Approaching recession in Russia: how long will the aggressor be able to patch up his “trishkin captan”?

Until now, the Kremlin has tried to maintain a good face while playing a bad game, at least in front of its electorate, in every way possible to demonstrate economic pseudo-stability, allegedly in defiance of Western sanctions. However, everything secret becomes clear and, according to experts, very soon the “trichkin captain” of the economy of the aggressor country will reveal its true essence. And not only in front of a competent public, but also in front of ordinary Russians who blindly trust their Führer and his clique.

Separation from civilized partners will make the Russian “trichkin captan” burst at the seams in various places. With the withdrawal of the last European banks from Russia, the country will soon face serious problems in settlements with EU countries. In particular, Raiffeisenbank, one of the last European financial institutions through which the aggressor made payments in the EU, is closing its branches in Russia.

Here is just a small list of “trifles” due to which the “cob on clay feet” will soon lose its stability. Due to the lack of spare parts for German turbines, Russia may face an energy crisis in the near future, Moscow switches to barter settlements with China, Kyrgyzstan begins to block payments with Russia. And all this against the background of increasing inflation due to overheating of the economy.

The devil is in the details

This phrase can be understood literally when it comes to Russian energy generation. Approximately 9% of the capacities are built on Western-made turbines, which require maintenance and replacement of parts over time. Due to sanctions and isolation, Russia does not have the opportunity to fully service these facilities, which may lead to their failure by 2030. This would create a capacity deficit of 1.6 GW, which could rise to 4.2 GW by 2042. Russia plans to build a new 1 GW power plant and run new lines from the Kursk and Voronezh nuclear power plants, but the implementation of these plans against the background of current events raises doubts.

Why is the economic “Potemkin village” of Russians built in 2022 rapidly falling apart? 

Until the summer of 2022, the Russian budget was actively replenished with currency from the sale of oil and gas. Although, of course, such activity of the West contradicted the need to impose an economic blockade on the aggressor country. At that time, the US and EU sanctions were more related to export operations. In the first months of the war, despite the exit of many European companies from the Russian market, the aggressor country made good money from oil exports, thus strengthening its financial cushion. At that time, the energy-dependent West did not take radical measures against Russia against the background of increasing prices for Russian energy resources.

Some European politicians – the same Germany – made a “green transition”. By increasing the consumption of gas and coal, it weakened its nuclear energy. The drama of the situation is that the largest economy in Europe ignored the warnings of Ukraine, Poland and the Baltic countries about the incorrectness of such a strategy. It is important to note that gas pumping from Russia to Germany fell by 40% as early as June 2022.  

Then, in the same 2022, sabotage occurred on the Nord Stream pipeline, which made their work impossible.  “PP” was an important route for the supply of Russian gas to Europe, but after the start of the invasion of Ukraine, supplies began to decrease, and the restoration of supplies is not expected in the near future.

Russia, which two years ago kept Europe on the gas “needle”, raised the prices of blue fuel to unimaginable levels. Even before the diversions on the Nord Stream, Russia began blackmailing Germany for premeditated reasons by reducing gas pumping in the pipeline. And a year ago, Russia cut off gas to Germany. The reason was the limitations at the compressor station, caused by completely justified technical delays in the work of the Siemens company, which did not return the gas pumping units for repair on time. This happened on the eve of sabotage on the gas pipeline. 

Fortunately, the situation has changed significantly since then, and Europe has begun to look for alternatives to Russian gas.

Parallel imports and a shadow fleet to patch holes in Russia’s “trish captan” 

Finally, in the summer of 202, when the Kremlin elites realized that they had lost control over military operations in Ukraine, they began to actively invest in their military-industrial complex and the mobilization of contractors. A black hole has formed in the state budget. the situation worsened with the drop in revenues from oil exports. 

In 2023, the Kremlin made a bet on so-called parallel imports, trading with the outside world through intermediary countries – Tajikistan, Kazakhstan, Armenia, Belarus. It was in Armenia that the structure and volume of foreign trade changed a lot during the year, which could not go unnoticed by Western observers.

Meanwhile, Moscow was forming its shadow fleet to transport oil, but its activity was noticed by the Americans. It seems that India was involved in this scheme, but after serious prompting from the US, the latter significantly minimized oil imports.

All this time, the Kremlin tried to build an economic “Potemkin village” using the reserves created in the National Bank of Ukraine, as well as income from the reorientation of oil and gas. Thus, preferential mortgages were issued in the field of construction, the military industry was also actively subsidized from the state budget. Also, state budget funds were used to buy bonds of industrial complex enterprises. The increase in the production of armored vehicles and weapons greatly contributed to the growth of GDP, since this indicator takes into account the production in general, and not only consumer goods. 

Thanks to this, Russia was able to balance the economic consequences of Western sanctions, slightly improving its economic indicators. But, wanting to show the face of the product and not wanting to demonstrate the economic “kitchen”, the Kremlin was able to convince public opinion that the Russian economy is on the rise, the West is rotting, Western sanctions against Russia are not in effect and recession is not to be feared. 

He laughs well who laughs last

But the Central Bank probably understands the real state of affairs. Mobilization, relocation of qualified personnel, increase in production volumes of the industrial complex formally reduced the unemployment rate in Russia. And at first glance, it’s good. But for a Führer with Napoleonic plans for import substitution of water-soluble toilet paper sleeves and replacement of nameplates on Chinese cars, this is not enough. 

The military industry essentially sucks out all the human potential of enterprises that suffer from sanctions. Yes, the Russian auto industry cannot come to its senses after the withdrawal of Western car concerns from the market. So far, their main occupation in the key of import substitution is the replacement of nameplates on imported Chinese cars. 

The situation with consumer products is so critical that the authorities have already considered restricting imports from China. The Celestial Empire is well aware of its superiority over its vulnerable eastern outcast neighbor. And it is possible that the clever Chinese will take advantage of their advantage and buy Russian oil at a low price, while selling their products, which Russia cannot do without – the same smart phones – at triple the price. 

In addition, China is forced to reckon with Europe and the USA and minimize banking transactions with Russia.  This has already created a problem in the calculations with Russia for imports.  Some payments do not go through for months, accordingly, deliveries for incomplete transactions will not be made. 

Another significant expense item of the Russian state budget is payments to the mobilized and the families of the dead. An economic trap is created – on the one hand, there is more money in circulation, which increases consumer demand, on the other hand, the shortage of goods makes it impossible to satisfy this demand and increases inflationary expectations of the population.

Another twisting of the nuts for the Russian elite

According to the laws of the genre, precisely when the Moscow economy is blocked, there are problems with payments from the PRC, store shelves are half-empty due to high demand, the next strengthening of Western sanctions is very timely.

The head of the Central Bank, Nabiullina, has long insisted on the need to raise the discount rate. But this measure will not save the economy while preferential mortgage lending programs are in effect. The Central Bank of the Russian Federation itself is in a state of uncertainty, and the Moscow elite is in shock – after the disconnection of the Moscow Stock Exchange from Western stock exchanges. Finally, after what Russian refineries and oil depots have been turned into by the Armed Forces, it is possible that Russia will have to impose an embargo on fuel exports.

The IMF has already worsened the forecast of Russia’s GDP growth in 2025 to 1.5%. In the current year, this indicator was 3.2%. Although, taking into account the tightening of import restrictions, currency shortages and an increase in the discount rate, this indicator can be reduced. As expected, Moscow’s economic Potemkin village is crumbling like a house of cards. 

And instead of a powerful economy integrated into the civilized world, which Peaceful Russia could be, the aggressor country is increasingly falling to the level of Iran. It is important to continue to jointly fight for the Kremlin’s legitimacy.  He started the war – and he is responsible for the consequences of his aggression. 

Tatyana Morarash