Vladimir Putin isn’t winning the economic war any more than he is in Ukraine

In Putin’s telling, “European countries have dealt a serious blow to their own economies all on their own” and consumers in the West are now paying the price as inflation hits 40-year highs.

So much for the diplomatic and economic pressure that has seen Russia become the most sanctioned country in history and which President Joe Biden boasted foolishly in April would see the rouble “reduced to rubble”.

Biden’s boasting was misplaced – sanctions do not work overnight, even ones as massive as those imposed on Russia. They take time and continual adjustment. Indeed, the whole point is they are not supposed to cripple an economy at the stroke of a pen.

It would also be wrong to look at those headline current account numbers and come to the conclusion that Russia is doing just fine. It’s not.

First off, Russia is not an economic success story – it bears no resemblance to the advanced countries of Europe. Its gross domestic product per capita is lower than every European Union state apart from Bulgaria and it has been shrinking ever since 2013.

Russia has more in common with the likes of Nigeria and Mozambique than it does with even the least well-off EU country.

If Russia’s economy was in a bad place even before its February invasion Ukraine, it is in a worse place now, thanks to sanctions.

The International Monetary Fund expects it to contract by 8.5pc this year, and possibly as much as 17pc next year.

It’s hard to tell what’s going on because the Russian government has now stopped publishing trade and budget data – hardly a sign that there’s a stunning economic success story in the making.

You can, however, look at the data of countries exporting to Russia, as a Bank of Finland economic thinktank focused on emerging economies does.

Their figures show that exports to Russia from Germany were down by 64pc year-on-year, France by 78pc, Italy by 48pc and Spain by 74pc. And it is not just sanctioning countries in Europe that aren’t selling things as exports from China and Vietnam, Taiwan and South Korea also fell sharply.

So yes, Russia is indeed reaping an energy bonanza, but that huge current account surplus also tells you that there’s nowhere to spend the money as imports have collapsed.

Putin in fact resembles Smaug the Dragon in The Hobbit, sitting on a vast pile of gold and doing nothing with it (come to think of it the resemblance doesn’t end there).

You don’t have to peer far into the guts of Russia’s economy to see how badly it is all going.  Earlier this year AvtoVaz, whose Togliatti plant usually churns out 400,000-plus vehicles per year, said it was launching the Lada Granta Classic. For around €12,000 you will get a ‘sanctions proof’ car and that means no airbags, no anti-lock braking system, no new emission restriction technologies, no satnav and no modern seat-belt pre-tensioners.

This car meets European emissions standards from 20 years ago and it is hard to imagine who outside Russia might buy it, aside from North Korea perhaps.

Russia is an economy that is headed for autarchy in a world of increasingly complex global supply chains and finance and it is hard to cover up those difficulties.

Central Bank of Russia Governor Elvira Nabiullina told Russian news agency Interfax earlier this year that garment makers could no longer source buttons and that the paper industry now needed to develop its own chemicals as imports had ended.

While economic sanctions were never going to stop Russia’s war overnight, they are intended to raise the price of continued aggression.

“In fact, they are unravelling its economy, wiping out more than a decade of economic growth – and some of the most meaningful consequences have yet to be felt,” said the International Working Group on Russian Sanctions, a body of independent experts

“Eventually, the price may reach a level where Russia’s war on Ukraine becomes prohibitively expensive.”

We haven’t reached that point yet, in part because it was so difficult to reach agreement in Europe on existing sanctions.

According to Elina Ribakova who is deputy chief economist at the Institute for International Finance and an expert on Russia, sanctions on oil should have been much tougher initially rather than the planned phased withdrawal as this has allowed Putin to build those current account buffers and to threaten to cut the gas entirely.

As time passes and alternative supplies come online – whether LNG, coal or even nuclear – Putin’s ability to hold Europe to ransom will diminish.

As it stands, the German economy, which is the most exposed to Russian gas, would contract by between 0.5pc and 3pc of GDP if supplies were totally cut, according to many economists. That’s harsh but not as large as the 4.5pc decline seen during the pandemic.

The invasion of Ukraine shows that Russia is a threat to any country that is sees as being part of its historical zone of influence – and that would include the three Baltic states that are EU members. Any notion of going back to business as usual cannot happen.

Europe may well be in for a cold winter, but unless we break our energy dependency on Russia as quickly as possible we run the risk of a permanent freeze.