The Russian government is hiding the true impact of sanctions on its economy, eight leading European finance ministers have said.
In an open letter to the Guardian, the finance ministers say that Russian president Vladmir Putin is “peddling the false narrative that the Russian economy is strong, and that its war machine is unharmed by western sanctions”.
“This is a lie that must be rebutted. In fact, there are many signs that the Russian war economy is deteriorating.”
“The sanctions and other measures to weaken the Russian economy are effective, but even more can be done. We must continue to increase pressure on Putin’s regime and support Ukraine.”
Since Russia’s illegal invasion of Ukraine in 2022, Europe, the US and allied nations have imposed multiple rounds of sanctions on Russia.
‘Propaganda’ war
The EU alone has hit Moscow with 14 rounds of sanctions, with the UK also repeatedly targeting individuals and industries tied to the Russian war effort.
The list of signees includes Poland’s Andrzej Domański, the Netherland’s Eelco Heinen and Sweden’s Elisabeth Svantesson.
The letter argues that the Kremlin is fighting a propaganda war to show that they are “unmoved” by sanctions and other efforts to support Ukraine, but that the reality is that the Russian economy is faring worse than the government admits.
Return to ‘Soviet playbook'
The Russian government has long maintained that the sanctions are not working as intended, insisting that allied nations in Iran, China and various African nations are providing enough support to mitigate their impact.
The finance ministers point to Putin’s reliance on forced labour in factories, export bans on certain goods and a “return to the Soviet playbook” with the seizure of private assets and a “a total disregard for the social and economic wellbeing of the population”.
“To cover future deficits, Putin will have to use monetary financing, adding more fuel to inflation, and further deplete the Russian cash reserves. If Putin stays on this path, the long-term damage to the Russian economy could be significant and is likely to further erode confidence.”
The ministers call for the sanctions system to be strengthened, with loopholes closed, mirroring sanctions applied to Belarus and the pressure applied to ‘third-party enablers’ of the Ukraine war in the Middle East and Asia.
Since the start of the sanctions regime, there have been widespread concerns that banned goods are simply exported to nearby countries before being re-exported on to Russia.
‘No spare money’
On Tuesday (22 July), Russian state news agency TASS reported that Putin had said that the budget was growing, the deficit was “minimal” and both energy and non-energy revenues were growing.
However, the 71-year old former KGB officer admitted that “there is no spare money” and called for financial discipline.
Last month, he reacted poorly to a G7 plan to fund Ukraine’s war effort using frozen Russian state assets, calling the move “theft”.