After the 2022 Russian full-scale invasion of Ukraine, the world witnessed a wave of sanctions that severely affected the Russian economy. The West acted quickly and decisively, with the US and the European Union imposing restrictions on almost every sector of the Russian economy.
Since then, Russian officials have promoted the idea that the sanctions are ineffective or, more cynically, that they hurt Europe more than Russia itself. Yet beneath the facade of resilience painted by Russian propaganda, Moscow’s economy is undoubtedly suffering severe consequences.
A deeper analysis reveals how the sanctions are dealing a devastating blow to the Russian economy, the quality of life of its citizens, and, ultimately, the stability of the Russian state itself.
The ruble as an indicator of economic health
The ruble exchange rate is a clear indicator of the health of the Russian economy. Today, it has fallen to 100 rubles to the dollar, a severe devaluation from pre-war times and reflects the vulnerability of the Russian financial system. This decline reflects not only the severity of the sanctions but also a loss of confidence in Russia's long-term economic prospects.
For the average Russian, this means galloping inflation, reduced purchasing power, and an increasingly uncertain economic future. Basic necessities such as food, medicines, and imported products have become many times more expensive, placing enormous pressure on household budgets.
Sanctions have resulted in a de facto war economy in Russia, as more and more resources are directed toward the maintenance of military activities rather than productive economic investment. Russia has acted as a street thug, nationalizing and confiscating foreign resources, leading to the departure of global brands that had previously supported the Russian market.
The absence of those companies and the failure to replace their presence with adequate domestic alternatives has created a void, resulting in a limited product range and reduced competition. This war economy model is not only unsustainable but also an obstacle to real economic growth and modernization.
Frozen Russian assets
One of the often-overlooked consequences of the sanctions is the billions of dollars in Russian assets currently frozen abroad. According to some estimates, Russia has more than 300 billion dollars in reserves and assets located in foreign institutions that it cannot access. Those reserves would be key to stabilizing the ruble, financing public expenditures, and providing a financial cushion for the faltering economy.
Without those funds, Russia faces limited options, and it is difficult to envision a rapid economic recovery. Western control of these assets is a powerful reminder that the Russia no longer controls its own economy.
Over-reliance on Western technology
Western restrictions affect many sectors, from technology to aviation. For example, sanctions on technology exports have severely affected Russia's ability to modernize its industries, as it had become heavily dependent on Western technology for everything from automotive to telecommunications products.
Russian airlines, cut off from Boeing and Airbus products and services, are unable to adequately maintain its fleet, has a severe shortage of spare parts, increasingly forcing them to cannibalize parts from existing aircraft to maintain fleet operations. The Russian economy is essentially operating on borrowed time, with infrastructure and equipment becoming increasingly obsolete, which will further reduce productivity.
Is the West suffering as much as Moscow?
One of the narratives the Kremlin continues to promote is that Western sanctions have backfired, harming Europe more than Russia. This claim, however, does not stand up to even a basic, let alone a more detailed, analysis.
Despite the challenges Europe faces, particularly in transitioning from Russian energy sources, most EU countries have already diversified their energy sources. Russia's oil and gas revenues have plummeted, and Europe's rapid adaptation is undermining Moscow's leverage on power.
For Russia, the energy sector represented a significant part of its GDP, and the sharp drop in demand from Europe created a financial hole that Russia cannot fill with domestic or alternative buyers. Even when it has found alternative customers such as China or India it has had to offer major discounts.
Uneven implementation of sanctions
A worrying aspect of the sanctions story is the inconsistent response of Western companies. While many withdrew their operations from Russia in response to the aggression, some either remained there or quietly resumed operations.
This inconsistency not only undermines the broader sanctions strategy but also weakens Western unity. Companies that continue to operate in Russia are indirectly financing a war effort that the West has unanimously condemned and continues to condemn. For the sake of moral consistency and strategic efficiency, Western countries must ensure that their companies do not provide economic lifelines to a country like Russia.
The continuous economic erosion in Russia is a testimony to the effectiveness of the sanctions imposed by the US and the EU. However, the West must not be complacent. Additional measures are necessary if the goal is to quickly and irreversibly stop Russia's ability to wage war.
An immediate and effective step would be to release some of the frozen Russian funds, not for their return to Russia but for Ukraine's rebuilding and defense. This strategy would simultaneously weaken Russia's economic foundation and strengthen Ukraine's resilience.
Furthermore, the West must maintain and expand the sanctions regime, focusing on the remaining loopholes that allow Russian companies access to foreign markets and technologies. The key is to remain vigilant and consistent, recognizing that Russia's economic collapse will have far-reaching consequences. As Russia's economic isolation deepens, so will the desperation among its leaders, not least that of Putin, grow!
Russia’s economic present and future
Today, Russia's economy is just a shadow of what it once was, devastated by sanctions and burdened by a government obsessed with military expansion rather than domestic prosperity.
A dramatic drop in the value of the ruble, billions in frozen assets, and the collapse of Russia's industrial and consumer sectors point to a terminal economic crisis. While Russian propaganda may continue to promote resilience, the reality is clear: Russia's economy is in freefall, and its citizens are paying the price.
Under the leadership of President Vladimir Putin, Russia has become an international pariah, a rogue state with few allies and even fewer options for reversing its economic decline.
The West must remain resolute, recognizing that any easing of sanctions would only strengthen Putin and prolong the suffering of Ukrainians. The US and the EU must continue to impose severe economic sanctions on Russia, using all their financial and political leverage to further isolate and destabilize the Russian economy.
By redirecting frozen Russian funds to Ukraine, the West can ensure that Russia's economic collapse has a constructive purpose: the restoration of a sovereign and democratic Ukraine.
In the end, Putin's attempts to blame Western sanctions for Russia's misfortunes are empty rhetoric. Russia's economic collapse is self-inflicted, a consequence of choosing aggression over diplomacy and war over peace.
As this economic decline accelerates, it is increasingly apparent that Putin is not only leading Russia into the abyss but is willing to sacrifice its future to maintain his grip on power. The West must remain firm, ready to carry this policy through to its ultimate outcome: a Russia that is both militarily and economically defeated, unable to threaten its neighbors or destabilize the international order ever again.
The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.