From quantity to quality: the Central Bank warned of the cumulative effect of sanctions

This is both a simplification of technologies and a failure in exports.

Yekaterina Maksimova

According to the regulator, the short-term (shock) effect disrupts well-established business processes, supply chains and payments, which accordingly leads to a decrease in production levels. Then the business somehow adapts. “The achieved stabilization of the level of economic activity in Russia indicates that such processes are actively underway”, the Central Bank clarifies, but warns that sanctions against Russia “also have a long-term cumulative effect” that can reduce the potential of the country's economy.

The authors of the report list the main points: lack of access to high-tech products, investment and, of course, export restrictions.

“Therefore, the role of reverse engineering and parallel imports of investment goods cannot be overestimated. In fact, these are also adaptive, stabilization mechanisms, only requiring more time. The potential for growth and development achieved as a result of the work of these mechanisms is unlikely to be significant in the absence of real prospects for a large-scale entry into the world markets of products manufactured under technological restrictions”, - predicts the Central Bank of the Russian Federation.

According to the regulator, in November the Russian economy as a whole returned "to the stabilization phase." At the same time, this was partially influenced by the increase in government orders, and not by business processes.

Among the new economic shocks that could significantly reduce the level of economic activity in the coming months, the Central Bank considers the embargo on sea exports of Russian oil, which came into force on December 5. In February, Europe will also stop buying Russian oil products.

At the end of 2022, Russia increased its oil and gas revenues due to the rush demand for energy resources and their shortage on the world market. At the end of the year, the excess of income may reach 40%. In nine months, a 40 percent increase has already been recorded: revenues from the export of crude oil and petroleum products alone amounted to 46.75 billion euros.

In 2023, Aleksey Gromov, the chief director for the energy direction of the Institute of Energy and Finance, explained in an interview with NI , the miracle will not happen again.

As for the embargo on petroleum products, in 2021, revenues from the export of crude oil amounted to $99 billion, and the export of petroleum products exceeded $70 billion. And Russia cannot quickly find new markets outside the EU. The annual export volume is 144-145 million tons of oil products, of which more than 100 million tons were sent to the EU countries, Great Britain and the USA. According to the results of the current year, the export of pipeline gas to Europe has decreased by more than five times, and after the explosion of the northern flows, this sales market for Russian exporters is irretrievably lost.