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 | (Source: Economic Policy) |
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Few days ago, the U.S. and EU hit Russia with another round of sanctions. |
The U.S. imposed sanctions on Russia's big oil companies Rosneft and Lukoil. Their 29 subsidiaries are also involved. Their assets in the U.S. are freeze. American companies are also forbidden from engaging in business with them. They have until November 21st to stop buying from these companies and their subsidiaries. Putin says this is a hostile act and that it will not lead to anything. For Putin, any country respecting itself will not act under constraint and a dialogue is needed. |
The EU also issued another round of sanctions. They include energy, finance (including cryptos), goods and services. But unlike the U.S., the Kremlin does not take these sanctions seriously at all. |
Let's take a closer look at the sanctions that hit Russia and how it affects Moscow. |
Origins and evolutions of sanctions |
The first big wave came in 2014, after Russia took over Crimea. These measures focused on people involved. They also limited Russia's access to markets in the West. But the attack on Ukraine three years ago triggered a huge global response. The EU and U.S. nations hit Russia with broad, multi-layered sanctions. These seek to cut off the financial lifelines that fund Russia's war machine. |
Up to date, the EU alone has adopted 19 packages of sanctions. These include: |
The freeze of Russia's central bank reserves held abroad, A ban on transactions with major Russian banks, Restriction on exports of advanced technology, Capping the price of Russian oil exported by sea.
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The latest package adds new restrictions on Russia's LNG. It forbids EU imports from 2027 onward. It also tightens rules on bypass through "shadow fleets" and 3rd state intermediaries. |
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Key measures |
The sanctions target many pillars of Russia's power. |
Financial sanctions cut Russia off from the global banking system. Big banks were removed from the SWIFT network. This makes payment difficult. Assets of Russia's central bank—worth hundreds of billions of euros—were frozen. This deprived Moscow of a financial safety net. Sanctions on people hit oligarchs, government, and military leaders. Their assets are freeze and travels banned. |
Trade and technology bans aim to weaken Russia's industrial and military base. The export of semiconductors, machine tools, and dual-use goods was highly restricted. Companies withdrew from Russia. It reduced access to advanced components and engineering expertise. This shortage affects Russia's ability to produce modern weapons, aircraft, and energy equipment. |
Energy sanctions are the toughest. Oil and gas exports are crucial sources of revenue for Russia. The West has imposed embargoes on most Russian oil. It also placed a price cap to limit income from remaining sales. The EU's decision to end LNG imports marks a further step. These measures seek to reduce Moscow's budget income, which finances war spending. |
Transport and logistics sanctions target the naval "shadow fleet" used to move sanctioned oil and goods. Ships and service companies helping Russia evade sanctions have been blacklisted. Ports have also been instructed to deny access to these ships. These steps aim to close the loopholes that have allowed Russia's trade to continue despite sanctions. |
Consequences for Moscow |
The impact has been substantial but uneven. In the short term, Russia adapted better than many thought it would. Higher global energy prices in 2022 and 2023 gave windfalls. The state also increased trade with China, India, and other partners. But sanctions tightened and technology shortages deepened. |
Inflation rose, foreign investment fell, and Russia's access to modern tech reduced. The aircraft industry struggled without spare parts from the West. Car production fell due to lack of electronic parts. The ruble, though stabilized through capital controls, lost value by 2024 and 2025. Russia's long-term growth prospects are grim. It is shut out from global markets. This hurts productivity and innovation. |
Energy sanctions are starting to bite. Russia has managed to sell oil to Asian countries. But it must offer steep discounts and rely on a costly shadow fleet to bypass sanctions. Future LNG bans by the EU will further shrink revenues. The IMF estimates that Russia's potential GDP is now several percentage points lower than before the war. |
Global consequences |
Sanctions on Russia also have global impacts. Energy markets were initially destabilized. This led to higher gas and oil prices in Europe. Over time, EU states diversified their energy supplies. They invested in renewables and other sources like Norway, the U.S., and North Africa. The short-term pain pushed for a long-term shift toward energy independence. |
For countries non-sanctioning, mostly in Asia and Africa, the situation has been mixed. Some gained from cheaper Russian oil and new trade opportunities. Others faced higher food and fuel prices. The disruptions to Ukraine's grain exports worsened the global cost-of-living crisis. |
Are these sanctions really a game changer? |
Sanctions have not yet compelled Russia to end its war. Critics argue that sanctions often hurt ordinary citizens more than elites. Plus, Russia has found ways to adapt. Some say that the goal is not an immediate surrender. But is its more of a long-term weakening of Russia's capacity to wage war. From that perspective, sanctions are working. Russia's economy is shrinking, the defense sector is strained, and Moscow's dependence on China is growing. |
Enforcement remains a key challenge. Some countries continue to serve as intermediaries for sanctioned goods. Plus, crypto-based or offshore transactions allow partial evasion. That is why the newest EU packages focus on anti-bypass measures and coordination with partner states. |
Decoding geopolitics isn't a job. It's survival. |
Joy |
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