“Look at Moscow and its expanding metro: are we in a crisis economy, affected by sanctions? No! ” More than two and a half years after the launch of Russia’s “special operation” in Ukraine, this anonymous Muscovite, a typical portrait of the wealthy middle class, says he is torn between, on the one hand, his opposition to the Kremlin regime and the military offensive and, on the other hand, his almost unchanged daily life in a seemingly booming economy.
The rapid development of the public transport network in Moscow is one example among others of this paradox. Since February 2022, economic sanctions adopted by the European Union and the United States have limited Russia’s financial capabilities and reduced imports of Western technologies, including transport. However, on Saturday 7 September the capital had the luxury of inaugurating its sixteenth metro line, which was brand new and very modern, inaugurated by Vladimir Putin himself. With a double message, reiterated every week by the president: Russia continues its development; Western sanctions are a failure.
“The city council’s budget is not affected by the sanctions. Of course, there are sometimes logistical concerns, longer delivery times and higher costs. But imported equipment, both Western and now partly Chinese, is still arriving here.”explains behind the scenes one of the European players in the modernisation of Moscow’s infrastructure.
Like the entire Russian economy, the construction and transport sectors are not immune to the uncertainties linked to Western sanctions. Computer servers are thus filled with computers from the West. The American guarantee no longer covers the replacement of parts, and new imports from “friendly countries” are needed: former Soviet republics, China, Turkey or India. Another example: to circumvent the Western embargo on Russian diesel, Moscow has turned to one of its main allies in the Mediterranean, Morocco, where it transships its cargoes, before re-exporting them to… Europe.
Tax reform
No sector has been spared from the effects of the sanctions, which were quickly affected in 2022 in their logistics and banking transactions. But many materials imported from Europe by factories for more than ten years have been replaced by new equipment, particularly from Belarus. Supply was maintained thanks to local production – import substitution that boosted growth – but also to… parallel imports.
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