The thesis that Russia coped with sanctions is an exaggeration. Just in 2022, some Western decisions reduced the effectiveness of others. But this will not always be

Explains the economist Oleg Itskhoki (project Re: Russia)

2022 became abnormal for the Russian economy. The war and sanctions, it seemed, should rapidly bring the country into a crisis, but the disaster did not happen. On the contrary, in paradoxically, the economy was more resistant to external shocks than many experts predicted. In the new report of the expert platform Re: Russia “worse than the crisis. How the Russian economic anomaly is being built and leading - 2022 ” famous Russian economists analyze the causes and mechanisms of the atypical reaction of the economy to sanctions, as well as scenarios of events in 2023. With the courtesy resolution, Re: Russia “Medusa” publishes the section of the report written by a professor of economics of the University of California at Los Angeles Oleg Itskhoki-about why Russia did not have a classic crisis with “raids on banks”, how Western sanctions leveled each other's effect, how Russian companies managed to avoid the waves of bankruptcy and, most importantly,-that-which Waiting for the economy in 2023.

Classical model of the crisis: "Railing to banks"

When they say the “crisis”, as a rule, implies some kind of simultaneous collapse, which often has the form of a banking or financial crisis, or a really sharp fall in the economy-a large number of industries. What we observe in the Russian economy is rather a slow sliding down - with the exception of the first month of the war, March, when in fact everything that happened looked like a banking, financial and currency crisis at the same time.

It turned out that in the Russian economy there are three factors that have been in this combination of war, sanctions and accumulated economic conditions: firstly, it is a huge surplus of the trade balance , secondly, a budget surplus, which was also associated with high export prices for energy carriers, and thirdly, the Russian economy was not dollarized.

And when economists ask why the balance with raids on banks and subsequent banking and financial crisis was not realized, a large question arises. Can such a crisis scenario be realized in the presence of three conditions: a surplus of a trade balance, budget surplus and the absence of dollarized contracts within the economy? If any of these factors were not there, then a large -scale financial crisis would be a very likely script.

But there is a second circumstance. When we think about the “raid on banks” as a trigger of the crisis with the help of economic models, we do not assume (see, for example, the Diamond -Dibvig model, for which they received the Nobel Prize in 2022 ) that the state can simply take and close the banking system for several weeks. In economic models, the planner does not want to allow this, because if the banking system is paused and it is impossible to get funding for consumption and investment, this affects the well -being of people too much. And the Central Bank of Russia actually stopped the functioning of the banking system. Why was it possible to close the banking system in the Russian economy for weeks and thus stabilize it? Why the Russian Central Bank is so easier to do: he wanted to - he raised the interest rate to 20–25%, wanted to - he generally forbade banks to issue money to the population. Of course, this is a very powerful tool in terms of stopping the banking crisis, but why is this tool are usually not available in other countries? This is a significant issue for economic modeling.

The combination of fundamental factors, primarily a colossal trade surplus as a result of record export incomes and decreased imports, and an aggressive policy to stabilize the banking and financial system in the aggregate allowed to avoid equilibrium with hill for banks, which would significantly change the entire macroeconomic landscape of Russia in 2022. As a result, after stabilizing the banking system, instead of an acute crisis scenario, an inertial macroeconomic scenario was implemented with gradual compression and stagnation of the economy.

Paradox of sanctions in the conditions of a trade surplus

Further, the Russian economy was in a situation where for months exports were several times higher than import. A significant surplus of the trading balance was observed in 2021 as energy prices grow as a result of the exit from the covid crisis and the expectation of the war that increased at the end of the year. And since March, this surplus increased multiplying, both due to a significant jump in energy prices, and due to sanctions that reduced Russian imports. According to the results of 2022, the surplus of the trade balance in the lobes of GDP will be more than 10%. And this is more than in China at the peak of export growth of the mid-2000s.

Since export is part of the production, and imports are part of the consumption, this situation means that the gap between the release and consumption is more than 10% of GDP. This is an unprecedented gap, the presence of which explains why the situation did not happen (economists call it “Sudden Stop” - “Sudden Stop”), when a sharp outflow of capital occurs against the background of a shortage of trade balance and this provokes a financial crisis.

Typically, the crisis occurs in a trade deficit situation. For example, in Greece in the early 2010s, in Argentina in 2001 and in many other cases, where two factors were superimposed: a large trade deficit and a stop of capital influx (lending). In Russia, there was a fundamentally different situation: on the one hand, indeed, it was impossible to borrow in international markets, but no one had to borrow. And this is a huge difference between Russia and other countries - it did not need to introduce a regime of rigid economy (“Austerity”), which has to follow countries in conditions when the flow of money ends, and the trading balance is in short supply. The state did not need to pursue a policy of “Austerity” when salaries and pensions are undergoing or reduced to cope either with a shortage of trade balance, or with budget deficit. In Russia there was a reverse situation - the flow of currency is colossal, and many imported goods cannot be bought.

It turned out that a combination of financial and imported sanctions in the absence of export sanctions simply very poorly works in the short term. This does not mean that sanctions do not work or are not effective. This is a big question - have sanctions were effective from the point of view of Western countries? And it cannot be answered quickly. But it can be stated that a combination of imported and financial sanctions (in the absence of export) does not achieve goals, if the goal is a financial crisis. She, on the contrary, deals the financial crisis. Because there is a flow of money from exports, but there is no way to spend it, which means that there is no lack of funding and does not need to pursue Austerity policy, which Europe was pursued by Europe in 2010-2012.

If export sanctions are imposed on this, then the country has a great need to “occupy” to cope with these sanctions. In this case, sources of income are cut off, an alternative to them - borrowing. But since there is no need to borrow, financial sanctions do not give a significant effect.

In this sense, it seems to me that a combination of sanctions against Russia after an invasion of Ukraine was one that was politically possible for Western countries, and not the one that could lead to a financial crisis in Russia. Import sanctions slowly and systematically work to reduce production potential, but do not give acute crisis manifestations.

In general, we now have an understanding that imported sanctions partially level the effect of financial sanctions, and export sanctions, on the contrary, strengthen it (our new article with Dmitry Mukhin explains this theoretically ). This does not mean that imported sanctions do not work, but they smooth out the potential crisis effect of financial sanctions, reducing the deficiency of currency in the domestic market.

The paradoxes of crisis abundance

Another paradox: why didn’t dominly bankruptcy? Some violations of contracts were, including, for example, default under leasing contracts of all aircraft. But in the other direction, not towards Russia: there was a default of Russia towards Irish firms. But why did not a wave of defaults in the Russian economy when the firms would say: “Circumstances have changed, we can’t pay anymore”? In principle, there could be potentially a wave of violations of contracts-if any contracts are violated, why are others not collapsing in a chain?

Apparently, the answer here is the same - there was a lot of money in the economy. It makes sense to violate contracts when there is not enough money and they are not enough, and when the economy is flooded with money, apparently, you can afford the business “AS Usual”, even though some contracts were forcedly violated by the war.

The labor market is another large paradox. We see in the data that some of the industries have stopped, for example, many engineering industries fell by 80% or more. For me, a big riddle, how can it be that a whole group of production can just stop for months and this does not lead to any crisis phenomena? Why did we not see any surge of unemployment in the data? It is clear that at many enterprises this is some kind of “midday”, and not a complete employment. But I would like to understand this situation quantitatively: it is possible that a number of technological production has stopped, but there is no unemployment.

This is a large riddle, as the labor market can be in this state. Probably, this is a non -market balance, which is explained by the fact that, again, there is money, the state distributed quite a few subsidies to companies directly from the budget. And it turns out that there was no acute need to dismiss. But what happened to smaller enterprises? If with large enterprises it is clear - they coordinate their employment policy with the state, then why did we not have unemployment caused by dismissal from smaller enterprises? I have no good explanation of what happened to the labor market and what mechanisms it was compensated for.

Another paradox - how all this converges in GDP, if there are a number of industries that fall by 30–90%, and GDP falls only by 3%. Perhaps all these industries have a very small weight in the production structure, but this seems unlikely or amazing.

Naturally, it is necessary to take into account that there were industries that grew as a result of restriction of imports and its own production. If it is impossible to buy imported goods and services, then the demand for domestic goods and entertainment, internal travels is growing. These are industries where I would expect more significant growth than the one that shows the data. And this is also amazing. That is, those shocks that we see and which are associated with a large -scale drop in import, in reality, are quite poorly reflected in Russian economic statistics.

It seems that we are observing a situation in which there is a large number of powerful shocks, but somehow, when they all developed, there was no crisis fall in GDP and employment. And again: this, perhaps, is not so surprising against the background of high income from exports and that as a result, consumer demand remained at a high level. Usually, when we are talking about crises in Western economies, they are associated with the fact that internal demand is strongly compressed due to the growth of uncertainty and reducing consumption in favor of savings. In Russia, it is necessary to state, domestic demand as a result of all these shocks did not fall too much.

Now imports are restored, we see this from the data of other countries. He fell twice as May, and by August he recovered more than half of this, that is, up to 75–80% of the pre -war level. And from a number of countries-for example, Turkey-imports grew three to four times. Although now this is a question of composition: whether they overpay for the same goods delivered now through Turkey, or have to buy lower quality goods? Perhaps the cost of imports increased in many respects due to higher prices and additional logistics and transport costs, and import volumes in fact decreased stronger. Nevertheless, it can be assumed that the main part of the import, with the exception of certain categories that they are closely monitored, will be restored in one way or another over time.

But since 2023, the main external restrictions will be associated with the compression of export, not imports. That is, imports in the long run will be low, but not because it will not be possible to circumvent restrictions (they will exist in a narrow circle of goods, but this is not so important for general imports). The main restrictions will be due to the fact that Russia will lose part of export income, and imports will not be able to grow for this reason.

The paradox of the currency course

Today's exchange rate in Russia can be called market. In particular, the Central Bank has strong restrictions on how it can influence this course. The Central Bank would like the course to be weaker, but in these conditions it is difficult to do (it is written more about this in our article “Sanctions and the exchange rate” with Dmitry Mukhin).

At the same time, this course is not quite market. What is non -resident in it? He ceased to be investment. That is, foreign investors can no longer invest in ruble assets. This means that the international financial sector no longer disciplines the dynamics of the ruble course - and the ruble mainly reacts to current factors, and not to expectations of the future. For the year, international speculators could play to lower the ruble in anticipation of export sanctions entering into force in December 2022 and February 2023, but they no longer participate in this market. Russian depositors have limited opportunities to engage in this kind of speculation.

But at the same time, the trade balance remains as an equilibrium condition, and there remains internal demand for currency and rubles. Because now, in principle, the restrictions within Russia, which were introduced in the spring and which the economists called “financial repression” are practically removed. In this sense, Russian households and firms can decide in which currency to save them, and this equilibrium condition is quite present for themselves. But one way or another, now the exchange rate is determined, first of all, by the trade balance of exports and imports. A colossal surplus is an influx of currency.

A tool was taken away from the Central Bank, which he always smoothed the exchange rate. That is, after freezing assets and falling under sanctions, the Central Bank could not continue the usual policy of buying and selling currency in order to smooth out the exchange rate. Therefore, the exchange rate first went to 125-130 rubles per dollar and a parallel retail rate appeared, which reached 150 rubles per dollar. Since the Central Bank lost its smoothing tool, they had to use unusual tools for financial repressions instead of a simple currency purchase tool (currency restrictions, deregistration, retention of foreign exchange earnings, withdrawal of currency abroad). And all March and April - it was a period of financial repressions plus a very high interest rate on rubles. Such measures from the Central Bank allowed to stabilize the demand for currency. And already since March, and especially in April, it was a surplus of a trading balance that determined why the ruble is so strong.

Now the Central Bank has very limited tools to manipulate the course. There are two of them, by and large. One is to print money. But this is just a monetary policy, its weakening, which will eventually lead to devaluation, and not something related to the exchange rate. To directly influence the course, the Central Bank must buy currency in the market.

At the same time, as I understand it, the Central Bank does not really want to buy currency, because he fears additional rounds of sanctions. And in this sense, the tools of influence are quite limited. Therefore, it seems to me that this course should be thought about as an equilibrium, which is determined primarily by the balance of export and import. And over time, as exports will decrease as a result of new sanctions, we will see devaluation.

Will the 2023th year be the year of the classical crisis?

It seems to be a key factor that ensured the relatively weak impact of sanctions on the economy was abnormally high income from export, the anti -crisis effect of which was enhanced by import restrictions. In such a situation, the effect of financial sanctions was leveled, and the effect of many standard shocks was weakened. There was no significant problem in connection with the outflow of capital, in particular-the need for a policy of saving (“Austerity”), and a strong, truly crisis compression of internal demand did not occur. Те же эффекты наблюдаются и на уровне фирм, которые не стояли перед необходимостью ни отказываться от выполнения контрактов, ни срочно и массово увольнять работников. Административные решения — возможность произвольно «закрыть» банковскую систему на некоторое время — также сыграли свою роль, но скорее краткосрочную.

Курс рубля перестал быть опережающим индикатором, поскольку он во многом отрезан от международного инвестиционного рынка, и таким образом остался в основном рыночным, но в первую очередь отражает сейчас текущую ситуацию с торговым балансом, а не общую ситуацию в экономике. Ожидаемое снижение экспортных доходов и восстановление импорта будут создавать давление в сторону ослабления рубля. ЦБ может временно замедлить это ослабление продажей валютных резервов. В то же время необходимость инфляционного финансирования бюджетного дефицита также будет создавать давление в сторону ослабления рубля, и первая половина 2023 года будет отражать противостояние этих факторов.

Макроэкономическая ситуация в 2023 году будет принципиально отличаться от 2022 года. 2022 год был годом импортных санкций, разрушения или подстройки существовавших цепочек поставок и построения альтернативных цепочек в условиях избыточного финансирования и притока валютных доходов. 2023 год, наоборот, станет годом относительно адаптировавшихся цепочек поставок, но одновременно и годом снижения экспортных доходов и притока валютного финансирования в условиях постоянного бюджетного дефицита. В этом смысле 2023 год будет гораздо больше, чем 2022-й, похож на типичный международный кризисный эпизод (то, что мы называем «sudden stop») со снижением притока капитала, девальвационным давлением и нарастающими проблемами с финансированием всей экономики — и банковской, и производственной ее части.

Oleg Itskhoki