"A car idling with an overheated engine". The state of Russia is worse than it seems – WaPo

The real economic situation in Russia is much worse than the Kremlin wants to show. The country has exhausted its internal financial reserves, and sanctions are beginning to hit the most vulnerable places: the budget, banks and incomes of the population, the article says The Washington Post.

"Banking crisis is possible. A non-payment crisis is possible. I don't want to think about the continuation of the war or escalation," a Russian official told the newspaper on condition of anonymity.

The Russian economy used to "benefit from a number of positive factors, such as high global commodity prices and a boom driven by increased government spending. But most of these factors have disappeared, and that's why Russia is now in the worst situation since the beginning of the war," said Janis Kluge, an economist at the German Institute for International and Security Affairs.

The economy is "frozen, and at its core, in my opinion, it is unsustainable," The Washington Post quoted a former adviser to the Russian Central Bank as saying. "The closest analogy is a car idling with an overheated engine. The car is neither moving forward nor backward, but the longer it stands, the more damage accumulates under the hood," he said.

Western sanctions are forcing Russia to sell oil at significant discounts, which is sharply reducing foreign exchange earnings and increasing the budget deficit. According to Reuters, oil and gas revenues in December can fall by almost 50% year-on-year, while military spending reached record levels.

The state of the banking system poses an additional risk. Massive lending to the defense sector in the early years of the full-scale war created a large amount of opaque and poorly regulated debt.

The Russian Union of Industrialists and Entrepreneurs has already openly stated that many companies are in a pre-default state.

Signs of the deteriorating situation are increasingly being felt by the population. Consumption is falling in Russia, the number of salary delays and employee complaints is growing, and in some regions, businesses are cutting back on production or shutting down operations.

But, as The Washington Post notes, the Russian elite does not expect economic difficulties to lead to large-scale social discontent or affect Putin's calculations in the near future.

"Growing economic problems will not lead to social or political upheaval. But next year will be the first really difficult one," said a Russian academic close to the diplomatic corps.

• In late November, Bloomberg gave a similar assessment of Russia's economy. Economists it spoke to said that Russia should end the war.
• A report by the French Institute of International Relations shows that the Russian economy is losing momentum and is entering a phase of stagflationincreasingly resembling the Iranian model, with prolonged stagnation, low modernization, and dependence on China.