Who's Winning And Who's Losing The Economic War In Ukraine

commondreams |  With the Ukraine war now reaching its one-year mark on February 24, the Russians have not achieved a military victory but neither has the West achieved its goals on the economic front. When Russia invaded Ukraine, the United States and its European allies vowed to impose crippling sanctions that would bring Russia to its knees and force it to withdraw.

Western sanctions would erect a new Iron Curtain, hundreds of miles to the east of the old one, separating an isolated, defeated, bankrupt Russia from a reunited, triumphant and prosperous West. Not only has Russia withstood the economic assault, but the sanctions have boomeranged–hitting the very countries that imposed them.

Western sanctions on Russia reduced the global supply of oil and natural gas, but also pushed up prices. So Russia profited from the higher prices, even as its export volume decreased. The International Monetary Fund (IMF) reports that Russia’s economy only contracted by 2.2% in 2022, compared with the 8.5% contraction it had forecast, and it predicts that the Russian economy will actually grow by 0.3% in 2023.

On the other hand, Ukraine’s economy has shrunk by 35% or more, despite $46 billion in economic aid from generous U.S. taxpayers, on top of $67 billion in military aid.

European economies are also taking a hit. After growing by 3.5% in 2022, the Euro area economy is expected to stagnate and grow only 0.7% in 2023, while the British economy is projected to actually contract by 0.6%. Germany was more dependent on imported Russian energy than other large European countries so, after growing a meager 1.9% in 2022, it is predicted to have negligible 0.1% growth in 2023. German industry is set to pay about 40% more for energy in 2023 than it did in 2021.

The United States is less directly impacted than Europe, but its growth shrank from 5.9% in 2021 to 2% in 2022, and is projected to keep shrinking, to 1.4% in 2023 and 1% in 2024. Meanwhile India, which has remained neutral while buying oil from Russia at a discounted price, is projected to maintain its 2022 growth rate of over 6% per year all through 2023 and 2024. China has also benefited from buying discounted Russian oil and from an overall trade increase with Russia of 30% in 2022. China’s economy is expected to grow at 5% this year.

Other oil and gas producers reaped windfall profits from the effects of the sanctions. Saudi Arabia’s GDP grew by 8.7%, the fastest of all large economies, while Western oil companies laughed all the way to the bank to deposit $200 billion in profits: ExxonMobil made $56 billion, an all-time record for an oil company, while Shell made $40 billion and Chevron and Total gained $36 billion each. BP made “only” $28 billion, as it closed down its operations in Russia, but it still doubled its 2021 profits.