VEB.RF Chief Economist: Russia Faces Defeat in 'War of Attrition' and Social Crisis

Andrei Klepach, chief economist at Russian state corporation VEB.RF, has said Russia cannot win the economic 'war of attrition,' according to The Moscow Times. He noted that the country is increasingly falling behind the rest of the world in technological development, while the costs of sanctions keep rising.

Klepach stressed that losses caused by Ukrainian strikes on oil, gas, port and logistics infrastructure are becoming a significant macroeconomic barrier to Russia's economic growth. He noted that both Ukraine and the countries supporting it are successfully coping with economic hardships, the outlet Meduza reports.

Losing even to Ukraine

According to Klepach, Russia is losing the technological and economic competition globally — not only to China and the United States, but in some respects to Ukraine as well, whose economy, though partly destroyed and hit by a demographic catastrophe, continues to survive.

Klepach estimated that Russia's potential economic growth rate will not exceed 1-1.5% due to new sanctions and Ukrainian strikes. This, he believes, will inevitably lead to a social crisis in the country at a moment when it is least expected. In his remarks, Klepach drew parallels with the February Revolution of 1917 and the collapse of the Soviet Union, though he expressed confidence that Russia will not fall apart, even as a social crisis appears nearly inevitable.

Sanctions and strikes continue

For several months, Ukraine has been striking Russia's oil infrastructure, which has already caused a fuel crisis in the country, and regularly attacks logistics centers belonging to the company Wildberries. The combined damage from these strikes is estimated at hundreds of billions of rubles.

In late July, the European Union published the lists for its 21st sanctions package, which included several oil refineries and around a hundred banks, including those owned by marketplaces. Meanwhile, the United States is preparing new sanctions legislation that would allow the president to impose 100% tariffs on imports from countries buying Russian oil, uranium or natural gas, or helping circumvent restrictions, as well as sanctions against Russian defense, energy and financial organizations. The US Senate has already approved the bill.