The Russian Economy Is Muddling Through the Sanctions War

The transatlantic campaign of sanctions against Russia after its aggression of Ukraine is unprecedented in scale and scope, involving not only dozens of democratic states but also many non-state actors. It imposes considerable barriers and additional cost to the functioning of the Russian economy, which is bound to undertake deep restructuring with far-reaching consequences for production and consumption processes. The current appreciation of the rouble and inflationary slowdown are not signs of improvement but rather the direct effects of the stabilisation measures undertaken and, in fact, bode ill for further economic development. Numerous problems have started to surface this summer and optimistic assessments on the basis of initial resilience of the Russian economy look premature. Russia currently lacks a strategic plan of economic restructuring under the new environment. The future course of events will depend on whether the private sector leads this restructuring with minimal losses or the government imposes its normative prospective, tilting the result farther from economic equilibrium.

Paper produced in the framework of the project “The EU’s selective engagement with Russia”.