31 March 2023, Friday, 0:49
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The Kremlin Can't Stop Economic Collapse

The Kremlin Can't Stop Economic Collapse

The drop in the economy is greater than Russian officials predicted.

Very active and protracted hostilities with population mobilization, as well as sanctions imposed on Russia, continue to destroy the economy of the aggressor country. The drop in all indicators by the end of 2022 was greater than Kremlin officials had predicted.

According to Channel 24's sources in the Ukrainian security services, forecasts by Central Bank and Finance Ministry officials for 2023 indicate that Russia will face the most difficult times since the 1998 default. Officials will not be able to improve the situation, because the only thing they can do in the face of rising costs and sanctions pressure is to delay the complete collapse of the economy.

However, the insane printing of rubles and the attempts of the Russian authorities to keep the indicators at least at the level predicted by the officials cannot affect the death of the manufacturing sector as such, which is actually the mainstay of the economy.

Only reports have saved the moratorium on bankruptcy

Internal documents of the employees of the Russian Ministry of Finance show that every sixth business was on the verge of bankruptcy at the end of 2022. Already in 2023, these figures may significantly worsen, and about 20% of companies in the manufacturing sector of the economy will stop working.

A whole wave of corporate bankruptcies hit Russia back last April, when civilized countries banned their banks from providing loans and refinancing to the aggressor country.

Nine months after the outbreak of full-scale war Russian companies showed a net financial result of almost minus one trillion rubles. These figures demonstrate that doing business in Russia is becoming unprofitable, and at some point even large enterprises will have to cease operating at a loss.

Due to the inability to make money, more than 60 thousand Russian entrepreneurs became insolvent. It entailed non-payment of loans and delays in salaries to employees.

This is actually the only thing that saved officials from stating the death of Russian business - the Cabinet of Ministers' ban on bankruptcy that was in effect from April 1 until October 1, 2022. As soon as the moratorium was lifted, the relevant agencies immediately drowned in reports of intentions to declare themselves insolvent. This mainly concerned medium-sized businesses that simply could not bear the recession, the trade blockade, the destruction of logistics and the disconnection of banks from foreign currency settlements.

However, since the official or actual bankruptcy of a company does not mean just stopping its activities, but also entails a significant loss of income for all companies involved in one way or another in business activities, an incredible increase in arrears has begun in Russia. Just in 2022 legal entities in the aggressor country could not pay about 9 trillion rubles. Half of this amount is debts to suppliers. In all, as of January 2023, Russian companies have overdue obligations of more than 560 billion rubles.

Everybody feeds Moscow.

The financial crisis, the consequences of which Russia has not yet been able to feel in full, has already fully hit budgets of the regions in the aggressor country. Late in 2022, each of the regions of the aggressor country was short of trillions in the most important tax that is paid by organizations from their profits because of the drop in the performance of local businesses.

Over the year, aggregate revenues of the regions decreased by at least 8%. At the same time, regions sent more than 60% of all revenues to the federal budget, although they had to reduce all their expenditures.

However, since the Kremlin is not going to relieve pressure on the regions and change something in the redistribution of finances, by the end of 2023, the survival of all federal republics depends directly on the center. If Moscow suddenly decides not to help the people of Tyva, the local residents will have no choice but to chew birch bark and hunt rats for survival.

Moreover, the Russian Finance Ministry reports that every other Russian region will spend considerably more than it collects in taxes. However, only the Moscow and Leningrad regions have "cash cushions" not to feel the worsening of living standards.

Therefore, in fact all of Russia in the most economically difficult year will be working solely for the needs of Moscow, while the Kremlin will only deal with its military and political problems. After all, Putin cannot wait to destroy Ukraine, conduct mobilization, bomb residential areas, and "feed" the population with propaganda.