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Russia has already felt the sting of Western sanctions aimed at damaging its economy, but the war in Ukraine that led to its consequences was still raging at the end of the year.
Missiles fell on Ukrainian cities, soldiers fought and the death toll continued to rise.
Critics can point to the ongoing conflict as a result of evidence-based sanctions. But experts say the move could keep pressure on Moscow, and still serves a purpose even if Russia has not withdrawn its troops.
“I don’t think that sanctions will force Russia to negotiate,” said Alexander Lanoszka, an assistant professor of international relations at the University of Waterloo in southwestern Ontario.
However, Lanoszka said the sanctions are putting stress on the Russian state and making it harder for Moscow to finance the war.
“[They can] raise the opportunity cost that the Kremlin faces when deciding on the budget,” said Lanoszka, who believes Western financial and military support for Ukraine will have a more tangible effect on the war front.
Less than forecast
The International Monetary Fund (IMF) estimates the Russian economy will reduce by 3.4 percent this year – a fraction of 35 per cent is the project of Ukraine’s war-ravaged economy will contract.
The decline in Russian GDP is lower than predictedalthough Sergei Guriev, professor of economics and provost at Sciences Po in Paris, said the measure “overestimates the performance” of the country’s war economy.
The increase in the production of cannonballs in Russia seems to increase the GDP, but Guriev noted that “there is no positive effect on the quality of life of Russian households.”
A marked drop in household spending is a true indication of how the war – and sanctions – have affected the lives of people there, he said.
Joy Neumeyer, a historian and journalist, says that Russian state media are promoting the view that sanctions are a costly failure for the West, while domestic consumers are doing well.
“The state media also claims, contrary to most economists, that the Western brand today seamlessly replaced by domestic equivalentsNeumeyer, who previously worked as a journalist in Russia, said via email.
The sanctions imposed on Russia have been overwhelming: Key banks have been removed from SWIFT bank messaging system; Russia’s central bank has limited in accessing $600 billion US in reserves seized by a foreign bank; Russia has cut off access to it Western technology and supplies.
Make adjustments
Top Russian officials have publicly acknowledged the challenges posed by sanctions.
In July, Russian President Vladimir Putin slam “economic blitzkrieg” the country has faced. But he suggested that it did not cause the damage that the West thought it would do.
Most recently, Elvira Nabiullina, head of Russia’s central bank, has the same messagetold MPs that the country’s economy and banking sector had withstood Western pressure – although he noted the effects had already been felt.
“Sanctions are very powerful and their impact on the Russian and global economy should not be underestimated,” said Nabiullina, who face their own sanctions.
Russia make moves in response to these sanctionsincluding raising benchmark interest rates to their highest levels this century, according to Reuters.
Janis Kluge, senior associate at the German Institute for International Affairs and Security, said the introduction of Russian capital controls at the start of the war was the most important adjustment made.
“This helped to stabilize the ruble exchange rate in the first week after the sanctions were imposed, and the strong ruble took some of the pressure off inflation,” Kluge said via email.
Higher energy prices
Energy prices rise amid war chaos, with European gas prices to rise “more than fourfold from 2021,” according to the IMF in October.
Higher gas prices benefit Russia, so Western governments – after months of negotiations – imposed a price cap on Russian oil to limit the income Moscow could earn from exports.
Russian authorities has refused to cap the price and threatened to cut off shipments to countries that agreed.
In response to the sanctions, Kluge said Russia is “capturing a new market for oil exports,” selling more oil to China and India.
However, Guriev said that the average price that Russia receives for oil is falling, and this already has implications for the war effort – such as when Moscow revived its mobilization efforts to bring more soldiers to Ukraine.
“It feels like we no longer have unlimited cash to hire soldiers,” Guriev said. “And that has been the main impact of the sanctions so far.
exodus west
The Russian economy has also been hurt by the exit of many Western companies – more than 1,000 of them have, to varying degrees, curtailed business activities there.
This pullback has involved businesses as diverse as fast food chainfashion brand, store retailer, mining company and automakers.
Experts say Russia’s key industries – including some key to the war effort – have been compromised by this exodus and sanctions that reduce access to Western technology and finance.
“Russia does not fully understand how its military defense complex depends on Western components, so now we see that Russia cannot produce stocks of modern tanks, modern jets, modern rockets,” Guriev said.
Reports indicate Russia may be lacking in long-range precision weapons and that Moscow has imported Artillery made in North Korea and Iranian-made drones.
Tomorrow
The war in Ukraine has disrupted the market, driving up global food prices and create uncertainty about European security.
This also prompted Western countries to take action.
The University of Waterloo’s Lanoszka said countries involved in the sanctions effort have remained closer than expected.
Ten months into the war, he judged the difference between them to be “more tactical than strategic.”
For Russia, the longer it is isolated from interacting more with the rest of the world, the more damaging sanctions will be.
“While sanctions are a slow tool, time can be valuable,” Kluge and co-authors said wrote in a brief fall for the European Union Institute for Security Studies.
Guriev said the strength of the sanctions would depend on the strength of the West.
If the goal is to hinder Russian industry and military industry in particular, he said the West must continue to “play a tough and tiring game” to undermine other countries’ efforts to help Russia overcome sanctions.
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