21 February 2023

One year on - Sanctions continue to cause problems for Russia

Almost one year has passed since the Western world implemented a slew of economic sanctions against Russia, following the invasion of Ukraine. FOI researcher Andreas Johnson answers questions about the impact the sanctions have had so far and what happens now.

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What effect did the sanctions have on Russia during 2022?

There have been negative effects for the Russian economy and the country’s ability to import technology and products, but the effects have not been as strong as some analysts predicted early on.

Early signs suggested the sanctions would have more serious implications – the Russian rouble fell sharply and the stock exchange tanked the weeks following the first round of sanctions. But the rouble recovered and the Russian economy managed to stave off the worst effects of the sanctions, mostly thanks to the unusually high price on oil and gas that we saw in 2022.

The idea behind the sanctions was to put pressure on Putin to either end the invasion or at the very least make it harder for Russia to continue the war. For those who hoped the effect would be swift and hard that has not happened.

But that is not the same as saying the sanctions haven’t worked and will continue to cause problems for Putin going forward.

In the first round of sanctions following the invasion, the European Union stopped short of implementing a complete import ban on Russian oil and gas, opting instead to reduce the amount imported over time. Has that happened and what effect has that had?

It is true that a ban was not part of the original packet of sanctions. However, oil and refined oil products was sanctioned in June and these sanctions have only recently come into effect. This means that the EU has managed to cut out around 90 percent of the oil previously imported from Russia. The EU has also started to reduce dependence on natural gas imported from Russia while Russia has reduced gas exports to the EU. The reduction of energy imports from Russia has been compensated by importing energy from elsewhere, but also by striving to reduce the amount of oil and gas needed.

However, the unusually high energy prices have meant that Russia’s total income from oil and gas exports increased in 2022. It´s not clear how the price on oil and gas will develop during 2023 but so far, we have not seen the peaks we saw in 2022.

Which sanctions are the most problematic for Russia?

The sanctions in place now are very wide-reaching impacting business and finance sector, energy sector and production. For example, the ban on technology export to Russia from the West has a negative effect on production in general, including technology needed by the military to continue the war against Ukraine.

The sanctions targeting the energy sector will continue to affect the Russian economy in 2023.

Is there a way to make the sanctions more effective?

There is an effort to make existing sanctions more effective by closing loopholes. When it comes to the ban on certain imports, for example, there are instances of third-party countries suddenly increasing their import of these products and the suspicion is that they are then sold on to Russia.

In addition to that, China and India continue to import large quantities of Russian oil. Other countries also continue to trade with Russia. As long as that is the case, Russia has a way to make up for some of the problems caused by the sanctions.

Are there plans to implement more sanctions?

The EU is preparing to implement another sanctions package in connection with the one year anniversary of the invasion. It is not clear at this moment what those sanctions will include but generally, I would say that much of the focus in the debate has shifted from harder sanctions to instead focus on more support for Ukraine. Several countries, including Sweden, are sending weapons, tanks and material to Ukraine.