Russia's finances are 'in the shit,' says a former Russian economy minister

• A former Russian economy minister warned of a looming financial crisis in Russia, per local outlet The Insider.
• "It's not that we're in the shit, it's that we've decided to settle down in it," Andrei Nechayev, a former economy minister said.

A former Russian economy minister has blasted the country's sanctions-hit economy and warned of a looming financial crisis.

"It's not that we're in the shit, it's that we've decided to settle down in it," Andrei Nechayev, Russia's former economy minister, said at a financial forum last week, according to a translation by The Insider, a Russian independent outlet.

The outlet has no affiliation with Insider.

A video of his comment at a panel discussion was uploaded to Telegram on May 16 by Vecherniye Vedomosti, a local media outlet. Nechayev's comment triggered some nervous laughter from the audience, the video shows. One person even applauded.

Nechayev, who was Russia's first economic minister from 1992 to 1993 after the fall of the Soviet Union, also warned of a looming economic crisis for the country.

Per The Insider, Russia has already exceeded its budget deficit plan for the first four months of 2023. Nechayev said Moscow has enough reserves to cover the deficit for just one year but will have to borrow thereafter.

Russia reported a federal budget deficit of 3.42 trillion rubles, or $42.5 billion, in the first four months of 2023 — overshooting its full-year plan for a deficit of 2.9 trillion rubles, Bloomberg reported on May 11, citing official data.

Russia's economic situation isn't surprising — its energy revenues have slumped 50% in the first quarter of 2023, thanks to a G7-led $60 per barrel price cap on seaborne crude and bargain-hunting from Asian buyers.

Russia has also tried to counter the sanctions by either importing from non-sanctioning countries or substituting with home-grown options. But it hasn't been very successful, particularly for high-tech products, analysts at Bruegel, a Brussels-based think tank, wrote in March 2022.

Nechayev shot a similar warning, saying that while McDonald's can be replaced by blinis — or Russian pancakes — there are no substitutes for high-tech products. He was referring to the fast food chain's exit from Russia last year following the invasion of Ukraine.

The former minister isn't the first high-profile voice to warn of Russia's technological decline following the sanctions.

"The world will move forward, but Russia will only use some second-grade technology and spend huge resources to recreate what there already is in the world, but can't be imported," Oleg Vyugin, a former high-level finance ministry and central bank official, told Reuters in an interview last September.

The Kremlin did not immediately respond to Insider's request for comment sent outside regular business hours.