Natural #gas production was down significantly in June, totalling 39.3bcm (May: 49bcm).
Russian gas production is now 23.3% lower than in June 21, reflecting the gas cut-off of the EU.
3/
Russian manufacturing continued to slide in June 22, taking into account seasonal factors (it always rises in June in absolute terms because of all the May holidays).
4/
Russia's tabacco industry continues to struggle:
Cigarettes: -32.4% yoy (down 16.6% from May 22)
Chemical industry also weaker:
Ammonia: -21% yoy (-6.6% from May 22)
Potash: -32.1% yoy (-6.5% from May 22)
There is a strong contraction in some corners of the #glass industry, especially sheet glass. In June 22, #Russia produced 2.4 million m², which is 64.5% less than in June 21 and 23.6% less than in May 22.
6/
Computer & electronics had a bad month. The reason could be exhausted inventory:
Semiconductors: -39.6% yoy.
Monthly comparison even more drastic:
May 22: 5.3 million pieces
June 22: 2.5 million pieces
7/
A closer look at the Russian automobile industry: There was a tiny rebound, but overall still in the deepest crisis (40%-90% less than last year).
13,400 cars (after 3,700 in May).
13,100 ICE motors (after 11,400 in May).
10,300 trucks (after 7,600 in May).
8/
Retail trade turnover in #Russia remains depressed, 9.6% below last year (in real terms).
9/
Wholesale turnover in #Russia continues to fall, now 18.3% below last year (in real terms).
10/
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For the past two years, it often seemed like sanctions could not hurt Russia. The Russian economy was on a massive sugar high, fueled by booming energy markets. But now things are changing. Russia's struggling coal industry is the best example.
After two crazy years, world market prices for coal have returned to something closer to normal. Suddenly it turns out that Russian coal can no longer break even at these more normal market prices. What happened? tradingeconomics.com/commodity/coal
The main reason is that sanctions have increased the cost of transportation, because some coal has to be redirected from Europe to India. The same thing happened with oil. But there is a difference: Oil margins are so high that it doesn't matter as much. energyandcleanair.org/july-2024-mont…
The average regional signing bonus for Russian soldiers is 596k rubles, it more than tripled from the beginning of the year. The average total bonus increased from 363k to 996k. But can the increase change people's minds about fighting in Ukraine?
When you enlist in the Russian military, your family can expect three different types of payments over the course of your (often literally short-lived) career:
- Signing bonus
- Monthly pay
- Compensation for death/injury.
If you want more men to sign up, increasing the sign-up bonus is the cheapest way to do it. It is the only risk-free payout for the recruits. Monthly pay depends on how long you survive, and compensation depends on whether the Russian bureaucracy deems you eligible.
How do sanctions affect the war in Ukraine? The simplistic explanation that "Russia is running out of money" is not wrong, but it is also not quite right. To understand the impact of sanctions, it helps to think of Russia's trade with the outside world as a big machine. 1/5
On one side of this machine, Russia puts in oil, metals, grain etc, and on the other side, this machine puts out computer chips, cars, and machinery. Sanctions sabotage this "trade machine" in many ways. As a result, Russia has to put in more barrels of oil to make it work. 2/5
If Russia's "trade machine" is not working well, it affects Putin's ability to solve the key economic problems of his war. There are essentially three distinct economic problems he faces (size of GDP, control over income, military production capacity / recruitment success). 3/5
Russia apparently cannot find enough men for its military. Today Putin doubled the federal signing bonus from 195,000 to 400,000 rubles. The regions are supposed to add at least 400,000. Many regions pay much more. 1/4 kommersant.ru/doc/6864822?fr…
In some places, the total signing bonus will buy you an apartment. Signing bonuses make up a significant part of the budget: Russia claims it mobilizes 100k soldiers in 3-4 months. If we assume total bonus is 1 mio, this is 400 billion rubles (4.5 billion dollars) per year. 2/4
But: These costs pale in comparison to payouts to injured soldiers or the families of dead soldiers, which are at least 3-5 million rubles. So if Russian losses are really 1,000 per day (the same rate as enlistment), this would add over 1.2 trillion rubles per year. 3/4
When Russia started its full-scale invasion, it had three major resources:
1.) Huge stocks of old weapons
2.) Poor & unemployed men
3.) Super solid finances
This has allowed Putin to fight a big war while keeping most Russians in their comfort zone: Lots of guns AND butter. 1/5
All three are not limitless, and the economic consequence of that is inflation. Inflation is the result of urgently ramping up military production, pulling men from the labor market and sending them to the front, and from weakening trade and fiscal balances. 2/5
So the question for Putin is more and more: Guns OR butter? War in Ukraine OR a nice comfort zone for most Russians? That means: Should he switch to a real war economy (so far he hasn't...)? Should he do another round of mobilization? Raise taxes? 3/5
The West needs to rethink sanctions and move from ad hoc measures to long-term economic containment. Russia will remain a threat to Europe for many years to come. The future of European security depends on the future of Russian economic might. 1/ brookings.edu/wp-content/upl…
After two years of unprecedented sanctions, the Russian economy has exceeded expectations. Yes, sanctions have had a clear impact, but they leave Putin with enough resources to militarize Russia in the coming years and turn it into a conventional military threat to Europe. 2/
Time is an advantage for Russia. It allows for adaptation, new infrastructure, new supply chains, etc. But time can also be an advantage for the West - if it takes a strategic approach: Bolder restrictions on Russian energy exports are possible if markets have time to adjust. 3/