How much has Putin’s war on Ukraine damaged Russia’s economy?

European Union energy ministers held emergency talks Monday about their purchases of Russian natural gas. The previous week, Moscow cut off supplies to two member states, Poland and Bulgaria, because they refused to pay for the gas in rubles. Fears are growing that Germany, Europe’s economic powerhouse, could be terminated next.   

But while Europe frets about this latest economic repercussion caused by Russia’s war on Ukraine, what of Russia itself?

Oil and gas fund up to 50% of the Russian budget. Is President Vladimir Putin killing his golden goose and battering the Russian economy? 

Putin has shrugged off the prospect of parting company with Europe, his best natural gas customer. But Ole Hvalbye, an energy analyst with the SEB bank in Oslo, Norway, said this would be, for Russia, a very painful divorce.

“You can think about this as a sort of 25- to 30-year-old marriage, you know. These are really long-term contracts. It takes time to build the infrastructure for gas supply. It’s a massive investment,” he said.

Doubling the existing Russian gas pipeline network to China would take eight years, cost billions and still cover less than half the lost sales to Europe, Hvalbye estimated.  Then, there’s the damaging psychological effect of Russia cutting off supplies to Poland and Bulgaria.

“Russia has, sort of, ruined their reputation. And there will not be many countries going into these new long-term contracts with them,” he said.

The reputation for unreliability might also affect long-term contracts to supply crude oil and oil products, which are Russia’s biggest export. They’re worth almost $200 billion a year.

So, has Putin’s war been an economic disaster for Russia? The immediate financial cost has certainly been enormous, according to Tim Ash, senior strategist at BlueBay Asset Management in London.

“It comes to something like $1.4 trillion of impact on Russia,” Ash said. “That’s a huge amount of money. It’s about $8,000 per head of the Russian population.”

That figure takes into account the halving of the Russian stock market’s value, the freezing of assets controlled by the central bank and Russian oligarchs, and Western sanctions’ overall effect on economic activity. The sanctions are likely to continue as long as Putin remains in power.

“This adds up to less investment, less growth, lower living standards, probably a brain drain, higher inflation and an overall undermining of Russia’s productive capacity,” Ash said.

This isn’t just a Western perspective. Russia’s central bank surveyed more than 13,000 businesses across the country, and, as pointed out by Elina Ribakova, deputy chief economist at the Institute of International Finance, the results were dire.

“Almost every industry you take, they’re having shortages, they’re having difficulties to export their products to the markets they used to export to — Europe is the most…