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Clara Ferreira Marques

Russia’s Fortress Economy Has Some Cracks

Vladimir Putin has built up fiscal and other defenses that will insulate the country against Western sanctions. But autarky comes at a cost.

It’s not as impregnable as it looks. 

It’s not as impregnable as it looks. 

Photographer: Dimitar Dilkoff/AFP via Getty Images

President Vladimir Putin has spent years preparing for the worst. Since at least 2014, when Russia was buffeted by the combination of crashing oil prices and sanctions over Ukraine, the Kremlin has focused on building financial barricades, enforcing macroeconomic discipline, weaning itself off the U.S. dollar and backing import substitution. Even as the pandemic squeezed ordinary households, Moscow held the budget purse strings tight.

As a result, Russia comes to the current crisis with its fundamentals looking healthier than most, with a relatively light debt burden, plus an impressive near-$640 billion of international reserves and a fiscal cushion equivalent to roughly 12% of its economic output in the shape of a National Wealth Fund bolstered by hydrocarbon revenues. There’s improved self-sufficiency too, and in 2020, for the first time in the post-Soviet period, Russia became a net exporter of agricultural produce.