6 months into the war, how’s the Russian economy faring?

Wednesday marked six months since Russia’s war on Ukraine, and the Joe Biden administration has just announced that the U.S. will provide another $3 billion in military aid to Ukraine. That increases the value of U.S. military aid to Ukraine since January 2021 to more than $13.5 billion.

The invasion provoked the Western world to impose severe economic sanctions on Russia as punishment and to deter further aggression. How has the Russian economy fared since then?

“Marketplace” host Kai Ryssdal spoke with Kristy Ironside, an assistant professor of Russian history at McGill University in Montreal, about how Russia’s economic standing has changed since their last discussion. The following is an edited transcript of their conversation. 

Kai Ryssdal: So when we spoke six months ago today, actually, one of the things we talked about was the sanctions effort and trying to cut Russia basically out of the global economy. With the understanding that you’re a professor of history, not a professor of economics, do you think that’s happened?

Kristy Ironside: Well, yes and no. Yes in the sense that many different firms have pulled out of the Russian market at this point. I think the count is up to around 1,000. So McDonald’s pulled out, Starbucks, all these kinds of companies have left. So, in that sense, Russia is definitely very economically isolated. But in another very important sense, it’s not, in the sense that it is still selling oil and gas to the rest of the world, particularly to Europe. So it’s still connected in that very important way.

Ryssdal: And that’s manifesting, actually, in the ruble too, right? When we talked last time, the ruble had cratered — that is the only word to think of it. And now it’s not only stable, but back to where it was, like, in 2014 or something.

Ironside: Absolutely. This has been one of the really surprising things that has happened. And part of the reason it’s happening is because, right now, there is no demand for products in U.S. dollars and euros within Russia itself because it is so cut off from the world economy. And it’s also happening because the Russian government has implemented de facto capital controls. So it’s forcing Gazprom, its, you know, energy provider, to repatriate its profits in rubles. So it’s generating demand for the ruble, which is helping to keep the ruble up behind the scenes.

Ryssdal: Let me just take you sideways for a second, just because you mentioned Gazprom, and natural gas, obviously, is a huge story in Europe. Prices are up here as well in the States. Winter’s coming, as the saying goes, and natural gas is going to get more dear, and that’s only going to benefit the Russians, the Russian government. 

Ironside: They’re definitely counting on this. I think this is one of their strategies, is they’re trying to promote this disunity that’s in Europe around this issue. They’re counting on people not wanting to pay more to heat their homes when it gets colder in a couple of months’ time. And that puts domestic pressure on governments to ease those sanctions.

Ryssdal: Are you in contact with people in Russia, whether Moscow or elsewhere? 

Ironside: I am.

Ryssdal: What are they telling you? 

Ironside: I mean, to be honest, the people that I still have in Russia are quite guarded. But a lot of my friends and colleagues have left. I have a lot of people who now are living in Serbia, in Georgia and Armenia, you know, maybe — hopefully — not permanently. A lot of them of course want to go back, their home is there. But they’re very worried. They don’t know what to do in the short term. And these are people who don’t support the government or who, you know, are just extremely horrified by what’s going on. So it’s a very complicated situation at the moment for everybody involved.

Ryssdal: I went back and I listened to the interview that you and I did at the end of February. And the last question I asked you was what you thought it might take for the Russian population to — and, look, granting all the repression and hardball tactics that the [Vladimir] Putin government engages in — I asked you what you thought it would take for the Russian people to say, “That’s it. We don’t want this anymore.” Are you surprised that the Russian people have lasted six months?

Ironside: Yes, and no. I mean, I think part of it is that we’re still seeing them being sheltered from a lot of this. This isn’t to say that people don’t understand this is happening, but their information world is very different than ours. Let’s put it like that. And again, I always keep saying this, but I think it’s really worth remembering Russia is a very big place. It’s very diverse. And the kinds of people that I interact with — I have a very urban life when I go to Russia. I live in Moscow, my friends, my colleagues are there, my archives are there. But it’s a very different world than when you’re out in the provinces, when you’re in some of these smaller places where they’re less connected to, you know, global chains, like McDonald’s or things like this. So, if you’re a young [tech] professional in Moscow, this is disastrous to your living standards and less so to somebody living in Siberia. So we’re still watching this happen kind of in slow motion, and I’m not entirely sure where it’s all headed, if I’m being perfectly honest.

Ryssdal: Look, you’re the expert. So if you don’t know, I don’t know who’s gonna. Look, let me ask you one last thing, and then, and then I’ll get out of your hair. When I call you in six months and this invasion and war is now a year old, what are you going to be looking for between now and then? What are you looking at?

Ironside: I’ll be looking at what’s going on domestically in the economy, if prices continue to rise in Russia. Inflation is definitely affecting them. So the fact that the ruble is doing fine, it’s a very imperfect measure of living standards because of course, you can’t buy dollars in Russia right now. You can’t, you know, easily engage in trade. I’ll also be watching brain drain. This is another thing that’s going on right now — lots of young people are leaving. I read statistics this morning, and we’re talking about potentially millions of people who have left since this started. So those are things that I’ll be watching for. 

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