After the Russian-Ukrainian conflict broke out, the West imposed many sanctions on Moscow, causing the Russian economy to suffer a lot.
Punishment of the energy industry
As soon as Russia launched a special military operation in Ukraine, the US imposed sanctions on the Moscow energy industry. In March 2022, Washington banned imports of Russian crude oil, liquefied natural gas and coal, and restricted US investment in most Russian energy companies. By December 2022, the US and its allies in the Group of 7 agreed to impose a ceiling on Russian crude oil at $60 per barrel.
EU sanctions are more ambiguous because the region is so dependent on the Russian energy industry. At the time of the conflict, Moscow supplied nearly 40% of the EU’s gas and almost a third of the bloc’s crude oil. At the end of 2022, the EU announced a ban on importing most of Russia’s crude oil and joined the price ceiling similar to G7. In early 2023, the bloc imposed an additional ban on refined Russian oil products such as diesel and gasoline.
However, according to the newspaper’s experts, The Economist, these sanctions appear to be ineffective. Specifically, after a period of calm as European companies sought to adapt to the new price ceiling, shipments were resumed at a rapid pace. The destinations of the shipments are no longer Europe, but China and India.
Many people think that although Russia can sell oil, the price will be lower, according to The Economist, which is difficult to confirm as Indian companies do not share data with price trackers as European traders do. In addition, Russia is now less dependent on Western financial and transportation infrastructure, so “hidden transactions” may well have increased greatly.
Although the volume of Russia’s oil and gas exports to Europe fell in 2022, the country’s energy revenues hit $168 billion for the year, the highest level since 2011. Russia ended the year with a surplus current account balance is 227 billion USD, a record high, according to the page The Conversation.
Financial field
The US and EU have banned all transactions and frozen the assets of the Central Bank of Russia, removing some Russian banks from the SWIFT global payment system. Up to now, the West has frozen about $ 350 billion in foreign exchange reserves as well as the assets of Russian oligarchs.
The EU has also banned the sale, supply and transfer of euro banknotes to Russia to limit the access of the Russian government, Central Bank, individuals and legal entities.
According to research institute Bruegel (Belgium), fairly comprehensive sanctions on the financial sector have had an impact on Moscow but have not achieved the effect as the West expected.
Russia’s central bank said Russian banks lost nearly $25 billion in the first half of 2022, largely due to affected foreign currency operations.
However, the Russian financial system remains stable, mainly thanks to the measures taken by the Central Bank of Russia. As soon as the conflict broke out, the Central Bank of Russia raised interest rates to 20% to protect the ruble. The agency had previously prepared a large amount of foreign currency in anticipation of sanctions.
Most of the major banks in Russia have recovered after a short period of negative impact from disconnecting from SWIFT in March 2022.
The Central Bank of Russia in Moscow on February 28, 2022. Photo: TASS
Prohibition of Russian imports of specific goods and the departure of many foreign companies
In addition to economic and financial sanctions, the US and its allies have imposed measures to control exports of high-tech products (such as aircraft equipment, semiconductors, etc.) Russia. The aim is to limit Moscow’s military capabilities.
Russia has a way to deal with these sanctions. Some of Russia’s neighbors have acted as intermediaries, importing goods from the West and then sending them to Russia. Armenia is an example, the value of its smartphone imports in the summer of 2022 increased more than 10 times and the number of phones that Armenia exports to Russia also exploded during that period, according to the website. Council on Foreign Relations.
Moscow also turned to buying technology products from China. According to China’s National Bureau of Statistics, Russia-China bilateral trade will reach a record $190 billion by 2022. More than 40% of Russia’s microchips are imported from China.
One of the issues that Russian officials are most concerned about is the departure of foreign companies due to sanctions and pressure from European consumers. Figures from researchers from the Yale School of Management (USA) published on January 31 show that more than 1,000 foreign businesses have cut operations in Russia since the conflict broke out.
Analysts predict that, to prevent this situation, the Russian government may increase pressure on businesses to leave, even nationalizing the assets of companies leaving Russia.
Some Russian industries are heavily affected by these two sanctions. The withdrawal of foreign manufacturers and shortages of input materials caused the automotive industry and the aviation industry in Russia to reduce output by 80% in 2022.