Days before the first anniversary of the Ukraine war, Russian President Vladimir Putin on Tuesday told the nation’s Federal Assembly that the nations who framed the sanctions have impacted their own economies and Russia remains unscathed.
“The initiators of the sanctions are punishing themselves. They have not achieved success. They provoked a growth of prices in their own countries, the closures of factories, the collapse of their energy sector and they tell their citizens that it is the Russians who are to blame,” Putin said while addressing the assembly.
The Russian President is well within his rights to claim that the sanctions have not impacted Russia – not certainly in the manner that the West said it would in the initial months of the war.
Comedian Bill Maher, who hosts the HBO primetime show ‘Real Time with Bill Maher’, in his episode aired June 2022, quipped that one should check if Russians are imposing sanctions on the US and its allies while reacting to skyrocketing energy prices, stock market crashes and inflation in the US as well as in the UK.
Many countries jumped on the sanctions bandwagon and those that decided to remain neutral were nudged by the West to fall in line.
The US wanted to throw everything but the kitchen sink at Russia when it came to sanctions and also pushed Germany, Australia, Japan and South Korea to also do so. France, the UK and other prominent EU member states had their reservations but they did not want to face a war which would engulf the rest of the continent.
They wanted to limit the war to Ukraine and hoped that the sanctions would limit Putin. Days before the one year anniversary of the war in Ukraine, the Kremlin’s war machine grinds on, albeit with a few hiccups but the Russian economy is poised to grow.
According to German not-for-profit news outlet Collectiv, Russia is now the world’s most sanctioned country with 19,939 sanctions imposed on individuals and companies.
At least 14,534 sanctions were imposed after February 24.
Let’s take a look at some of the sanctions:
Banks
The first targets were Russian banks. Within the first week of the war, the UK, US and Australia froze assets and sanctioned several Russian banks like the Black Sea Development and Reconstruction Bank, Industrial Savings Bank, Genbank, Bank Rossiya, Promsvyazbank and VEB.RF.
The European Union sanctioned 27 “high profile individuals and entities” and announced restrictions against all 351 members of the Russian State Duma and restricted economic ties with the so-called independent republics of Donetsk and Luhansk.
The US, EU, Japan, Australia, UK, Canada and New Zealand placed export controls on software, equipment and technology in the same month and later Taiwan also joined the sanctions bandwagon.
Sberbank and its subsidiaries, VTB Bank, Otkritie Financial Corp. Bank, Alfa Bank, Sovcombank and Novikombank and their subsidiaries were sanctioned in the US and American citizens were barred from dealing with them.
However, the biggest move that the US made was to block transactions with the Central Bank of Russia and before that the Biden administration on February 25, 2022 sanctioned Russian President Vladimir Putin and Minister of Foreign Affairs Sergei Lavrov.
All of these were aimed at limiting Russia’s access to money.
The US and its allies removed major Russian banks from the international financial messaging system Swift, delaying its payments to Russia for its oil and gas exports.
Energy
On March 8, the US announced that it will ban imports of Russian oil and gas. In April, the EU – which depends largely on Russian energy – proposed an import ban on Russian coal and the UK said that Russian energy imports would be phased out by the end of 2022. The EU in June barred the import of crude oil and certain petroleum products from Russia into the EU.
However, the US, the G7 and Australia could not agree on one thing – the price cap on Russian seaborne crude. After several rounds of negotiations and disagreements, the G7 and Australia agreed to cap the price of Russian seaborne crude oil at $60 per barrel on November 2, 2022.
The EU made up its mind the next day and imposed a $60-per-barrel price cap for crude oil, petroleum oils and oils obtained from bituminous minerals originating from Russia.
The price-cap issue was finally solved when the EU agreed on two price caps for petroleum products originating from Russia – $100 per barrel for oil products that trade above the price of crude oil and at $45 per barrel for products that trade at a discount to crude oil. This was on February 4, 2023 – 19 days before the anniversary marking one year of the war in Ukraine.
Individuals
The US and its allies sanctions Sergey Lavrov, Russian foreign minister and Russian President Putin in February but they did not stop there.
Russian oligarchs were also held responsible for funding Putin’s war machine. Billionaire former football club owners like Roman Abramovich to founders of Russia’s largest private bank, Pyotr Aven and Mikhail Fridman, entered the list of sanctioned individuals.
According to Refinitiv, more than 10,600 Russians remain sanctioned including Putin’s love interest Alina Kabaeva, industrialists Oleg Deripaska and Alisher Usmanov and even President Putin’s adult children and minister Lavrov’s wife and daughter. The sanctions did not even spare the Russian Duma.
Did the sanctions work?
The West and the western media’s portrayal of the sanctions made it seem like images of Russians queuing outside banks and convenience stores would go viral following the sanctions but those images are yet to be seen.
In 2022, the Russian economy contracted by 2.2% and the construction sector grew, the Guardian reported. It added that the agricultural sector also grew but there are accusations from Kyiv that Russia has stolen Ukrainian wheat from granaries held in Russian-held areas and inflated the numbers.
However, the International Monetary Fund (IMF) says the Russian economy will grow faster than the UK in 2023 and 2024 and questions regarding how effective the sanctions were continue to be raised.
Oleg Itskhoki, a Russian-American economist, told the Guardian that the EU not imposing a Russian export embargo early led to high levels of trade and raked in profits which could help sustain the war for many months.
Also, immediately after the sanctions on the banking sector, the governor of Russian central bank Elvira Nabiullina raised key interest rate to 20% which shut down mortgages and corporate lending but it did its job – Russians did not panic and did not withdraw their money stored in Russian banks.
Also, it is noteworthy that Turkey did not join the sanctions coalition and there are more than 1,200 companies which even include American FMCG brand Procter and Gamble and Japan’s Mitsubishi who are yet to discontinue or scale down their operations.
A chart by LeaveRussia – a website which tracks which companies continue operations in Russia – shows only 191 companies have left Russia.
But, the West remains hopeful.
David Fyfe, chief economist at research organisation Argus Media, told news agency BBC that oil purchases are funding the war but lack of hi-tech components which the military sector requires will impact the war.
An ally of Putin-critic and jailed opposition leader Alexei Navalny, Vladimir Milov, who was also a former Russian deputy energy minister, says the West should stop checking if the sanctions are working regularly and allow the measures to impact the Russian economy at their own pace.
Another expert says, the sanctions are a marathon but not a sprint but in Ukraine, people are sprinting every time there are Russian missile strikes.
(with inputs also from S&P Global Market Intelligence)
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