The purpose of the sanctions is to cut Russia's income and give President Vladimir Putin a choice: spend the money to maintain the declining living standards of Russians or continue the biggest war in Europe since World War II.
"The so-called blitzkrieg that our ill-wishers conceived with regard to Russia, the economic blitzkrieg, of course, failed," Putin said in front of his government. The economic downturn and inflation in 2022 turned out to be better than expected, and gas revenues hit record highs, despite Putin's decision to voluntarily cut exports without any sanctions in an attempt to strangle the European economy.
But if we compare not with the gloomy forecasts of last spring, but with how it would have been without the invasion of Ukraine, the picture is different. "After 12 years of stagnation, 2022 was supposed to be a year of rapid economic recovery after the pandemic and growth of 3-4%, and even more with high oil prices. However, instead, there was a recession, even according to official statistics," notes economist Oleg Yitzchok of the University of California, Los Angeles.
It turns out that Russia has already missed 6-7% of the growth in welfare. And this is only in terms of GDP, which takes into account both record exports and war expenses. They have grown significantly. But imports and consumption in general have declined. People do not export oil and do not develop conquered lands. They buy cars and Coca-Cola, and master summer cottages. Therefore, the real state of affairs is more likely to be indicated by the figures of inflation caused by the shortage of goods and services due to sanctions, and the reduction in the turnover of retail and wholesale trade. "So if we evaluate the decline in the standard of living of the population, then the figures in the region of 10-12% reflect reality rather than GDP statistics," Itzkohi says.
The effect of sanctions will increase every month, economist Vladislav Inozemtsev believes. But they will not stop Russia's aggression against Ukraine. "Sanctions strike not when they are announced, but at least six months after they come into force. By the end of 2023, we will really feel the effect," he said at the December conference "Russian realities-2022: politics, economics, civil society."
"Sanctions will not change Putin's policy. The Russian economy may collapse, but Putin's desire to fire rockets and shells at Ukraine will not disappear from this," Inozemtsev said. Even if the money runs out, the cost of the war in the budget is allocated to protected items. And the money is not over yet: in addition to savings in the stabilization fund, Russia continues to earn.
“Sanctions are not magic. They limit the ability to finance a war, but they will not stop it by themselves,” Yitzchoki says. “As long as Russia sells oil and gas, GDP will be fine, and the budget will be fine.” ". "Import sanctions may lead to economic stagnation for years, but not to an acute financial crisis. For there to be a crisis, financial sanctions will have to be combined with export sanctions, not with import ones." This is exactly what the West did. With a delay of almost a year, he introduced an embargo this winter on Russia's main export commodity - oil and oil products. Many exceptions have been made to it, including a price ceiling, and it is too early to talk about efficiency.
"Half of Russia's export earnings are oil and oil products, and 2023 will be very different from 2022 if the European embargo and the oil ceiling work," Yitzchoki said.
"But today it is clear that this is not the force that will stop the war."
Transatlantic coordination on sanctions against Russia seems ideal since the Russian invasion of Ukraine. This is something new: until February 2022, sanctions were a source of diplomatic friction between the EU and the US.
However, the damage from them is far from evenly distributed. Europe is disentangling the main consequences, while other Western countries have suffered much less. And the United States also won as the largest oil producer in the world and an alternative supplier of energy resources to Russia to Europe. The main negative consequence for their economy - a jump in inflation due to rising oil prices - was leveled by the Americans, having achieved an exception from the European oil embargo in the form of a price ceiling. And the US trade embargo is almost non-existent. Historically, they have very weak trade ties with Russia. Since World War II, the USSR and Russia have accounted for less than 3% of annual US exports and imports, according to the Congressional Research Service (CRS), a research center that specializes in expert opinions and reports for the US Congress.
However, sanctions threaten the current US-dominated world order.
Each successive round of trade and financial sanctions hurts the West more and more. All simple and not very decisions have already been made, and the allies, primarily the Europeans, are in no hurry to expand the restrictions. They suggest focusing on enforcement, closing loopholes, and setting up a new mechanism for large-scale sanctions for everyone, rather than complicating it even more.
Moreover, in order to agree on decisive measures, the EU requires the unanimity of 27 countries, each of which has its own interests and attitude towards Putin's war. Some are critical of Russian diamonds, others are critical of nuclear fuel, and others are critical of pipeline oil supplies. The complete isolation of all Russian banks from the Western financial system is also unrealistic, because somehow you have to pay for goods that are not subject to sanctions: food, medicines, metals, and much more.
The West's main trump card is secondary sanctions. This is when all countries that have not signed the sanctions are offered to choose - either to comply with them anyway and say goodbye to Russia, or to go over to the camp of its allies, fall under penalties and lose access to the US and European markets.
However, until now, the authorities of Western countries have not talked about the possibility of applying secondary sanctions without a large-scale escalation of Russian aggression.