April 11, 2022

Russia’s Economy Has Adjusted to Sanctions. That Doesn’t Mean Moscow Is Winning the Financial War.

There have been signs over the past several days that Russia’s economy is adapting to the harsh economic sanctions imposed on it in response to the invasion of Ukraine. The ruble has rebounded. The extreme stress on the domestic banking sector has moderated. The Russian government continues to make debt payments and sell most of its oil. And on Friday, the central bank cut its benchmark interest rate, after having doubled it in the immediate wake of the sanctions.

All this activity is partly a reflection of the technocratic skill of the officials in charge of Russian economic policy, the persistence of energy revenues (Russia’s most important revenue source), and a kind of broad adaptation to sanctions that other states in comparable situations have experienced, admittedly at a cost to economic well-being. What these adjustments are not, however, are obvious signs that the U.S. and its allies are losing the economic war against Russia. At least not yet. Rather, they are a reminder that the effort to impose economic costs on Russia is a long game aimed to degrade its capacity to continue the conflict and its future prospects.

It is far too soon to declare defeat, just as it was far too soon to declare with pride that the ruble was “reduced to rubble,” as President Biden said a few weeks ago.

Doing so raised expectations that economic stress would prompt immediate collapse. But these economic restrictions were never supposed to single-handedly force Russia to abandon its military plans—though many of us hoped they would as Russia faced the choice of wrecking its economy and future prospects. Both on and off the battlefield, Russian policy makers have not exactly followed traditional cost-benefit analysis. Moscow’s distorted decision making, combined with the lack of easy, cheap, asymmetric policies that the coalition can use to influence Russia, means that these measures need time to build. Sanctioned targets retain some policy agency. Likewise, the U.S. and allies will need to calibrate the pressure they are bringing to bear and focus more on how to cushion the blow for global consumers.

Read the full article from Barron's.

  • Podcast
    • May 8, 2025
    How Do You Tariff a Movie and Liza Tobin on the Trade War with China

    China expert Liza Tobin, managing director at Garnaut Global and new CNAS adjunct senior fellow, joins Emily Kilcrease and Geoffrey Gertz to discuss the ins and outs of the US...

    By Emily Kilcrease, Geoffrey Gertz & Liza Tobin

  • Podcast
    • May 3, 2025
    Friendshore First, Trade War Second

    Edward Fishman is the author of Chokepoints: American Power in the Age of Economic Warfare. Fishman is an adjunct senior fellow at the Center for a New American Security (CNAS...

    By Edward Fishman

  • Podcast
    • May 1, 2025
    Trump's First 100 Days in Trade Policy

    Emily and Geoff look back on the first 100 days of Trump’s trade policy, with a focus on how different parts of the U.S. political and economic system are reacting. They get i...

    By Emily Kilcrease & Geoffrey Gertz

  • Podcast
    • April 24, 2025
    What Is President Trump’s Economic Plan?

    A to-and-fro between Washington and Beijing has left many world leaders confused who to side with, as many look towards the White House wondering if there is a detailed plan a...

    By Emily Kilcrease

View All Reports View All Articles & Multimedia