The longer the war continues, the greater the destruction and the greater the bill for reparations. As of late 2022, total material damage could easily amount to $1 trillion-plus perhaps another $1 trillion (or more) for deaths, wounds, and displacement of human beings. Since Russia’s total GDP is not much more than $1 trillion (not even one-twentieth of the US figure), how could Russia ever meet its obligations to Ukraine?
The issue is not fanciful. The UN General Assembly on November 14 adopted a resolution by 94 votes to 14 that calls for war reparations to Ukraine. The resolution stated Russia “must bear the legal consequences of all its internationally wrongful acts, including making reparation for injury, including any damage, caused by such acts.” It called for an international mechanism to agree on compensation for damage, loss, and injury, as well as a register to document evidence and claims. China and Cuba were among the 14 negative votes, while India was one of 73 countries that abstained.
Presenting the resolution, Ukrainian Ambassador Sergiy Kyslytsya outlined the impact of the Russian war on his country, including the bombing of residential buildings and infrastructure, the demolition of nearly half of the power grid and utilities, massive displacement, and atrocities such as murder, rape, torture and forced deportations. The ambassador also pointed out that Russia had supported the creation of the UN Compensation Commission in 1991 following Iraq’s invasion and occupation of Kuwait. That commission, Kyslytsya noted, completed its mandate in February 2022, having paid out over $52bn in reparations to victims.
It took three decades, but Iraq — despite its own sufferings — used oil revenues to pay off its debts to Kuwait. Russia, despite its relatively small GDP (1.33% of world GDP), declining growth, and a brain drain accelerated by Vladimir Putin’s “special operation,” could gradually use its oil wealth and sale of other commodities to indemnify Ukraine.
Despite the bite of sanctions, Russia has earned huge sums from its foreign trade this year. It continued to be one of the world’s leading exporters of crude oil petroleum — with China, India, and Turkey the leading buyers. The state-run Russian energy giant Gazprom posted a record profit in the first half of the year, even as shipments to Europe slumped. International car makers still depend on Russia for palladium and rhodium to make catalytic converters. French nuclear plants rely on Russian uranium, while Belgium is still playing a key role in Russia’s diamond trade.
Russia earned at least $55bn in 2022 from the export of coal briquettes, platinum, pig iron, asbestos, and nickel mattes. The only high-tech product in which Russia is a world leader, with 26% of the global market, is nuclear reactors, valued at $870m in 2022.
Back in 2020, Russia imported $220bn of products from the rest of the world, including cars, car parts, medicine, and computers — buying heavily from China, Germany, and Korea. The volume of its imports plunged as sanctions and trade limits went into effect, but a few countries, including China and Turkey, have deepened their relationships with Russia since the war began. China’s total trade with Russia in 2022 was $15bn — up 64%, due largely to imports.
Russia’s role in world trade is minuscule compared to that of China, the European Union (EU), and the United States. Indeed, the value of Russia’s trade in 2021 was less than India’s and about the same as Singapore’s. Nonetheless, the value of Russia’s exports grew after it invaded Ukraine, even with many countries opposed the war. Attempts by Western nations to use sanctions and other measures to cripple Russia’s economy had limited effects as the war pushed energy prices higher. In October, the International Monetary Fund (IMF) said it expected the Russian economy to shrink by only 3.4% percent in 2022 (a much smaller contraction than predicted earlier in the year.)
Russia needs to find buyers for its gas, with China and others only able to make up some of the difference, mainly due to inadequate infrastructure. By mid-year, Germany had cut by half its natural gas imports from Russia, relying more on Norway and the United States.
The longer-term picture for Russia’s fossil-fuel export-dependent economy is surely questionable. Without profound change, Russia’s capacity to meet challenges creatively will not improve — in 2021, it ranked 47th on the Global Innovation Index (in which Switzerland, Sweden, and the USA rank 1, 2, and 3). Ukraine, before the war, ranked 57th, but it has shown tremendous resilience in 2022.
The impact of sanctions on Russia will probably become more severe, but when and to what degree are uncertain. While Russia’s ability to produce oil and other commodities will not suffer unless war or civil strife hits the homeland directly, its income is dependent on global prosperity. If recession strikes, its energy income will plunge, as it has in the past. Before the Ukrainian conflict, Russia enjoyed a favorable trade balance — $427bn in exports versus $247bn in imports in 2018. This kind of surplus—at least ($180bn) has surely increased in 2022. It’s also worth remembering that the West has frozen $300bn in official Russian assets and even more in the private assets of ultra-wealthy individuals with Kremlin links.
Much of Russia’s present and future trade earnings surpluses will be needed for domestic needs, but a large fraction can and should go to Ukraine. The major obstacle is not economic but political, and whoever ultimately inhabits the Kremlin should be made to agree.
Walter Clemens is Professor Emeritus of Political Science, Boston University, and Associate, Harvard University Davis Center for Russian and Eurasian Studies. His next book is‘What Happened to Russia?’
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.