If the steadfastness of the Russian economy in the face of the sanctions imposed on it more than a year ago surprised many observers, Moscow is facing a difficult situation and an uncertain future, despite its adaptation to the severe sanctions imposed on it in response to the invasion of Ukraine.

Russian President Vladimir Putin has repeated for a year that international sanctions are useless and reflect negatively on Westerners more than on his country, stressing "strengthening economic sovereignty" and creating "more opportunities" for Russia.

However, he suddenly changed his tone at the end of March, warning of the "negative" consequences of the sanctions "in the medium term", in the first position of its kind since launching the attack on Ukraine in late February 2022.

Putin said that "returning to a path of growth should not make us complacent," acknowledging that there were still "problems" that needed to be "solved."

Are these statements an indication of the deterioration of the economic situation, or just a warning to companies after he urged them in mid-March to "not miss new growth opportunities"?

Arnaud Dubien, director of the French-Russian Observatory in Moscow, said Putin's position "is simply realistic."

"It is a mobilization message addressed to the companies and ministries concerned: 'The situation is better than expected, but do not be complacent, and continue to search for alternative (solutions')," he told AFP.

Alexandra Prokopenko, a researcher who previously worked at the Russian Central Bank, said, "He tells them what it means: 'You and your business are safe in Russia only under my authority, there is no return to before February 2022 +'."

The Russian economy is currently facing several problems, with the severe decline in gas exports, shrinking labor force, shortages in some production chains, the drop in the value of the ruble, the halt of the tourism sector, and others.

Dubien pointed out that "the sectors most affected by the sanctions, such as the automotive sector, are those that were most open to international investments and cooperation."

In the latest example, AvtoVAZ announced that supplies from some of its foreign suppliers had stopped, which would make it "impossible ... to continue production of integrated cars from the second half of May."

Russia can no longer practically obtain Western technologies and is forced to head towards Asia, which necessitates additional waiting times.

Prokopenko pointed out that companies related to the military industries sector are the ones that "manage their affairs better," referring to the sectors of "optics, medicine, metal equipment, and so on."

The government acknowledges this imbalance, affirming its intention to enhance exchanges with Asian countries, led by China and India, to compensate for the loss of the European market.

However, "the situation remains difficult," Sergey Tsyplakov, professor of economics at the Higher School of Economics in Moscow, told AFP, referring to "financial infrastructures" among the victims of the sanctions.

And VTB Bank, the second largest Russian bank, announced, on Wednesday, losses amounting to seven billion euros in 2022, due to the sanctions, notably its exclusion from the international payment system SWIFT.

In light of the current situation, many observers believe that the real challenge for the Russian economy will come in the coming months.
"There is no indication that in 2023 Russia will receive additional revenues, as in the past year, through oil and gas revenues," Prokopenko told AFP, which increased significantly in 2022 with higher energy prices.

According to the International Energy Agency, Russian oil revenues declined by 42% in February at an annual rate, and the reorientation of the gas market to the Asian region takes a long time for logistical reasons.

However, Moscow urgently needs to keep its fuel revenues at a high level to continue financing its offensive in Ukraine, at a time when about a third of the annual federal budget is allocated to military and security expenditures, according to official figures.
Putin warned Tuesday that "the sanctions will last a long time."

Prokopenko believed that "it takes a long time to adapt, find new partners and establish good relations," considering that the future is "hazy."

For his part, Dubian said that "sanctions are not without pain, but macroeconomic balances are not in danger at the present time," adding that "Russia can finance its war effort for an additional three or four years ... but it has lost the equivalent of a decade of development since 2014." Now you may lose a second contract."