One Year of War in Ukraine: Are Sanctions Against Russia Making a Difference?
The United States and its allies have imposed harsh economic penalties on Russia over its war in Ukraine. One year after the invasion began, here’s what they have achieved and where critics say they’ve fallen short.
What sanctions has the United States imposed against Russia over the war in Ukraine?
Since Russia invaded Ukraine in February 2022, the United States has implemented a broad sweep of sanctions, focused on isolating Russia from the global financial system, reducing the profitability of its energy sector, and blunting its military edge. These sanctions add to a bevy of economic punishments that Washington imposed on Moscow after it annexed Crimea in 2014.
The latest sanctions have targeted Russia’s:
Financial sector. The barrage of sanctions began with unprecedented penalties on Russia’s central bank. The United States has effectively frozen the bank’s U.S.-based assets—aiming to prevent it from using its foreign reserves to prop up the Russian ruble—and barred several Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a Belgium-based interbank messaging service. Meanwhile, the U.S. Treasury Department has sanctioned two large Russian banks and prohibited the trading of securities issued in Russia. Washington has also locked up the U.S.-held private wealth of sanctioned Russian individuals, including President Vladimir Putin.
Energy. The United States has also focused on reducing Russia’s ability to profit from the sale of oil. In March 2022, Washington banned the import of Russian crude oil, liquified natural gas, and coal, and restricted U.S. investments in most Russian energy companies. In December of that year, the United States and its Group of Seven (G7) allies agreed to a cap that aims to limit the price of Russian crude oil to $60 per barrel or less. So far, the United States has refrained from sanctioning Russia’s nuclear energy sector, and it continues to import Russian uranium. Russia supplied 14 percent of U.S. uranium imports in 2021.
Military tech. The U.S. Commerce Department has implemented restrictions that curb exports of high-tech products such as aircraft equipment and semiconductors to Russia with the aim of curtailing its military capabilities. The export restrictions extend to goods other countries produce using American technology.
What are other governments doing?
The United States has implemented these sanctions in tandem with the European Union (EU) and other partners. While the EU has placed its own sanctions on Russian banks and individuals, including Putin, the bloc’s sanctions on Russian energy have proven the most contentious.
At the time of the invasion, Moscow was supplying nearly 40 percent of the gas consumed by the EU and nearly one-third of the bloc’s crude oil. Some member countries were even more reliant on Russian energy—Hungary was importing around 85 percent of its gas and 65 percent of its crude oil from Russia. Given that dependence, EU proposals to ban Russian gas imports have stalled amid skyrocketing energy prices and opposition from Hungary and other countries. However, in 2022, the EU announced an embargo on imports of most Russian crude oil and joined the G7 price cap; in early 2023, it imposed an additional ban on Russian refined oil products such as diesel and gasoline.
The EU and other governments have also imposed sanctions targeting Russia’s military technology. In December 2022, the bloc agreed to ban exports of some military hardware to Russia and countries such as Iran that would potentially supply Russia with the materiel. Meanwhile, Taiwan, the world’s leading producer of semiconductors, said it would restrict exports of computing chips, which can be used in drones and other military equipment, to Russia.
But some countries have been reluctant to embrace sanctions. China and India, for instance, have increased their imports of Russian oil and natural gas. Some of Russia’s neighbors have acted as middlemen, importing Western goods and then sending them on to Russia; the value of Armenian smartphone imports increased over tenfold last summer, echoed by a boom of smartphone exports to Moscow.
Are they working?
That depends on their objective. Sanctions have inflicted some pain on Russia’s economy, but they have not caused widespread economic collapse or halted Russia’s aggression against Ukraine. “While Western-led sanctions may be eroding Russia’s economic base, they have not come close to persuading Putin to reverse his policy,” writes CFR President Richard Haass. Some experts say this absence of coercive effectiveness indicates a broader flaw in the sanctions approach, arguing that sanctions too often inflict economic pain on normal citizens without causing the desired behavioral changes in target governments.
Analysts say Russia is a particularly difficult target given its importance as an exporter of many crucial commodities, including oil, fertilizers, wheat, and precious metals. Indeed, the International Monetary Fund (IMF) recently forecast that the G7 price cap was unlikely to diminish Russian oil exports and that Russia’s gross domestic product (GDP) would grow 0.3 percent in 2023, in contrast with predicted contractions in some Western economies. India, for example, has seen a sixteenfold increase in oil imports from Russia since the invasion began, while its total bilateral trade with the country has more than doubled.
Russia has spent years bracing itself for this situation, including by hoarding more than $640 billion worth of central bank reserves. Only half of these reserves are in currencies subject to sanctions, with the remainder in gold and other foreign currencies.
Still, sanctions supporters say the punishments are not designed to crush Russia’s economy or end the war, so their effectiveness should be judged through a different lens. They say the purpose of sanctions is sending the message that violating international norms and invading a democratic neighbor will be met with a strong coalition response. They point out that sanctions have still caused a disruption; some estimates still predict a looming contraction of Russia’s economy. Other proponents argue that the effectiveness of the penalties should be measured over years rather than months.
How has Moscow responded?
While Russia has lost access to the world’s most popular reserve currencies, it has adjusted to conduct much of its bilateral trade in rubles. In the immediate aftermath of the invasion, Russia’s central bank hiked interest rates to 20 percent in a move that economists attributed to shoring up the ruble. It worked; the value of the ruble hit a seven-year high in June 2022 and has now stabilized to roughly its pre-invasion level.
Russia has also wielded its status as an energy exporter to retaliate against Europe. In August 2022, Moscow shut down the Nord Stream 1 pipeline, which supplied almost 60 percent of Germany’s natural gas. It has also halted gas exports to Poland and Bulgaria, and operated a “shadow fleet” of oil tankers to continue selling its oil above the G7 price cap. By the third quarter of 2022, European energy prices had increased to fourteen times their level in the third quarter of 2019.
Finally, Russia has turned to China and other friendly states for help. Moscow and Beijing have worked together for years to trade without dollars. In late 2022, China imported record quantities of Russian natural gas, and Russian payments in Chinese yuan increased thirty-four-fold in the first nine months after the war began. And after Moscow was cut off from Western semiconductor manufacturers in February 2022, Beijing stepped in to supply the critical technology.
Will Merrow created the graphics for this In Brief.