Economist Vitaly Shapran is convinced that Ukraine, with its clear and planned actions, will be able to bring the moment of destruction of the Russian economy as close as possible. However, it is impossible to not count on quick results.
Points of attention
- The main approaches to Russia's economic collapse are organising the oil industry crisis, eliminating leadership positions, and cutting its reserves.
- An essential strategy for the approaching collapse of the Russian economy is also its weaning from technical progress.
- Ukraine and its allies can use various domestic and foreign policy strategies to bring Russia's economic collapse closer.
- The current situation in the Russian economy shows its vulnerability.
What is known about the Russian economy's condition amid the unleashed war against Ukraine
Vitaly Shapran noted that the GDP growth rate of the aggressor country from January to May 2024 was 5%, with an annual forecast of 2.8%.
Inflation in June 2024 reached 8.6% in annual terms.
Both indicators indicate that Russia's economy is far from a disaster. I don’t have 100% confidence in these figures; however, we do not have estimates from other sources. It is evident that GDP growth is higher than forecast, and inflation is not the Turkish 71.6%.
Vitaly Shapran
Ukrainian economist
According to the expert, as of today, the Russian economy rests on three pillars:
extraction of energy raw materials (historical trend);
manufacturing industry (invigorated by government spending);
construction (state costs plus project and mortgage financing schemes).
Even though Ukraine is used to complaining about the "ineffectiveness" of Western sanctions, they still work and have a positive effect, but they are not as powerful as we would like.
Due to sanctions and a corrupt management system, the Russian economy is now in a much worse state than in 2019-2021. To start a crisis, it will be enough for a kind of "Aurora shot" — a shock that will force economic agents to change their behavior and cause panic. An example is the reaction of the population and business to Prigozhin's munity. "Aurora's shot" for the beginning of the crisis can be: a sudden drop in oil prices (a variant of the collapse of the USSR), the death of Putin or the beginning of an open war between his entourage, a major man-made catastrophe, etc., — explains Vitaly Shapran.
Ukraine's current task is to organise as soon as possible an "Aurora shot" for the Russian economy.
How to bring Russia's economy closer to collapse
According to the expert, there are several ways. For the best effect, none of them can be ignored.
Organisation of oil industry crisis.
What is important to understand is that the oil industry remains the provider of resources that support the surplus of finance and enable the multiplicative revival of the economy through the manufacturing and construction industries. The elimination of the leadership positions of the oil industry in the aggressor country should concern not only prices but also its ability to carry out significant volumes of exports.
A separate strike can be made against the shadow tanker fleet. Russians actively renounce it, but you can have no doubts about its existence.
Vitaly Shapran
Ukrainian economist
Cutting reserves
As the economist notes, the freezing of international Russian reserves and the funds of some Russian state-owned companies is an interesting experience for Russians, which equates them to Iran.
We should also not forget about the unofficial reserves of the aggressor country.
Thanks to them, the Kremlin not only uses stolen funds for investments in the economy, but also for circumventing sanctions.
I am very sorry, but neither we nor our allies have anything to brag about here. In my opinion, the "working out" of active measures for unofficial funds of the Russian Federation is now more important than measures to artificially curtail the oil industry of the Russian Federation, the expert emphasizes.
Weaning from technological progress
It is no secret that the aggressor country produces very little of its own products for final consumption.
The temporary rise of military industry, mechanical engineering and other complex industries does not guarantee them technical leadership. Especially since airplanes with imported parts fall, ships sink, and some part of the products they call Russian is 95% made from contraband parts.
Vitaly Shapran
Ukrainian economist
As the expert emphasises, Russia's separation from progress should only gain momentum, and it is better that it be precisely in the segment of equipment for production, as well as for industrial or commercial transport and communication.
Vitaly Shapran is convinced that Ukraine and its allies have a good chance of driving Russia's economy into an "dead man walking" mode quite quickly.
Especially taking into account the fact that Putin began to go somewhere in a very, very hurry.
The senseless visit of Orban in the Kyiv-Moscow-Beijing format, brutal terror strikes on Kyiv and other Ukrainian cities, aimed at intimidating Ukrainians, numerous complaints from Russian exporters about settlements with the People's Republic of China, Putin's unsuccessful visit to the People's Republic of China in May, etc. — too many of these factors show that the Kremlin needs a break, — notes the economist.
Ukraine and its partners must take advantage of the fact that the enemy has just begun to exhale.
