Spoiler: Cyprus has been a haven for Russian money for many years. Putin’s oligarchs have been pouring money into Cypriote banks and properties. And they used to be welcome. Russians invested in Cyprus mainly to launder their dirty money. They could also get a golden VISA, one for permanent residency and one for citizenship.
That door is closed now. Russia’s borders are still open. Russians with money and assets abroad are fleeing while they can.
Spoiler: As I showed in my previous post,the Kremlin psychopath’s industries, and war machine are reliant on our supply to satisfy domestic demand. But the story doesn’t end there. Foreign intermediate goods are also used in Russian exports. And a lot of the revenues from exports are used to kill Ukrainians and bomb their schools and hospitals.
Overall, foreign value-added accounts for a bit more than eight percent of total Russian gross exports. The foreign shares are higher in Manufacturing, Construction, Publishing, Computer Services and Professional & Scientific Services. The largest foreign shares are found in Publishing. That’s where you find Kremlin’s propaganda machines RT and Sputnik. Foreign translators and mouthpieces are employed by the Kremlin helping Putin to fight his propaganda war.
Not only will Russian exports fall due to the sanctions. The goods will also be of lower quality now that high-income countries will stop feeding his industries and war machine. That will lower Russian income in two ways. Firstly, because of lower quantities of exports and secondly because of lower prices of exports. This adds to Putin’s clusterfuck.
Spoiler: The psychopath in the Kremlin has made an unprecedented miscalculation. His war machine and the Russian economy which he has neglected, is about to have a meltdown.
The sanctions are hurting and will hurt even more. Financial sanctions against his banks, exclusion from Swift, closed airspace and ports will make it extremely tough for him to finance his industries’ production of weapons, vehicles, computers, medicines and more that he needs to kill Ukrainians. In the end of this post you can find links detailing the sanctions and a list of firms turning their backs to Putin. The lists of firms and sanctions are not complete. The number of sanctions and firms leaving Russia keep growing.
The focus of this post is to look at how sanctions will hurt the Russian industries. To have an idea about the effects of these sanctions, this post will investigate how much of Russian total domestic final demand (public and private consumption + investments) that is sourced from other countries. It is a signifiant share in many industries.
This is bad news for Putin. He overestimated the capacity of the Russian economy. He underestimated the Russian economy’s reliance on the rest of the world. He overestimated his military’s capacity. He underestimated other countries’ solidarity with Ukraine. But his biggest mistake was that he underestimated the Ukrainian people. The Ukrainian people’s fight for freedom and democracy is draining his resources.
Spoiler: Since the psychopath in the Kremlin decided to attack Ukraine on a full scale, the corruption project, aka, Nordstream2 will not be certified by Germany. If I’m correct, Germany has also decided to stop buying Russian gas. The sanctions against Russian will significantly decrease trade with Russia. The Kremlin will probably also implement counter sanctions. To have an idea about the effects of these sanctions, this post will investigate how much Russian exports constitute of total domestic final demand in other countries. The next post will look at it the other way around to give a picture of how Putin has punished his own people.
The Kremlin war against Ukraine has caused many countries and the EU to seriously begin to think of how to reduce their dependence of Russian gas. The dependency is often measured in terms of how much imports of Russian gas or oil constitutes of total energy imports or consumption. That measure is not reflecting the true dependency of Russian gas and other products from Russia. It doesn’t take other suppliers of gas or energy into account. And it doesn’t show how much of the gas that is needed to produce different types of goods and services. A more accurate way to measure the dependence is to look at how much of the total value of final demand in different countries that are generated in Russian gas production. This approach takes into account the total supply of energy and the extent to which energy is used in the production of goods and services that are absorbed domestically in different countries.
This is bad news for Putin who overestimated our dependence on him.