The U.S. and its allies have rolled out fresh sanctions against Russia this week, but the effort is sparking new discussion about how all of the unprecedented sanctions haven’t been hurting the country as much as expected.
The moves over the past two years in response to Moscow’s invasion of Ukraine “have been more bark than bite, both for the Russian economy and the ruble
USDRUB,
” said Terry Haines, founder of Pangaea Policy, in a note. He added that “there’s no reason to believe that another round of sanctions deters Russia or gets it to rethink behavior.”
Russia’s economy is expected to grow 2.6% this year, according to January projections from the International Monetary Fund. That’s better than the 2.1% growth anticipated for the U.S. and the 0.9% expansion forecast for the euro area.
After sanctions first began in February 2022, Russia’s economy shrank by 1.2% in 2022, but that was a smaller-than-anticipated decrease. There was then 3% growth in 2023, according to the IMF’s figures. For 2025, a 1.1% expansion is expected.
“Russia’s economy has indeed surprised in terms of the strength of growth so far,” said the IMF’s director of communications, Julie Kozack, when asked during a news conference Thursday about the effectiveness of sanctions. There have been boosts from military spending and “quite a lot of social transfers,” which refers to government aid to households, she said.
But she said there are “signs of overheating of the economy,” with inflation rising, and there should be “negative impacts” from “being cut off from the international financial system,” as well as from “reduced access to technologies” and losing “some highly skilled labor.”
“So we do expect that these effects will have an impact — a significant impact — on growth and prospects for the medium term,” Kozack told reporters.
More than 800,000 Russians left their country following the full-scale invasion of Ukraine, according to an estimate last year, and a U.S. intelligence report in December said the Ukraine war has cost Russia 315,000 dead or injured troops.
U.S. President Joe Biden talked about the latest American sanctions against Russia on Friday in a speech at the White House, while also calling for further support for Ukraine and criticizing Russian President Vladimir Putin.
See: U.S. and E.U. pile new sanctions on Russia for the Ukraine war’s 2nd anniversary and Navalny’s death
Biden said he’s “announcing more than 500 new sanctions in response to Putin’s brutal war of conquest, in response to Alexei Navalny’s death, because make no mistake, Putin is responsible for Alexei’s death.”
Navalny, a fierce Putin foe, died a week ago in an Arctic penal colony at the age of 47.
Now read: Two years after Ukraine invasion, the corporate fight against Russia continues
