As the war in Ukraine has raged on, two things have become clear: Russia will not get the swift victory it had planned for. This much was clear just days into the fighting. At the same time, we know Russia will not withdraw its troops any time soon, even with all of the sanctions it is facing. As it became apparent that Ukraine would not yield without a fight and the international community lined up to support it, many hoped that a quick economic war would cause Russia to buckle.
As this hope has failed to materialize, some analysts in the West have turned defeatist, complaining that the sanctions are not “working.” Clueless journalists repeat the Russian apologist narrative that the ruble is now even stronger than it was before the war, without mentioning that it is impossible to buy foreign currency in Russia at the official exchange rate.
There has been a great shortage of realistic expectations. There is no hope that Russia will withdraw from Ukraine before next spring, but every reason to believe that it could do so once spring arrives.
The Russian economy is crumbling. Unemployment is high, interest rates are above 20 percent making mortgages outright unaffordable for just about everyone, and as I predicted at the beginning of the war, Russia is having to sell its oil and other exports at a massive discount to those countries who have not joined the Western sanctions regime and banned Russian imports. As Russia’s economic position deteriorates, importers’ leverage will increase further, forcing even deeper discounts.