Sanctions on Russia
in War in Ukraine ·
A really sharp piece by the French economist, Professor Jacques Sapir, published in American Affairs. He dives into how much the West gets wrong when it comes to the actual scale of the Russian and Chinese economies.
A Geopolitical Assessment of the Russian and Chinese Economies
My favorite little mantra: the Russian economy is basically on par with Spain. 🤣
Then, after breaking down the gap between GDP and PPP, he notes:
He points out that the West has seen massive growth in services over the last 50 years, noting:
It’s worth noting that even this doesn't really capture the true strength of these economies. It’s just one thing. You also have to consider another factor...
Innovation index: what are we actually looking at here?
If you really want to pin down the actual scale of the Russian economy, there’s only one way to do it properly: look at where Russia sits in the global export market for key commodities. It’s the ultimate yardstick, isn't it?
A Geopolitical Assessment of the Russian and Chinese Economies
Ever since President Vladimir Putin's War with Ukraine kicked off, everyone's been obsessing over how big the Russian and Chinese economies actually are compared to Western ones. In the beginning, you had policymakers trying to downplay their global impact by comparing Russia's GDP to, say, Spain or Italy. But now that these geopolitical tensions are reviving old Cold War-style blocs, we really need to get a clear handle on just how significant these economies truly are.
My favorite little mantra: the Russian economy is basically on par with Spain. 🤣
Relying solely on raw GDP numbers has probably given the West a false sense of security. On paper, Western economies look dominant, and our ability to slap on sanctions seems decisive. But there's a catch. The West relies so heavily on service sectors—leaving us pretty weak in direct productive industries like manufacturing, mining, and agriculture—that we've created massive vulnerabilities in our supply chains. When things are peaceful and trade flows freely, you might not even notice these gaps. But in an era of deglobalization, intense geopolitical rivalry, and state-on-state conflict, these weaknesses hit hard, while basic industrial sectors suddenly become everything. Getting a real look at this means the West has to rethink its entire strategic position.
Then, after breaking down the gap between GDP and PPP, he notes:
If we look at the USA, Germany, China, and Russia through the lens of exchange rates (Table 1) versus PPP (Table 2), a few things jump out. First, using standard exchange rates significantly undersells the size of the Chinese and Russian economies. By that metric, the Russian economy looks half the size of Germany's and about 130 percent of Spain's. China, despite growing faster, was roughly two-thirds the size of the US economy back in 2019. But once you switch to the PPP method, the profile of Russia and China shifts dramatically. The Russian economy almost reaches parity with Germany, and the Chinese economy hit parity with the US in 2016, having held a slight lead ever since.
The discrepancy between exchange rate methods and purchasing power parity is rarely discussed in mainstream literature regarding China and Russia. This oversight could easily lead to overconfidence in how effective sanctions actually are. Even public-private partnership metrics might still be failing to capture the true strategic weight of the Russian and Chinese economies when it comes to major geopolitical maneuvering.
He points out that the West has seen massive growth in services over the last 50 years, noting:
Is it even worth questioning the actual value of certain services? I mean, sure, if you're looking at a service-based economy during peacetime, everything seems perfectly legitimate. But things shift when you're dealing with war—or even just the constant threat of it. In a conflict scenario, services tend to lose their shine compared to the heavy hitters like agriculture, manufacturing, and construction. It makes you wonder. To really get an accurate comparison between different economies, shouldn't we be looking closely at the share of goods-producing sectors? That's how you actually see what they're capable of.
At first glance, you can see where Russia sits on the spectrum. It’s tucked right between China, where services only account for about 49 percent of GDP, and heavyweights like the United States, France, or Italy, where services make up at least 75 percent of the GDP. Then you've got Germany sitting somewhere in the middle, with services at around 69 percent. Why does Russia look this way? It really comes down to the sheer scale of its industrial and agricultural sectors—that specific structural makeup is what dictates its actual economic weight, just as you can see in Table 4.
If you take a look at Tables 4 and 5, things start looking a lot different. When you strip away everything else and focus strictly on direct production activities, the GDP of Russia and China looks significantly larger than most people realize. It’s actually pretty wild—China’s economy is becoming nine times stronger than Germany's and three times the size of the US economy. Even Russia is on track to eventually overtake Germany, eventually sitting at more than double the size of France. It really forces you to rethink the whole narrative, doesn't it? It flies in the face of those common claims that Russia is basically just performing on par with Spain, or that China is still trailing far behind the United States. The math tells a very different story.
It’s worth noting that even this doesn't really capture the true strength of these economies. It’s just one thing. You also have to consider another factor...
Innovation index: what are we actually looking at here?
Looking at the numbers, China is still sitting comfortably at the top with a massive lead, though Russia has slipped back to sixth place. If you step back and look at the bigger picture, the combined patent count from China and Russia is almost double what you'd see from the United States, Japan, South Korea, Germany, France, and the United Kingdom put together. It really makes you wonder about the actual balance of power on this particular front, doesn't it?
If you really want to pin down the actual scale of the Russian economy, there’s only one way to do it properly: look at where Russia sits in the global export market for key commodities. It’s the ultimate yardstick, isn't it?
Back in 2019, Russia was basically sitting on a mountain of resources. We're talking the world's second-largest producer of platinum, cobalt, and vanadium. They were third in gold and nickel, fourth in silver and phosphates, fifth in iron ore, and sixth when it came to uranium and lead. Not to mention their agricultural game? Massive. They were the top wheat exporter globally and led the pack in barley, buckwheat, oats, and rye—plus they were the number two player in sunflower seeds. Then there’s the energy side of things. Obviously, Russia is the biggest gas exporter on the planet with the largest reserves to back it up, and they rank second in crude oil exports. When you combine that industrial muscle with their control over raw materials, it really puts their alliance with China into perspective. It makes sense, doesn't it? If anyone tries to pull the plug or even just significantly throttle trade with Russia, what do you think happens to the global commodities markets? It wouldn't be pretty. Expect massive disruptions.
It’s pretty obvious now why trying to measure the economic muscle of China and Russia solely through GDP—specifically when you're using exchange rate methods—ends up painting a totally distorted picture of their actual power. It’s a flawed way to look at things, isn't it? And honestly, relying on such skewed data could lead to some seriously bad decision-making. The industrial production metrics we’ve been highlighting? They matter even more now than they did before. Look, it’s not like we’ve officially pivoted to a full-blown wartime economy, but let's be honest—outside of Ukraine, economies all over the world are feeling the heavy weight of current geostrategic realities. It's unavoidable. If we actually want to get serious about assessing the balance of economic power and making decisions that aren't just guesswork, shouldn't our priority be using a diverse set of economic indicators? We need a systematic search for the data points that actually reflect reality on the ground. Otherwise, what are we even doing?