Russian supplies dropped to invasion lows in February

Russian supplies dropped to invasion lows in February

September 27, 2022: -On Monday, Russian stocks decreased to reach their lowest point since February 24, when the first Russian troops came to Ukraine.

The MOEX Russia Index decreased 6.9% by afternoon in Europe, falling nearly 7.4% earlier in the session.

Markets in Moscow have declined since President Vladimir Putin announced a military mobilization the previous week, setting the Russian economy on a war footing and prolonging the conflict in Ukraine.

“From a macro perspective, the main importance for Russia’s economy could come additional Western sanctions, growing pressure on the public finances and greater issues which faces Russia’s labor supply,” Capital Economics Senior Emerging Markets Economist Liam Peach said on Friday.

Russia calls up 300,000 reservists after losing large swathes of territory to a surprise Ukrainian counteroffensive in the last weeks. The Kremlin is holding “referendums” in parts of eastern Ukraine to consolidate Russia’s presence there.

With some EU member states which call for more Russian banks to be cut off from the SWIFT payments system, U.S. senators who propose stricter secondary sanctions for the G-7 oil price cap, and speaking of EU-wide oil price limits, Peach is getting that the Russian energy sector, a key pillar of economic strength could come under threat.

“Calling up reservists and prolonging the conflict comes at a cost. Russia’s federal budget swung into a big deficit in August and, for the government to take care of its prudent management of the public finances, tax hikes will need,” Peach said.

He said that the call-up of 300,000 reservists, alongside reports of many military-age citizens fleeing the country to avoid conscription, could compound Russia’s labor collection problems.

“Official figures experience total outward migration of 216,000, and unofficial figures put the number closer to half a million,” Peach added.

“For a country with a refusing working-age population, this is a big loss of labor and could stifle Russia’s increasing prospects in both the short and medium term.”

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Russian supplies dropped to invasion lows in February