Economic indicators one year after Russia's invasion of Ukraine : The Indicator from Planet Money On this day one year ago, Russia launched its full-scale invasion of Ukraine. Today, we cover three indicators about the war's economic impact.

For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org.

The economic war against Russia, a year later

  • Download
  • <iframe src="https://www.npr.org/player/embed/1159453563/1198987767" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, “WAKING UP TO THE FIRE”)

ADRIAN MA, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Adrian Ma, here with Darian Woods and Wailin Wong.

DARIAN WOODS, HOST:

Now, today marks the one-year anniversary of Russia's full-scale invasion of Ukraine. It's a milestone for a war that has raged longer than many analysts anticipated. And today, the U.S. and U.K. announced further sanctions on Russia.

WAILIN WONG, HOST:

On a special edition of Indicators of the Week, we bring you three economic numbers that help shed light on where things stand today.

(SOUNDBITE OF MUSIC)

WOODS: So for Indicators of the Week, with the one-year anniversary of Russia's full-scale invasion of Ukraine, we have three metrics that show where things stand.

First of all, Adrian Ma.

MA: So my indicator is 2.1%. That is how much Russia's economy shrank last year, in part because of economic sanctions imposed by the U.S. and other allied countries. And that 2.1% decrease is a lot less than what forecasters and President Biden were predicting about a year ago, when the sanctions were put in place.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT JOE BIDEN: This is going to impose severe costs on the Russian economy, both immediately and over time. We have purposely designed these sanctions to maximize the long-term impact on Russia and to minimize the impact on the United States and our allies.

MA: And specifically, the goal with the sanctions was to weaken Russia's ability to carry out a war - right? - to cripple its financial system, make it harder for Russia to export stuff to the world and to try and prevent it from importing supplies that could help its military.

WONG: I remember this time, when there was just a raft of announcements from multinational companies saying they had pulled out of Russia or they had stopped doing business in Russia. It was like McDonald's and IBM.

MA: Yeah. So it seemed like, at the time, the Russian economy was just cratering. And some predicted sanctions would cause Russia's GDP to drop as much as 10- or 15%, but turns out it was just about 2%.

WOODS: Right. And we've talked a bit on the show about how Russia's central bank has done these drastic actions to prop up the economy - also how Russia's managed to bring in significant oil and gas revenue. I imagine those are factors here, right?

MA: Yeah. I think it's fair to say all those things helped Russia's economy kind of weather the past year. Though another thing I think we should consider is that the sanctions are being levied by just 37 countries and the U.S., I mean, which, on the one hand, is not a small number. And we're talking about countries together which make up more than half the world's GDP. But that also leaves a lot of other countries that are not on board with sanctions. And even though, like you might remember a year ago, all these countries were in the United Nations, voting to condemn the Russian invasion, there were also a few dozen other countries who sort of stood on the side and said, you know what? We're going to sit this one out. And what has happened in the months that followed is that some of those countries kind of filled in the economic crater that was created by sanctions, and they did that by upping their trade with Russia.

WONG: So we're talking about countries like China and India.

MA: Yes. Those are the two big ones. China increased exports of machines and cars and computer chips to Russia. India upped its purchase of Russian oil. And then, there were even some countries that condemned the invasion early on - countries like Turkey and Brazil - who have since increased their trade with Russia. And so all this is a big reason why Russian trade has really bounced back towards pre-invasion levels. In the short term, all of this means that sanctions really didn't have the impact that a lot of people were hoping for, but it's also worth mentioning that longer term could be a different story. Analysts think that sanctions are likely to set Russia's economy back years.

WOODS: I also have a sanctions indicator about how Russia might be getting around them. My indicator is three. In summer last year, Kazakhstan's imports of fridges from Europe was three times higher than a year prior. Now, Wailin and Adrian, why do you think Kazakhstan suddenly wanted three times as many fridges?

WONG: Well, before I venture a guess, let me get this straight - of all things today, why is your indicator about fridges?

WOODS: There is a serious point here, Wailin. I'll get to why - just bear with me. A bunch of U.S. and European government officials and think tanks believe that this is kind of fishy because, at the same time that Kazakhstan's fridge imports surged, its homeware and electronics exports to Russia have grown a lot, too. And the wider context is that countries near Russia that have had a surge in imports and exports have been accused of facilitating Russia's sanctions evasion. Now, the Kazakhstan government denies this - says that they haven't seen evidence of specific companies evading sanctions. And if they do, they'll clamp down.

WONG: Wait, so is the thinking that Kazakhstan is importing fridges and then exporting them to Russia because Russians are finding it hard to import the fridges themselves?

WOODS: Yeah. And actually, the plot thickens here. Some of these fridges could be used for weapons.

MA: What does that mean - fridges for weapons?

WOODS: Right. So take tanks - Russia struggled to build tanks last year, as it was scrambling to find components that were sanctioned, like semiconductor chips. And these days, fridges can get pretty advanced. Like, we've all heard about or maybe seen these fridges with touch screens and Wi-Fi. I still find it weird. I don't know about you guys. And what could be happening is that the chips are being stripped out of these fridges and added to Russian tanks. A Treasury report from last year said that the Russian military is reportedly cannibalizing chips from dishwashers and refrigerators to fix their military hardware. Ukrainian forces have seized Russian tanks. They've inspected them, and they've found components from fridges.

MA: That is, like, kind of hard to imagine. I mean, like, this little computer chip started off in - what? - probably, like, a factory in Korea and then somehow got shipped to Germany, where it was, like, put inside a fridge, and then it somehow ended up in Russia...

WONG: Through Kazakhstan.

MA: ...Through Kazakhstan, to end up on, like - on the battlefield in Ukraine?

WOODS: That kind of chain is totally possible. And it's not just Kazakhstan where these patterns are happening. You see a really dramatic spike in imports in Armenia, in Kyrgyzstan as well. And the bigger picture here is that the sanctions have these loopholes. Part of those extra sanctions announced today were targeted at people or companies whom the Treasury Department accuses of helping Russia evade sanctions.

WONG: Speaking of trade, my indicator is also about trade - not in refrigerators, but in one industry in the region that really affects the whole globe, and that is grain - specifically, 3 million tons of it. That is my indicator - 3 million tons. That's how much grain was shipped out of Ukrainian ports in January, according to data from the United Nations. And this number tells a couple of different stories. One is what the international community would consider a success story. So you might remember, back in June of 2022, we did a story about how Ukraine was trying to get millions of tons of trapped grain out of the country.

WOODS: Right. I remember this big crisis, when the Black Sea was blockaded, and that grain couldn't get out.

WONG: Yeah. And so actually, a month after we did that story, the U.N. brokered a deal between Russia, Ukraine and Turkey to allow safe transport of Ukrainian grain exports through the Black Sea. So this agreement helped get those crucial shipments moving again, and so the 3 million tons in January is part of that good-news story.

MA: OK, so that's the good-news story. But you said there was a couple different stories here?

WONG: Yeah. So the flip side of this is that that 3 million ton number is kind of moving in the wrong direction. It's down from December, and this Black Sea grain deal that the U.N. helped negotiate is expiring next month. And now there's news reports saying there's a lot of uncertainty over whether Russia will be willing to extend the agreement, and then this uncertainty is maybe putting the brakes on shipping activity.

WOODS: I mean, I'm just trying to picture myself as - I don't know - the captain of some shipping company, just wondering if I'd even have boats that would be safe over the next month.

WONG: Right? I mean, it's just a huge risk. And meanwhile, the Ukrainian Grain Association has accused Russia of deliberately delaying ship inspections because part of the agreement is that a joint team with representatives from Ukraine and Russia and Turkey and the U.N. have to inspect all the ships. And this Ukrainian grain group says some ships have been waiting a month to get cleared, and it blames Russia for the delay.

So the worry is that, if the agreement doesn't get extended, we'll be back to where we were last year, with grain shortages and increased food prices all over again, which we know hits low-income countries especially hard.

WOODS: All right. So some pretty - I don't know - glass-half-empty indicators this week.

MA: Hopefully we don't have to do this segment next year.

WONG: Ah, yeah, same here.

(SOUNDBITE OF MUSIC)

WONG: This episode was produced by Corey Bridges, with engineering from Debbie Daughtry. It was fact-checked by Sierra Juarez. Viet Le is our senior producer. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.

(SOUNDBITE OF MUSIC)

Copyright © 2023 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.