Russia’s large-scale invasion of Ukraine in February 2022 not only caused global outrage but also led to a series of sanctions aimed at crippling the Kremlin’s war capabilities. Russian assets abroad were frozen, its economy was isolated from the global financial system, and its energy exports were targeted.
Western officials and commentators labeled the sanctions as “crippling,” “debilitating,” and “unprecedented,” giving the impression that Russia’s economy would not withstand the pressure and would be forced into economic collapse, compelling the Kremlin to withdraw its troops.
However, 27 months later, the war continues, and rather than being devastated, Russia’s economy is growing. The International Monetary Fund forecasts a 3.2% economic growth for Russia this year, surpassing growth rates in advanced economies. Despite the sanctions, Russian supermarkets remain well-stocked, though prices have risen and some Western products have disappeared following the exit of Western companies from the Russian market. Nevertheless, many of their products still make their way into Russia through various channels.
Although fewer Western CEOs attend Russia’s annual economic forum, the St Petersburg International Economic Forum claims participation from delegates from over 130 countries and territories. Russia has developed new markets in the East and the Global South, allowing officials to assert that efforts to isolate Russia have failed.
Yevgeny Nadorshin, senior economist at PF Capital, acknowledges that sanctions disrupted many economic operations, but adaptation and restoration have occurred. Elina Ribakova, senior fellow at the Peterson Institute for International Economics, explains that sanctions were never expected to cause an immediate collapse but to disrupt until workarounds were found, which Russia has achieved.
Russia redirected its oil exports from Europe to China and India, circumventing the G7 and EU’s price cap aimed at limiting revenue from oil exports. Despite efforts to limit Russia’s oil revenue while keeping the global market stable, Moscow continues to profit.
China has become Russia’s main oil supplier and a crucial economic partner, with bilateral trade reaching a record $240 billion last year. Chinese products now dominate Russian markets, and Chinese components are evident in new Russian products like the Volga car.
Military spending, rather than industries like the automobile sector, drives Russia’s economic growth. The ongoing military operation in Ukraine has spurred armament production and increased employment in the defense sector, raising wages in this field. However, Chris Weafer of Macro-Advisory warns that prioritizing military spending over other sectors will harm long-term economic development, diverting funds from infrastructure and other projects.
