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Putin acknowledged that Western sanctions could hurt Russia’s economy

Russia’s Vladimir Putin by video link at the Moscow Kremlin on March 30, 2023. Credit: GAVRIIL GRIGOROV/SPUTNIK/AFP via Getty Images

Russian President Vladimir Putin has admitted that Western sanctions would be a major blow to Russia’s economy, depriving it of funding for the Kremlin’s aggression against Ukraine.

“The illegal restrictions imposed on the Russian economy may have a negative impact in the medium term,” Putin said in televised remarks on Wednesday, state news agency TASS reported.

It was a strange admission from the Russian leader, who has repeatedly insisted that Russia’s economy is resilient and that sanctions have hurt the West by raising inflation and energy prices.

Putin said Russia’s economy had grown since July, thanks in part to stronger ties with “eastern and southern countries,” possibly referring to China and some African countries. He also stressed the importance of domestic demand for the economy, saying it would become the main engine of growth.

Russia’s economy has shown remarkable resilience to unprecedented sanctions imposed by the West, including an EU ban on most petroleum imports. Preliminary estimates from the Russian government showed that economic output shrank by 2.1% last year, a much more limited contraction than many economists had initially predicted.

Although China has given the Kremlin an economic lifeline by buying Russian energy and providing an alternative to the U.S. dollar, cracks are beginning to appear.

Russian government revenue fell 35% in January from a year earlier, while spending rose 59%, leading to a budget deficit of about 1,761 billion rubles ($23.3 billion).

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The World Bank and the Organization for Economic Co-operation and Development forecast contractions of 3.3% and 5.6% in 2023, respectively. The International Monetary Fund estimates that Russia’s growth will remain stable this year, but the economy will shrink by at least 7 percent. % in the medium term.

In response to Russia’s aggression in Ukraine, Western countries have announced more than 11,300 sanctions since the February 2022 invasion and have frozen about $300 billion in Russia’s foreign reserves.

A Russian oligarch, Oleg Deripaska, said earlier this month that Russia would run out of money next year.

Rob North and Livvy Doherty contributed to this report.

Esmond Harmon

"Entrepreneur. Social media advocate. Amateur travel guru. Freelance introvert. Thinker."

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