Putin ‘Destroyed’ Russian Economy Save For Oil, White House Says

Topline

Russian President Vladimir Putin has sunk his country’s economy outside of the still lucrative oil exports, a Biden Administration official said Monday, as Russia largely retreats from the global economy amid its invasion of Ukraine.

Key Facts

“All he has is oil, so that’s what funds this war,” Amos Hochstein, an advisor to President Joe Biden, told CNBC.

“Putin has destroyed the rest of the economy,” Hochstein added.

Russia’s gross domestic product will shrink 3.4% this year, according to International Monetary Fund projections, far worse than the still positive but stagnating expected 2022 GDP growth of other global powers like the United States (1.6%), China (3.2%), United Kingdom (3.6%) and Japan (1.7%).

Much of Russia’s decline comes from the impact of sanctions from the U.S., European Union and their allies, halting nearly all exports to the opposing countries, but Russia’s oil business remains booming for the petrol-rich land: Russia’s energy export revenues will grow 38% this year to nearly $340 billion, according to Kremlin documents viewed by Reuters in August, thanks to surging prices for crude oil and eager buyers in China and India.

Key Background

After Russia invaded Ukraine on February 24, energy prices skyrocketed as uncertainty grew about what the impending Western response to the world’s second-largest oil exporter, and by far Europe’s largest oil and natural gas provider, would mean for global markets. The price of international benchmark Brent crude was $92.51 per barrel Monday, up 12% from a year ago, while U.S. gas prices are up 11% in the period. Soaring energy prices sent already surging inflation to levels not seen in the U.S. and Europe in more than 40 years, bringing the global economy to the brink of a recession.

Big Number

20%. That’s how much Russia’s exports have shrunk since launching the invasion, according to the New York Times.

Tangent

The war has also caused global food prices to increase as Russia blocks ships carrying grain from leaving ports in Ukraine, one of the world’s largest agricultural producers. Over the weekend, Russia backed out of a long-awaited deal for the exports to continue, sending wheat prices up over 5% on Monday.

Further Reading

​​How Russia Pays for War (New York Times)

Global Food Crisis Back On? Russia Bails From Grain Deal, Blaming Ukraine Drone Attack (Forbes)