How sanctions impact Russia and how they can be strengthened

Once US President Joe Biden, describing Washington's strategy and the West in general, stated that there are two options – to start World War III and go to war with Russia physically or to ensure that the country acting against international law pays for it.

The focus here is on sanctions, a tool to deter and restrict Russia's ability to succeed economically, thereby limiting its capacity to continue its brutal aggression. Sanctions aim to deprive the aggressor of resources, dismantle its military ambitions and demonstrate the unity of the democratic world.

There are successful cases of sanctions being effective.

There are also significant gaps though that need addressing. Read more in the op-ed by Yelyzaveta Yasko, Ukraine's MP, Sluha Narodu – Sanctions work but not enough: How to strengthen international pressure on Russia.

Yasko writes that sanctions have dealt a significant blow to Russia's economy. She notes that in 2023, Russia's foreign trade balance deteriorated sharply: the trade surplus fell by 63%, and the current account surplus by 79% compared to 2022.

"The decline in foreign currency inflows has caused significant ruble devaluation, increased inflationary pressure, and forced the Russian Central Bank to raise interest rates and reintroduce capital controls," Yasko points out.

Moreover, she states that sanctions have frozen approximately $313 billion of Russia’s foreign exchange reserves, while the unfrozen portion is being actively depleted.

Additionally, Russia has lost its primary natural gas market in Europe and faces difficulties in producing advanced weaponry.

"The financial pressure is also being felt by the Russian population,"* Yasko notes.

Despite these outcomes, Yasko admits that the sanctions regime is gradually losing its effectiveness due to numerous gaps and loopholes.

One major problem is that several third countries have not only refrained from joining the sanctions regime but are actively helping Moscow circumvent the restrictions.

Another challenge is the creation of a so-called shadow fleet of tankers under different countries' flags, enabling Russia to bypass price caps on oil.

"A separate issue is the trade in Russian slabs (semi-finished steel products), which are not covered by sanctions. This allows the EU to purchase cheap materials, facilitating dumping practices, delaying the transition to a green economy and bringing Russia approximately $60 billion annually, around 3% of its GDP," Yasko emphasises.

According to her, the diminishing effectiveness of sanctions means that pressure needs to be increased rather than relaxed. She proposes several steps to significantly enhance sanctions against Russia:

First, it is important to expand export controls.

Second, it is needed to combat sanctions circumvention through subsidiaries and structures used to transfer finances and resources between countries.

Third, it is needed to establish a registry of individuals and companies violating sanctions to ensure greater transparency in international sanctions policy.

Fourth, it is important to raise awareness among the public and businesses about the importance of sanctions.

"To achieve maximum impact, it is essential to expand the sanctions coalition and work in coordination with international partners to close loopholes and intensify pressure on the Kremlin. This will create an even more effective system capable of significantly influencing Russia's political and economic realities, thereby accelerating the end of its aggression against Ukraine," concludes Yasko.