So is Russia on the brink of Colette are Sanctions working now he has been almost Eight months since the start of Ukraine War and the West imposing brutal Sanctions but it's not clear if Russia's Economy has been crushed because we are Getting conflicting reports now Western Media is of course saying that Russia's On the brink of collapse telling the World that sacrifices made when it comes To inflation and how those Supply shocks Are worded and Russia themselves are Hiding a lot of their economic data and This is making it into one big guessing Game for example Russia Central Bank is Only publishing the total figures for Their reserves but there isn't any Detailed breakdown also their foreign Trade data isn't public so it's Impossible to know the exact countries They are still trading with and how much Trade is flowing into and out of Russia Now I want to take an objective view Here and go through the current state of The Russian economy the challenges they Are facing and if the sanctions are Truly working or not and let's quickly Recap on the sanctions that the West Slap on Russia and we will focus on a Big tree now the first is sanctioning Away Russia's vast amount of Forex Reserves and back in March Russia had Over 600 billion dollars worth of Reserves but half of it has been frozen
Now the end goal was very simple deny Russia their cash so that they can't Import stuff and they can't defend the Ruble basically is to financially stop Them into submission now the second is Banning Russia from the Swift system and The entire Financial Matrix as a whole Now this essentially Cuts away Putin From the Western markets and they came To a point that Russia actually Defaulted on their US dollar debt Payments even though they had a cash to Pay the American Banks weren't allowed To process payments from Russia and the Third and perhaps the most dangerous one Is sanctioning Russian energy and this Sanction is evolving as we speak and the West is on the verge of escalating it Even further by imposing an oil price Cap and the purpose is simple Russia's mean exports and cut away their Last remaining sources of revenue but Here's the thing Russia is definitely Suffering and the people aren't having a Great time either but the economy hasn't Collapsed yet and it likely won't unless A few things happen in succession now Remember when Biden said he would reduce The ruble to Rubble well apparently that Didn't work the ruble crashed in the Beginning but has in fact rebounded to a Seven year high making it the best Performing currency in 2022 now the General idea of why the West Water the
Weaker Ruble is very simple it's the Same thing that's happening across the World with all the currency crisis Playing out a weaker ruble against the Dollar will mean Russian Imports will Become more expensive and drive local Inflation higher and this will help to Destabilize the economy and cause Hardship and anger in the local people But so far this hasn't happened yet and The ruble is stable for now but does This mean that the economy is still Strong now inflation is still crazy high In Russia we can see it Spike to over 17 Percent in April and then taper off Slightly to just under 14 in September Yes the ruble is strong but when you are Sanctioned to hell all your Imports Automatically become more expensive and The supply of goods and services drop Now even Russia's Central Bank is Forecasting inflation to stay high at Over 12 percent by year and as they keep Their interest rates at 7.5 percent now Russia's interest rates are notoriously Higher than the West because the ruble Isn't a reserve currency and Russia's Economy is much smaller but at 7.5 Percent we are at pre-war levels and What is concerning is Russia's Industrial production levels which are Falling we can see since April this year They have been on a losing streak with Their industrial output decreasing by an
Average of 1.5 percent a month but if we Compare this to Germany's own industrial Production we can see it is not exactly Catastrophic Germany is also suffering From horrible industrial production and It's more more painful for them because They are manufacturing Powerhouse while Russia is a commodity Giant and if you Compare June 2022 levels with those a Year ago we can see the main destruction Of their industry comes from motor Vehicle production for example but they Are core sectors of oil chemicals and Metal Products are still holding up so Russia's economy is suffering but I mean Exports is still robust and not about to Collapse yet now the lifeblood of Russia's economy is oil and gas exports It has always been about the Commodities And energy exports are Russia's Lifelines is the only way they can earn Foreign currency to buy other Imports And it is estimated that Russia will see A 38 rise in energy export earnings this Year translating to over 330 billion Dollars now it's really no surprise Because of the sanctions and the supply Crisis oil and gas prices are Skyrocketing and Russia is benefiting so Even if they have to sell energy to China and India at a discount the higher Price in general helps to boost their Revenues Russia is raking in a money but The big question is will the good times
Last now this is Russia's biggest worry Because the sanctions are starting to Bite into their margins firstly it's Very hard to estimate Russia's cause of Production but there are reports that it Is around 40 dollars a barrel so as long As the price of crude doesn't go below That threshold Russia is still in Business but they're starting to lose Ground on your energy exports we can see A sudden drop in Russian energy revenues From May onwards when it was almost a Billion dollars or Euros a day now it is Hovering at only 750 million a day and We can see the big crash comes from a Drop in pipeline gas exports the dark Blue bar and it should be very obvious By now why this is happening Europe is Slowly winning itself away from Russian Gas Putin shut up the gas caps early in September and now the north stream Pipelines have been blown up so Russia's Gas revenues are crashing and if we take A look at again gas prices in Europe it Is close to pre-war levels it spiked Hard from June to August reaching over 300 Euros per megawatt hour but now he Has crashed down to 120 and this is not Good news for Russian revenues guys Right now we are seeing the weather in October stay relatively warm and Europe's gas storage is almost full so Russian Revenue should continue to drop Unless a blizzard hits the EU during
Winter now whether the Russian economy Collapses or not all depends on their Energy sales whether the prices can stay High enough and if they can continue to Find buyers for their oil and gas and Right now things seem rather stable yes The West has blocked Russian energy but We have Asia particularly China still Buying from Russia to put things crudely Russia's immediate fate depends on China And at this moment in time they are Discount gas station for Beijing now I Believe that China will not abandon Russia when it comes to energy sales it Goes beyond just money it's about Bending together just in case Western Sanctions hit China in full force the Sino-russian relations will still be Strong and in fact China has purchased Over 50 billion dollars worth of Russian Oil and gas and this extends to cold and Refined copper purchases as well but There's also the reality of the upcoming Oil price kept now Putin has mentioned Time and time again that Russia won't Sell energy to countries that try to Impose the price kept but the price caps Open up a real serious can of worms they Give Russian bias including China and India and additional bargaining chip Sure they will pay more than the price Caps but it will be likely lower than Russia's original asking price and this Isn't good for Russian revenues so let's
Say the price cap for oil is at 60 Dollars and China is buying oil from Russia at say 80 which is quite a good Discount already China can now get put In to lower his price to maybe 75 or 70 Dollars and he will likely comply Because it's options to sell gas and oil Are getting very limited and it's no Surprise that China's Russia's biggest Trading partner providing them with Valuable Imports so the balance of power In this relationship is heavily skewed Towards China and things are already Moving very fast with the US already Setting a timeline for the price caps to Hit Russia from the 5th of December so We have to watch the oil price caps very Carefully because if they are Implemented this could crush Russian oil Revenues by another 10 or even 20 Percent the big problem for Russia comes When their oil revenues deep below the Amount of money they are spending in the Ukraine war now Wars expensive and Russia is burning a lot of cash to keep It going now it's very hard to put a Definite number on how much Russia is Spending but there are many estimates That put a figure at around 900 million To a billion US dollars a day now Russian energy revenues are already Below that figure and if this deficit Keeps growing Russia might need to end The war or face a huge deficit pending
Bill that could mean that inflation held Down the road if they start printing Money so if oil prices really do Collapse far enough it could end the war Early but as a whole Russia's economy Isn't doing well we have the IMF Projecting Russia's GDP to shrink by 3.4 Percent in 2022 while the World Bank Believes Russia's economy will contract By 4.5 percent this year so the Estimates are really very bearish and we Have to understand why now ever since Russia went towards Ukraine companies Are pulling out we have over 1 000 Brands either leaving or scaling back Their operations in the country now While Russia has tons of Commodities and They can eventually replace many of the Foreign Brands this will still take time So there's a supply crunch in Russia for Consumer goods and this is why we are Seeing higher than normal inflation in Russia and when I mean normal I'm Talking about over 10 inflation remember The UK is already above 10 percent but The big challenge comes to industries That Russia can't replicate and we are Talking about technology especially Semiconductor chips so most of the Microchips today are manufactured by the US and her allies and this includes Taiwan South Korea and Japan yes China's Share is growing slowly but this is Going to grind to a snail's pace for
Quite a while the U.S has slapped China With technology sanctions cutting away AI hardware and cheap making tools to Them so this will China's cheap Industry in the short term taking away Any support to Russia so this means Russia's military could be hampered as They burn through their microchip Stockpiles so when it comes to economic Warfare the West is definitely impacting Russia but Russia isn't about to Collapse back into the Dark Ages just Yet they have enormous stockpiles of Commodities and some of the lowest Energy prices around so they aren't Really impacted by energy inflation but Everything else from food to electronics Are flying up in price now the damage Done to Russia is extensive but the Sanctions have also backfired on West as Well because Russian energy is offline We are seeing Europe head into recession And Global Energy prices Staying High we Have Eurozone inflation climbing to 10.7 Percent which is a new record guys and We have countries that were dependent on Russian energy suffering the most Germany is about to enter recession in 2023 and this inflation rate today is 11.6 percent now even by European Standards that is insane plus now we Have the FED coming into Titan causing a Global currency crisis to happen so Russia is hurting but the pain is shed
Across the world thanks to the sanctions Everyone is paying for the consequences Of both Putin's War and the sanctions From the west but I want to talk quickly About the future 10 to 20 years down the Road what's going to happen now the Problem with the sanctions is that it Crosses many boundaries that we all Taught weren't possible it revealed the Hand of the West now the dollar has been Weaponized in so many ways that Countries especially in the is like China are now incentivized to the Dollarize because there's always a Threat that your US dollars or even Treasuries could get Frozen plus a Global oil price kept from the West is Showing that countries could get Together to boycott your products at the Expense of their own economy they will Cut off their nose to spite the face and Just recently we have reports that Mentioned how Saudi Arabia is Keen to Join bricks it's all about Self-preservation at this point and That's why they are more and more Bilateral trade agreements happening That's only going to grow into the Future and those are bypassing the Dollar completely yes the dollar is the Top dog right now but if you rely too Much on it your funds could get frozen Or you had mercy of the Federal Reserve Right and if you transact too much in a
Green bag and the dollar shortage Happens you are screwed and the big Problem is that the sanctions on Russia Won't be lifted anytime soon even if the War ends tomorrow I don't believe the Sanctions will go away just yet and this Will make Russia uninvestable in the Short to medium term the potential for Growth just isn't there and there's only So much they can trade with China but at The same time because Russian Commodities are cut off the whirling General maybe except for China and Asia We have to deal with higher energy and Commodity prices so we need to Understand that Russia's economy isn't On the brink of collapse yet but neither Will it see any meaningful growth as Well it could be trapped in a Stagflation hell for years to come so Let me know what you think is the Russian economy going to crash tomorrow Or I'll be wrong and it's actually doing Much better let me know in the comments Below stay safe be sure to smash the Like button subscribe as we navigate Through these crazy times
