The Russian economy, which has been under economic sanctions since the beginning of the Russia-Ukraine War, is about to complete its second year under these sanctions, while at the same time consolidating its own bloc in global politics and making breakthroughs in the field of dedolarization. The incentive to use national currencies instead of the dollar in trade, as well as the BRICS reaching 10 members by 2024, may create new areas of movement for the Russian economy under sanctions.
With this in mind, the Ankara Center for Crisis and Policy Studies (ANKASAM) presents the views of Iikka Korhonen, Research Director at the Bank of Finland’s Institute for Developing Economies (BOFIT), to assess the Russian economy under Western sanctions.
1. How does the expansion of BRICS affect the Russian economy’s global scope of action?
Expansion of BRICS does not affect anything. It is not a free trade arrangement. It is a club without secretariat etc.
2. How does Russia’s use of national currencies in its trade, especially with China, affect the US dollar globally?
Very little. There has been a slow movement out of dollar in invoicing international trade for some time now, but CNY is the only viable option, and even then only for a small number of countries close to China.
3. What does Russia’s GDP growth of 3% in 2023 after a 2.1% contraction in 2022 show us?
It shows that increasing public spending a lot increases economic activity in the short run.
4. How is the Russian economy’s trade with the CIS and post-Soviet countries affected by Western sanctions?
There is more scrutiny from third countries on the goods sold to CIS countries so that sanctions are enforced.
Iikka Korhonen
Iikka Korhonen is Director at the Bank of Finland’s Institute for Emerging Economies (BOFIT), where he conducts research and analysis on major emerging market countries, particularly Russia and China. He has been a visiting scholar at Oesterreichische Nationalbank, Hong Kong Monetary Authority, Kyiv School of Economics, Hitotsubashi and Yokohama National University. His research interests include monetary and exchange rate policies in emerging markets as well as the effects of economic sanctions.
