Russia’s economy will screech along even if it stops exporting energy to Europe. Sanction-free reserves, higher oil prices and a well-oiled propaganda machine would cushion the blow. That makes President Vladimir Putin’s threats to cut the bloc off from gas more credible.
On the face of it, an energy embargo, either imposed by Russia or foisted on Putin by Europe, sounds like a death blow for the country’s finances. Its economy is already forecast to contract as much as 15% this yearStill, Putin’s budget could prove relatively resilient. Around 9 trillion roubles, or $125 billion, of government revenue came from oil and gas last year.
Of course, an expected 15% GDP decline this year will also hammer revenues, and push up the budget deficit. But Putin’s wartime propaganda efforts will help. The Kremlin has used pro-government media to prime the population for tough times, giving it a freer hand to reduce expenditures such as $20 billion spent on healthcare last year, while ringfencing the $49 billion defence budget.
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