Putin is feeling the pressure of sanctions and is therefore turning to his allies. However, the president must not forget the consequences for Russia's economy.
Moscow – Russia's economy is facing a major dilemma: Western sanctions are increasing its dependence on allies. At the same time, dependence on some states could harm the Russian economy. Experts agree that Vladimir Putin's war economy is anything but resilient - even if Russia portrays it differently to the outside world.
Sanctions make Russia's economy even more dependent on allies
The Russian arms industry in particular is probably dependent on help from other countries. In recent weeks, there have been increasing signs of arms deals between Russia and North Korea. So far, Pyongyang and Moscow have denied any allegations. It was recently reported from South Korea that North Korea's defense companies are working at full speed to supply Russia with weapons.
Russia should deliver food in return. Putin also deepened his military cooperation with Iran in the Ukraine war. Iran is believed to have supplied Russia with a large number of powerful surface-to-surface ballistic missiles, six sources told
Reuters.
But these deals will backfire on Putin in the long run. "The country's defense spending is clearly problematic, as the Kremlin continually sources missiles, drones and even artillery shells from North Korea and Iran, thereby incurring heavy IOUs that will have to be paid to these rogue states in the future," writes American's Stephen Blank Think tank “Foreign Policy Research” recently published an analysis.
Sanctions against Russia's economy: Rogue states remain Putin's only option
According to Blank, the Russian economy's growing dependence on other allies is also a sign of the effectiveness of the sanctions. Western sanctions have been particularly effective in reducing Putin's trade profits and shrinking his war chest.
This can be seen especially when one looks at the development of trade relations between Russia and China. Putin may have relied heavily on Xi Jinping's help, particularly in the financial sector. The Chinese currency Yuan was intended to pave the way for Russia's economy to independence from the US dollar, and 75 percent of trade with China and 25 percent of transactions with other countries are carried out using the Chinese currency Yuan. Due to concerns about Western sanctions, Chinese credit institutions want to stop their payment transactions with Russia and no longer accept yuan payments.
Russia's economy depends on partners - sanctions threaten isolation
Another example of Putin's losses due to sanctions is the business between India and Russia. India is one of Russia's largest oil buyers. Income from oil deals is essential for Putin and has already plummeted. Now he is threatened with further losses because India, fearing secondary sanctions, could turn away from Russia and look for other ways to procure cheap oil. One possible candidate: the USA.
American oil shipments to India rose sharply in March, according to data from crude oil tracking firm Kpler. At the same time, Russian oil imports have fallen by about 800,000 barrels a day since peaking last year,
Bloomberg
data shows. If India stops buying oil from Russia, an important source of income for Russia's economy will disappear.
Russia's economy faces dilemma because of sanctions
Experts have been warning for months that Putin's war economy will take its revenge. The money currently flows mainly into arms deals and military spending, which is also expected to increase in 2024. For Putin, the high military spending is paying off insofar as the spending on the Ukraine war stimulates economic growth and Russia can boast of good economic data. However, the reality is different.