Russian Economy About to 'Hit the Ice,' Putin Ally Warns

Russia's economy is about to "hit the ice", billionaire businessman Oleg Deripaska, described as President Vladimir Putin's "favorite oligarch", has warned.

The businessman, whose fortune Forbes estimates at $2.4 billion, issued the warning in a post on his Telegram channel, saying that there is a general drop in commodity prices, including those that Russia exports, and that this could negatively impact the country's economy.

Russia's economy took a hit in February 2022 after the full-scale invasion of Ukraine began, when it was subject to more than 13,000 restrictions and became the world's most-sanctioned country, according to the Carnegie Endowment for International Peace. Foreign exchange reserves were frozen and Russia was cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system.

The economy has also suffered amid an increase in military spending. After the ruble hit a 17-month low against the U.S. dollar in August Russia's Central Bank raised interest rates from 8.5 percent to 12 percent at an emergency meeting. Last month, the bank again moved to increase them to 15 percent per annum, saying that "a long period of maintaining tight monetary conditions in the economy" will be required.

On November 17, Russian lawmakers approved a 2024 budget with a record amount set aside for defense spending. Russia's Finance Ministry said it foresees total spending in 2024 will reach 36.66 trillion rubles ($411 billion), with a predicted budget deficit of 0.8 percent of Russia's gross domestic product, the Associated Press reported.

Newsweek has contacted Russia's Foreign Ministry via email for comment.

Deripaska warned that next year's budget could be short 10–12 trillion rubles ($112.8 to $135.36 billion) due to the current drop in commodity prices. This could be caused by a general decline in global prices for raw materials, "suppressed economic growth," and "the tyranny of state capitalism, raising prices for all its products and services, drawing subsidies and subsidies from the budget," the oligarch said.

He said the current situation is a "trap", and it is only possible to get out of this through "serious economic changes, for which, apparently, there is no will yet."

"What the world calls a 'soft landing' continues, prices for all commodities are declining. And we have a record tax collection this year of 46 trillion rubles. Already in the next year the income situation [government revenues] will hit the ice," he added.

The IMF forecasts that the Russian economy will grow by 2.2 percent this year after shrinking by 2.1 percent last year, though it sees GDP growth slowing to 1.1 percent in 2024.

Russia's economy is heavily dependent on oil but crude prices hit a four-month low last week despite international tensions over the Gaza and Ukraine conflicts.

The effects of Western sanctions imposed on Russia are being felt nationwide, with support for the war falling as Russians feel the resulting financial pinch, according to a poll by independent Moscow-based research group Chronicles, released a year into the conflict.

In a thread on X, formerly known as Twitter, Swedish economist Anders Aslund, who has served as an economic adviser to both the governments of Russia and Ukraine in the past, explained that Western sanctions imposed on Moscow are working.

"A few comments on Western sanctions on Russia. They are often misunderstood. Western politicians love to talk about 'sanctions from hell,' but good sanctions take off 2-3% of GDP each year and they have done so for Russia, whose GDP has stagnated since 2014," he wrote on Wednesday.

"Putin & his ilk, on the contrary, claim both that the sanctions just make them stronger (which is wrong) & that they have to be abolished (which them must not). Their advocacy shows that the sanctions really bite."

A third group, Aslund said, include people who call for much tougher sanctions and claim against evidence that the sanctions don't work and are useless.

"While they call for tougher sanctions, their arguments help Putin," he said.

"A realistic expectation is: 1. The sanctions will keep Russia's economy stagnant. 2. The ever tighter technology sanctions will render the Russian technology ever more obsolete. 3. The financial & energy sanctions impose a hard budget restriction on the Russian government," Aslund wrote.

"Yet, much more can and should be done. 1. The West should tighten personal sanctions & coordinate them. 2. All military-industrial companies should be sanctioned. It is galling that Rosatom is not sanctioned. 3. The energy & technology sanctions must be enforced," he added.

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