Sanctions Taking Toll on Russia’s Economy, Washington-Based Think Tank Asserts

List of Global Sanctions Against Russia, Its Impact On Russian Economy and Companies Fleeing the Country. (shutterstock)

As the West continues to pile economic sanctions on Russia, the debate has raged over how effective the restrictions have been in degrading Russia’s economy and its ability to wage war in Ukraine.

It’s no secret that the Russian economy continues to function, while Moscow’s invasion of Ukraine—now in its 11th month—shows little sign of slowing.

“Hostile countries are not courageous enough to recognize that their infernal sanctions fell flat,” Dmitry Medvedev, deputy chairman of the Russian Security Council, said on Jan. 31.

“They don’t work,” Medvedev added in comments cited by Russia’s TASS news agency. “Even the International Monetary Fund (IMF) is forecasting economic growth in Russia this year.”

Russian President Vladimir Putin attends a meeting with top officials in support of the aviation industry in Russia amid Western sanctions, on March 31, 2022. (Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP)

On the same day, the Atlantic Council, a Washington-based think tank, hosted an online forum, titled “The real impact of Western sanctions on Russia.” The event featured a handful of panelists who suggest that Western sanctions, despite claims to the contrary, are taking their toll on the Russian economy.

“Sanctions are working,” said Elina Ribakova, deputy chief economist at the Institute for International Finance.

Nevertheless, she added, sanctions shouldn’t be seen as a “magic wand” that will instantly cause Russia’s economy “to disintegrate.”

Another panelist, Vladimir Milov, vice president for international advocacy at the Free Russia Foundation, voiced similar sentiments.

Too Early to Tell, Expert Says

While conceding that Russia’s economy has shown considerable resilience, Milov likewise asserted that Western sanctions have had a “big impact.”

“The picture is pretty grim for the Russian government,” he said, claiming that economic activity in Russia had contracted by 5 to 10 percent as a direct result of the sanctions.

According to Ferit Temur, a Turkish political analyst and expert on Russian affairs, it’s too early to say whether sanctions have seriously damaged Russia’s economy or its military capacity.

“Sanctions typically take their full effect in the medium and long term,” Temur told The Epoch Times. “Russia is largely self-sufficient in terms of both underground and surface resources.”

“Most Western countries have trade ties with Russia in terms of supply-chain dependency,” he added. “It’s unlikely that they will replace this supply chain with alternative-source countries in the short run.”

‘Strategic Patience’

According to Milov, who served as Russia’s deputy energy minister in 2002, Kyiv’s Western allies are “on the right track” in terms of their collective sanctions policy. But, he said, it will “take some time” before the effects of the sanctions would become fully apparent.

For this reason, he said, the “best advice” for Western policymakers “is to exercise strategic patience.”

In a report released on Jan. 31, the IMF said Russia’s gross domestic product (GDP) contracted by 2.2 percent last year. It added, however, that Russia’s economy would likely grow by 0.3 percent in 2023.

The IMF went on to predict that in 2024, Russia’s economy would expand by as much as 2.1 percent. By way of comparison, the U.S. economy is forecast to grow by only 1 percent for the same period, according to the IMF.

Milov, for his part, argued that other factors should be taken into consideration “beyond just a handful of macro-indicators that are frequently used in the headlines.”

Russia's President Vladimir Putin (R) and Turkey's President Recep Tayyip Erdogan shake hands during their meeting on the sidelines of the Conference on Interaction and Confidence Building Measures in Asia (CICA) summit, in Astana, Kazakhstan, on Oct. 13, 2022. (Vyacheslav Prokofyev/Sputnik, Kremlin Pool Photo via AP)

He added that indicators such as GDP, unemployment, and the ruble exchange rate “aren’t really indicative of what’s going on in the [Russian] economy.”

Calling for “more complex monitoring” of the situation, Milov pointed to other indicators, such as industrial output, and non-oil-and-gas tax revenue, which, he said, “offer a much more detailed picture of the impact of sanctions.”

Another panelist, Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center, called for the use of “soft indicators”—such as alcohol sales—to determine whether sanctions were working.

According to Temur, many in the West “still perceive Russia within the framework of their classical economic understanding, and evaluate it superficially based on certain macroeconomic data.”

“But since the late 2000s, the Putin administration has been pushing Russia, step by step, towards a statist economic model,” he said.

“Therefore, Russia’s ruling elite finds it more beneficial for their own interests to move away from the Western liberal economic model.”

Monitoring Compliance

Milov also voiced frustration that several third-party countries—“China, Hong Kong, Turkey, and others”—had declined to sign on to the Western sanctions regime.

This, he said, had allowed Russia to import “critical sanctioned goods and technologies” that would otherwise have been impossible to obtain. “The biggest problem today is sanctions circumvention and evasion.”

For this reason, according to Milov, the “key focus” in 2023 shouldn’t be on the imposition of fresh sanctions, “but rather on monitoring compliance with sanctions that have already been introduced.”

In this regard, Turkey, a longstanding NATO member, was mentioned several times during the Atlantic Council’s discussion.

While Turkey was quick to condemn Moscow’s invasion of Ukraine last year, it has so far declined to support sanctions on Russia, with which it shares extensive trade ties and a lengthy maritime border.

Turkish Elections

That being said, Turkey’s long-ruling Justice and Development Party will face hard-fought elections in May, which—if it loses—could lead to major foreign-policy shifts.

“Political change might come in Turkey after elections,” Milov said. “The opposition Republican People’s Party is showing an inclination to join the West on certain measures and probably join the sanctions regime.”

But regardless of the election’s outcome, Temur believes Turkey will maintain relations with Russia due to the two countries’ extensive economic ties.

“Nevertheless,” he said, “Turkey may distance itself from Russia if the opposition wins the election.”

Lichfield, for his part, admitted that the sanctions’ expected impact had taken longer than was initially anticipated.

“There was a sense, perhaps because the sanctions were so unprecedented ... this must mean the [Russian] economy would collapse and there would be a palace coup [in Moscow].”

He added, “We did get carried away in the beginning.”