Is Russia’s Economy Really Just Spain and Portugal? Let’s Do the Math.

Western pundits love to compare Russia’s GDP to that of small European nations. But once you factor in purchasing power, shadow economies, and statistical quirks, the picture looks very different.

You’ve heard the line often enough and it’s usually delivered with the half-smile of someone sure they’re winning the argument.

“Russia’s GDP is smaller than Texas.” Or perhaps Italy, or Belgium and the Netherlands combined. Well, this week, the novelty pairing is Spain and Portugal.

It’s as if geopolitics were a pub quiz and nominal GDP the clinching answer and the tone is always the same: smug, dismissive, and certain that the numbers tell the whole story. Sorry to break some bad news, but they don’t. And treating them as if they do has been one of the quiet failures of Western policy on Russia for decades.

Social media thrives on these soundbites, but the problem is they don’t stay on social media. Instead, they seep into diplomatic briefs, into think-tank reports, into editorial columns, and before long Russia has been reduced to a caricature; a “gas station with nukes,” a fading petrostate just waiting for sanctions to finish it off. Well, haven’t we been waiting a long time now?

Nominal GDP, the favourite metric of the bar-room economist and the chancer, is a crude and misleading measure because it’s simply the value of an economy expressed at current exchange rates. Of course, those rates are volatile at the best of times; but in Russia’s case, they are warped by sanctions, commodity prices, and heavy state management.

What that means is that nominal GDP tells you what a bank clerk in Zurich might see on a screen, not what the country can actually make, grow, or sustain. And by that yardstick, yes, Russia comes out smaller than some Western economies and, indeed, even the US state of Texas. But the comparison is as useless as it is glib because you might as well be comparing pineapples to hand grenades.

The truer measure is Purchasing Power Parity (PPP) which strips away the dysfunction of exchange rates and attempts to answer a simpler question: what will your money actually buy at home? A ruble might not stretch far in central Paris, where you'll pay in the region of €10 for a pint of beer, but in Kazan or Yekaterinburg it goes a hell of a lot further.

By that yardstick, the IMF places Russia’s economy in 2024 at more than $6.9 trillion; the fourth biggest on the planet. That’s more than Japan or Germany and larger than California and Texas combined.

And if we look at this week’s punchline (Spain at $2.74 trillion, Portugal at $0.51 trillion) their combined total is $3.25 trillion, so Russia’s economy is more than twice that size. It’s fair to say this is more a gulf than a rounding error.

However, even that comparison hides more than it reveals, because in the EU, GDP figures include what wonks call the “non-observed economy” (ie. prostitution, drug sales, and other black-market activities) and this is done at the insistence of Eurostat. Thus, even if a country doesn’t legalise them, statistical agencies estimate their value and add them in.

Russia doesn’t bother with this, and in fact takes the opposite approach. Its GDP omits the vast informal economy: the cash-in-hand labour, the village barter, and the unregistered shops and services that sustain everyday life outside the big cities. And in the world’s biggest country this amounts to a hell of a lot: so much so that a Swedish/Latvian study from 2018 measured the black economy at 45% of declared GDP. Which is probably along the lines of Sicily in the 1920s.

So what we are really comparing are ledgers padded with cocaine and brothel receipts against those that ignore potatoes swapped for firewood and God only knows what else. So, no wonder the numbers come out looking strange.

None of this is to suggest that Russia is an economic superpower. It’s not and it faces heavy structural problems; a declining population, capital flight, an enduring technology gap.

But it is also a country that can build its own aircraft, icebreakers, submarines, and nuclear plants. It can feed itself and it can fuel half of Eurasia.

That reality does not vanish because engagement farmers on X can find two EU states whose nominal GDP, when combined, looks similar on paper. But the real danger of that sort of comparison is not that it insults Russia (to be honest, the Kremlin can probably live with that) but that it dulls our ability to see the country clearly.

Dismissing Russia with a GDP one-liner is not analysis. Instead, it’s the data equivalent of comfort food. And garbage in and garbage out, in geopolitics, breeds the same mistake made over and over again.

Russia isn’t Spain and Portugal; It’s Russia. And if we treat it as anything less, we will go on misjudging it.