Will Putin be able to circumvent the Western economic blockade?

The severe sanctions imposed on Russia have caused a fierce fall in the ruble and are forcing the Kremlin to look for ways to keep the economy afloat. For Vladimir Putin, this means finding a way to somehow circumvent the Western economic blockade while his forces continue to invade Ukraine.

Experts say that Russia will surely try to counteract the impact of the sanctions from the sale of fuels, relying on its gold reserves and the Chinese currency. Putin is expected to transfer funds through small banks and the accounts of wealthy families that were not affected by the sanctions. Also that he turns to cryptocurrencies and tries to profit from his relationship with China.

Today, “the two biggest resources that Russia has are China and the energy sector,” said John Smith, former director of the US Treasury Department’s financial intelligence and surveillance division.

This country and the European Union (EU) imposed strong sanctions on the main banks and the rich Russians, freezing the assets of the Russian Central Bank that are outside the country and excluding its financial institutions from the Swift transfer system, but in general terms they continue to allow Russia to export its oil and natural gas.

Russia is likely to seek from China the goods and services it normally receives from the West, according to Smith. “They are confident that their huge energy reserves will continue to generate demand, especially in this cold winter. They can generate significant profits with the energy sector if they can get it to the markets,” Smith said.

Russia and China last month signed a 30-year agreement under which the Russians will supply gas to China. However, it will take three years to complete the gas pipelines to be used. China, on the other hand, announced last week that, for the first time, it will allow the import of wheat from all corners of Russia.

Smith, however, said that China and other potential buyers “have a lot of wiggle room to push prices down” now that Russia has fewer buyers and that China will try to avoid sanctions for dealing with Russia.

The sanctions do not affect Russia’s gold reserves, a metal that Putin has been accumulating for years.

Tyler Kustra, an associate professor of politics at the University of Nottingham who has studied the sanctions, noted that Russia had already adopted a kind of war economy, producing a number of items on its own even though it was cheaper to import them, in a effort to shield the Russian economy in case of sanctions.

Russia produces much of the food it consumes, he said, though not always of the same quality as what it imports. “My friends in Moscow tell me, ‘You can’t make cheese right,’” Kustra said.

It also seems inevitable that Russia will turn to cryptocurrencies to facilitate its international transactions, according to David Szakonyi, a political science professor at George Washington University. “But it is unlikely that this will be a substitute for long-term business transactions.”

The Joe Biden administration maintains that China will not be able to compensate for the loss of the US and EU markets and that the sanctions imposed will be devastating for Russia.