Russia's wartime economy is flush with resources and is weathering Western sanctions, European economist says

• Russia's economy is actually doing pretty well, according to European economist Michel Santi.
• Moscow has been able to purchase Western resources through middlemen, he said.

Officials in the West have touted the effectiveness of sanctions, but for the most part, Moscow is actually doing fine as its war in Ukraine continues to drag on.

That's according to Michael Santi, a European economist and a former banker who believes Russia is actually coping better with trade restrictions than many experts have said is the case.

Economists have said Russia's economy is in rapid decline, evidenced by the plunge in the ruble and soaring inflation. Moscow is also suffering from a record labor shortage, with the economy missing nearly 5 million workers, Russian researchers estimated late last year.

Santi, who is a former fund manager and professor of finance in Switzerland, wrote in an op-ed for the outlet Luxuo on Wednesday that many of the problems plaguing Russia's economy are overblown, and apart from a worker shortage, the country is still well-resourced.

For one, the standard of living for citizens who remain in Russia has "barely declined," Santi says. A record 46% of Russians said they believed living standards were improving in 2023, while a record 56% said they believed the economy was improving, according to a December Gallup poll.

Russian business confidence also remains elevated, rising 5% in December. That may be because Moscow has ramped up its efforts to boost its private sector, such as by offering interest-free loans to businesses, Santi said.

And though the West has imposed trade restrictions on Russia that have limited its ability to buy Western goods, some countries, like Armenia, Serbia, and Kazakhstan, have become middle-men, buying near-record amounts of goods from Europe before passing them on to Russia.

In that respect, Russia has "abundant" resources, Santi added, especially considering that there's still around $100 billion left that can be easily liquidated from Russia's sovereign wealth fund, according to Bloomberg estimates in December 2023.

Western nations are mulling whether they should seize Russia's $300 billion of frozen foreign assets to help rebuild Ukraine. But such a move looks unlikely to happen anytime soon, researchers from the Carnegie Endowment said in a recent note.

Russia's only problem appears to be its worker shortage, Santi says. The nation lacks around 400,000 workers from its defense sector, while its tech sector is in need of around 700,000 programmers, coders, and cybersecurity experts.

But even that has some upside. The nation now looks to be in a state of full employment, with an average 2.5 jobs available for each unemployed worker and the unemployment rate is near a historic low of around 3%.

"The Russian bureaucracy has defied Western predictions that anticipated a 'strangulation' through heavy economic and financial artillery," Santi said."The only current threat to the Russian economy is a shortage of labour."

Economists are divided over whether Western sanctions have successfully crimped Russia's economy, or if Moscow has managed to sidestep most of the consequences.

Russia, for its part, has put up a show of defiance against Western sanctions, with Putin repeatedly emphasizing the resilience of the economy. In January, the Kremlin's budget deficit was five times smaller than it was last year, Russia's finance ministry said on Wednesday.