Russia may suffer a heavy blow amid economic sanctions and lose top energy supplier status, experts say

In the early stages of the conflict in Ukraine, Russia's ability to withstand sanctions astounded analysts. However, there are increasing indications that Russia's economic situation will deteriorate due to its growing isolation, and its status as an energy giant would be significantly weakened. Russia has mostly retaliated after taking the initial blows of western sanctions by cutting off trade with the west, trading only with "friendly" nations, and forging alliances with countries that can tolerate doing business with a pariah state. Through the weaponization of the energy trade, it has had some success in sowing instability; most recently, it cut off gas supplies to Europe's crucial Nord Stream 1 pipeline while selling the remaining fuel supplies to consumers in China and India. In only the first three months of the conflict, Russia made almost $24 billion from selling energy to those two nations. According to Yuriy Gorodnichenko, a UC Berkeley economist, evidence are growing that Russia is going to pay a significant price for isolation in the long run beneath President Putin's brazen display of defiance. "What they propose to do is a recipe for long-term stagnation," Gorodnichenko told Insider, pointing to other isolated nations with the world's weakest economies, specifically North Korea, Afghanistan, and Cuba. In reality, Russia's isolation started in 2014 when its economic situation deteriorated before its invasion of Ukraine. In 2021, the GDP of the nation was $1.78 trillion, down from $2.06 trillion seven years earlier. The IMF predicts that this year's GDP will decrease by an additional 6%. "What happens is that [isolationism] reduces the number of products that [Russia] can buy," Jay Zagorsky, a markets professor at Boston University, said. "It can only buy Indian agricultural goods, it can only buy Chinese manufactured goods, that sort of thing. And when you limit yourself to one particular country you often end up not getting the highest quality, or the best price." This suggests that Russia's payment restriction on the "unfriendly" US dollar, which accounts for 88% of all worldwide foreign exchange transactions, is a significant obstacle that enables merchants to markup prices and raise import prices. According to data from the Peterson Institute for International Economics, economist Paul Krugman noted in a recent op-ed that trade with sanctioning countries has declined by 60% since the conflict, while trade with non-sanctioning countries has decreased by 40%.