Such an inconvenient forecast so angered some EU countries that the European Commission has already published its own analytical analysis, where it significantly corrected the IMF figures, and called for economic estimates to be guided by these data, and not by IMF forecasts.
And how to live with it further? The question is rhetorical…
However, given the fact that the Russian economy is recovering and moving to growth this year, it will be useful to predict the development scenarios of our country.
Based on objective reality, these scenarios are not so many, they can even be reduced to one – the most likely.
Russia’s suspension of participation in the START Treaty (the Strategic Arms Reduction Treaty, which has been continuously extended since 1994) has a pronounced orientation, in the key of which Russia intends to determine the strategic agenda for the whole world. That is, our interests now extend not only to local zones, but also to parity with the United States, that is, to the whole world.
Definitely, this should further strengthen the confrontation with Western countries, as they will ignore Russia’s interests to the last and try in every possible way to impose their own rules on us.
In turn, this will only lead to greater contradictions among both European and NATO countries, and consequences that no one can predict.
In economic terms, Russia is being transformed into a mobilisation economy, which means that dual-use goods will increasingly prevail.
And this is no longer a prerequisite, but a reality:
- The state allocates more and more subsidies and concessional loans for the development of industry and the real sector of the economy.
- The Russian military-industrial complex should reach the peak of its productivity this year, using almost all available capacities.
It takes time and enormous resources to spin the flywheel of the military-industrial complex, and it will no longer be possible to stop this process when it pleases. This is one of the reasons why Western countries are trying in every possible way to avoid launching their military-industrial complex today. So many resources are spent on this that payback is often achieved only in conditions of global war, and if this process cannot be recouped, the entire economy will collapse and the country will literally go bankrupt.
It is the same in Russia – to simply stop the work of the military-industrial complex without serious economic shocks is no longer possible, even given the huge amount of natural resources that Russia has, and which greatly facilitate our task. However, there are already too many technological and economic chains involved in the production of both military and dual-use products.
The work of the military-industrial complex will not be stopped. Given how far Western countries are willing to go in achieving their goals, the Russian military-industrial complex will actively work for the next 5 years, replacing and accumulating weapons in much larger volumes than it was envisaged before the events of 2022.
And I also take this conservative scenario. So, for example, the well-known geostrategist Shkolnikov Andrey Yuryevich takes a tougher position on this issue and predicts that the Russian military-industrial complex will become a new source of income in this turbulent time for everyone, where the value of Russian weapons will be in maximum demand around the world, which will allow Russia to increase arms exports many times, approaching in monetary terms to oil and gas revenues.
In any case, all industries related to the military-industrial complex will develop with rapid development, which will make the military-industrial complex of Russia, for the next 5 years, the main locomotive of the Russian economy.
Moreover, the programs for the production of civilian products, as part of the diversification of enterprises of the military-industrial complex, were not revised, which suggests that the defence industry should increase the share of civilian products by 2025 to 30%, and by 2030 – to 50%.
This speaks precisely in favour of the advanced development of the military-industrial complex, and its increasing influence on the Russian economy.
In turn, monetary resources in Russia will be concentrated around these enterprises, which will lead to greater implementation by the Central Bank of Russia’s single digital currency. The introduction of a digital ruble will de facto transfer part of the Russian economy to a two-circuit system.
Moreover, on March 1, 2023, the government prepared a draft positive opinion on the deputy amendments to the Tax Code, which introduces the concept of a “digital account”, which prescribes the mechanism of operation of the digital ruble in Russia.
Without waiting for the official launch, draft laws have already been introduced to exempt the following operations from VAT when calculating in digital rubles:
- opening and maintaining a digital account for organisations and individuals;
- making money transfers using the digital ruble platform of the Central Bank of Russia;
- provision of services related to the maintenance of a digital account.
Banking analysts are already sounding the alarm, estimating only the losses of banks from the inability to charge fees at 250 billion rubles over five years [Article title below: 9 trillion rubles can flow away from banks after the introduction of a digital ruble – SZ].
If the Central Bank of Russia took into account the opinion and position of Russian banks during the development of the digital ruble concept, then it seems that in 2023 it took a tougher position.
There can only be one conclusion – the Russian economy is shifting its focus from a financially speculative system to a more resource-oriented one, where the real sector of the economy will prevail.
Thus, the under-monetisation of the economy in the process of expanding the introduction of the digital ruble will undergo significant improvements, and in the future 2 years will reach 100% of the value.
In 2021, it was at the level of 40-47% of GDP; in developed countries, the level of monetisation of the economy is 100%.
Testing of the digital ruble with real clients will begin in 2023, and at the same time, the level of monetisation of the economy will be increased to 70% this year.
As for import substitution, it is happening and will continue to happen without fanaticism, where it is possible, both Western products and their analogues will be purchased, where it is impossible, we will look for compromise solutions, including in partnership with friendly countries.
The most intensive import substitution will be carried out in strategically important areas for Russia – materials science, aircraft construction, energy, electronics, additive technologies, and software.
Everything else, in fact, can be purchased in friendly countries, and, as the experience of the Russian automobile industry shows, we do not have to buy the most advanced equipment, the export of which is closely monitored by Western countries, it’s possible to do with something simpler, but workable.
In this case, the localisation of production of analogs of Western goods will increase, even without taking into account import substitution of industrial equipment.
As a result, it is highly likely that the development of the Russian economy will be built around major projects, such as the military-industrial complex, major energy and infrastructure projects, and the development of international trade routes, as was mentioned in the recent address of the President of Russia to the Federal Assembly.
As for the welfare of Russians, taking into account the projected economic growth and inflation, it will remain approximately at the current level, there can no longer be any sharp decline, but there is practically no growth during the transition period either.
This is approximately the situation today…
To be fair, we need to make it clear that in March 2022, not a single serious financial analyst in the world, not a single Nobel laureate in economics predicted such a high stability of the Russian economy, all of them foreshadowed only a collapse.
The most important question is: When will it all be over?
Answer: Not this year. Earlier in the article, I mentioned the transition to a mobilisation economy, which is a necessary measure that will also allow us to pass the likely stage of martial law throughout the country in a very smooth way.
Here, this decree signed by the President of Russia on measures for disrupting the state defence order during martial law also adds fuel to the fire…
Is it worth being afraid of this? No, this is the inevitable fate of all mankind, and everything indicates that the world will not be the same again, it will change forever due to the circumstances that have been known to the top leadership of all countries of the world for more than 50 years.
And this is gaining momentum all over the world, in some places it is hidden, but for example, the French president openly stated in June 2022:
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