Since the start of the Russian invasion of Ukraine in 2022, the USA, the European Union (EU) and other Western countries have gradually imposed economic sanctions against Russia. These sanctions, among other measures, aim to use economic pressure to force Russia to change its behavior and stop its military activities. Two years after their introduction, however, the question arises as to whether the sanctions are having the desired effect and how Russia is dealing with the restrictions.
To date, numerous sanctions have been imposed that affect large parts of the Russian economy. The focus is particularly on the energy sector, financial institutions and key industries. Imports of Russian oil into the EU have largely been banned, and a price cap of $60 per barrel is intended to limit Russia’s revenue. In addition, several Russian banks were excluded from the SWIFT international payment system, assets of oligarchs and policymakers were frozen, and export restrictions were imposed on key technologies crucial to the modernization of Russian industry.
These sanctions packages represent the most comprehensive measures since the Cold War and are intended to isolate Russia economically. But despite its breadth, the Russian economy is proving more resilient than expected. Although the ruble has lost value and some industries, such as the automotive and technology industries, are experiencing setbacks, overall the Russian economy remains relatively stable.
In particular, the energy sector, the backbone of the Russian economy, was able to continue to exist thanks to high oil and gas prices and trade diversion to Asia. A third of Russian government revenue still comes from oil and gas trading. Russia has also managed to find alternatives to Western markets, particularly through increased trade relations with China and India. According to current estimates, India sources 40 percent of its oil needs from Russia and has increased imports more than tenfold in the last two years.
In order for sanctions to have their full effect, they must meet basic conditions. Firstly, there is a need for the broadest possible international coalition. The more states participate, the greater the pressure on the target country. It is particularly important to support countries with close economic ties to Russia. As long as these countries do not follow suit, the damage to Russia will remain limited.
Second, sanctions must comprehensively affect all key economic sectors. Unilateral or incomplete measures leave the target country the opportunity to obtain supplies through alternative trade routes and cushion economic losses. These include trade, investment, logistics and mobility – key areas that need to be addressed to maximize economic pressure.
Another important point is the consistent enforcement of sanctions. Even well-designed sanctions lose their effectiveness if they are not sufficiently enforced. Loopholes and gray areas allow the target country to mitigate the economic impact.
China and India in particular have expanded their trade relations with Russia
The sanctions against Russia only partially meet these conditions. A central problem is the lack of global coordination. A UN resolution to impose global sanctions failed in the Security Council due to Russia’s veto. This means that there is no globally coordinated sanctions policy that could significantly increase the pressure on Moscow. The sanctions remain limited only to the EU, the US and some allies, while other major economic powers such as China, India and Brazil are not taking part.
China and India in particular have expanded their trade relations with Russia and are benefiting from the sanctions by buying Russian oil and gas at cheap prices. This lack of global participation significantly weakens the impact of sanctions, as Russia can continue to access significant markets that provide important foreign currency.
The price of oil is also a problem. Despite the price cap of $60 per barrel, the global price of oil remains high, allowing Russia to continue to generate high revenues. On top of that, some countries ignore the price cap and buy Russian oil at higher prices. In addition, Russia operates its own shadow fleet of tankers to organize its oil exports to new markets.
There are also deviations in the implementation of sanctions within the EU. Greece plays a central role here: a large part of Russian oil exports is handled by Greek shipping companies. Greece was able to ensure that the shipment of Russian oil was not completely banned. This deviation within the EU shows that the economic interests of some member states conflict with the enforcement of sanctions.
Comprehensive monitoring of trade flows would be politically difficult to implement.
Furthermore, Turkey, a NATO member, has not fully embraced the sanctions. Due to its dependence on Russian energy exports, it often acts as a transit country for trade between Russia and Western markets. Turkey has significantly increased its exports to Russia since the introduction of sanctions. The share of exports to Russia rose from 2.5 percent of Turkey’s total exports before the war to around four percent. Turkey was able to significantly expand its market position, particularly in areas where European exporters previously dominated. These trade shifts resulted in higher prices and margins for Turkish exporters.
The indirect sale of EU goods via third countries such as Turkey and Kazakhstan, which resell these products to Russia, is particularly problematic. Although the EU introduced the possibility of secondary sanctions in 2023 to prevent the resale of goods to Russia, these measures have not yet been activated. Comprehensive monitoring of trade flows would be politically difficult to implement and would pose significant challenges for the EU’s export-heavy countries. Without such measures, however, the economic impact on Russia will remain limited and the hoped-for economic upheavals will obviously not occur.
In summary, it appears that the Western sanctions against Russia do not meet the necessary conditions to exert maximum economic pressure on the country. The lack of global coordination, particularly due to the failure of a UN resolution, as well as the participation of important economic partners such as China and India prevent Russia from completely isolating itself.
The high energy prices and the circumvention of sanctions via third countries also significantly reduce the effect. While Western countries hoped for an economic collapse in Russia, the country has so far proven resilient. Trade diversion to Asia and the use of loopholes have helped Russia continue to generate revenue and finance the war against Ukraine. In an increasingly multipolar world with geopolitical turmoil, the case of Russia shows how difficult it is to force significant political and economic changes through sanctions.