Chinese Economists Calculate The Cost To Russia For Its War Against Ukraine

Bloomberg: Chinese Economists Tally Cost of Putin’s War, Warn on Deep Scars 

(Bloomberg) -- Russia faces a sharp and prolonged slump in its real income as international sanctions over President Vladimir Putin’s invasion of Ukraine leave deep scars on its economy, according to a study by two Chinese academics. 

The severing of trade links and access to multinational production may cut real income by almost 12% and result in a “permanent decline in real gross domestic product” for Russia, Xiayi Du and Zi Wang from Shanghai University of Finance and Economics said in the study published in the journal Economics Letters.

“This welfare loss is mainly due to losing access to foreign final goods and intermediates,” they said. 

One of the most downbeat assessments to date of the fallout from Putin’s war modeled the effect of isolation on Russia from all economies except China, its biggest trade partner. While China hasn’t joined the penalties, the risk of falling afoul of secondary sanctions may still constrain business ties. Read more .... 

WNU Editor: I have been doing the same research and calculations on the cost of this war to both Russia and Ukraine. To say that this conflict will leave deep economic scars is an understatement. 

In the case of Russia here are a few examples. The Russian Treasury has lost anywhere from $200 to $300 billion in foreign reserves when the EU and the US seized Russian assets at the start of the war. The Nord Stream 2 pipeline took 10 years to plan and build at a cost of $23 billion. On this one project alone the Kremlin was expecting a trillion dollars in revenues over its lifetime. That money is now gone. And forget about foreign investment. No one is going to put a dime in Russia for a very long time. Even when the war is finally over.

But even though this war will cost Russia a lot, it is going to be worse for Europe. Their economic foundation is built on having access to cheap and reliable Russian gas. Their decision to terminate this relationship means that Europe will now need to look for energy alternatives elsewhere. Good luck on that. Any alternative supply is not going to be stable, and it is certainly not going to be cheap. 

The big economic loser in this conflict is Ukraine. Ukraine was the poorest nation in Europe before the war.It is poorer now, and I shudder to think where it will be when the war is finally over.