The Russian economy continues to ‘work under strain’ despite Western sanctions – WP

Rather than collapsing under Western sanctions, the Russian economy is “working intensively,” though it faces the risk of “overheating”.

This information reported according to “The Washington Post”.

The article notes a labor shortage in Russia and rising wages.

“In Siberia, there aren’t enough men to drive buses. Dairy workers on Russian farms are earning salaries comparable to IT workers, while hotels struggle to hire waiters, cleaners, and cooks,” the article states.

There is also a shortage of welders and even taxi drivers.

According to Rosstat, real wages in Russia rose by 12.9% year-on-year in the first six months of 2024, with incomes of the lowest-paid workers increasing the fastest—by 67%. The economy has been driven by massive military spending, with overall wages rising along with military income, though the private sector lags behind. Russia also continues to earn substantial revenue from oil exports.

Economists suggest that Russia could fund the conflict in Ukraine for several more years, supported by high oil revenues and the limited effectiveness of Western sanctions, particularly the G7’s oil price cap.

However, inflation is escalating in Russia, as economic resources are “almost exhausted,” warned Central Bank head Elvira Nabiullina in July. The Central Bank has been raising its key interest rate, which recently hit a record 21%, to curb inflation.

Next year’s planned military spending could further fuel inflation, and there is debate about whether Russia can significantly ramp up its military production. Experts, however, agree that Western sanctions have largely failed to hinder Russia’s production of military equipment. Russia has found ways to bypass sanctions to obtain critical imports, such as microchips.

Earlier, “Bloomberg” reported that Moscow is restoring imports despite Western payment sanctions. Other media have suggested that Russia’s militarized economy could enable it to continue fighting for another 5-6 years.