Russia’s Economy Shows Resilience Despite New Sanctions, Experts Say
Despite a new wave of sanctions from the US and EU and signs of economic slowdown, Russia appears capable of continuing to fund its war in Ukraine, according to economic analysts.
The Russian economy is teetering on the brink of recession or stagflation, with inflation currently at 8%, double the Bank of Russia’s 4% target, despite aggressive interest rate cuts. Yesterday, the central bank lowered its benchmark rate by 50 basis points to 16.5%, the fourth consecutive cut this year. Business sentiment is weakening, with the S&P Global Russia Composite PMI falling to 46.6 in September – the lowest reading since October 2022. This economic strain comes as Western nations attempt to limit Russia’s access to resources needed to continue the conflict in Ukraine.
New sanctions imposed in October include direct US sanctions on oil giants Rosneft and Lukoil, and an EU ban on Russian liquefied natural gas (LNG) starting in 2027. However, experts suggest these measures may not be enough to significantly impact Russia’s war effort. “The decrease in Russian exports will not soon undermine Putin’s ability to wage war,” said Vladislav Inozemtsev, co-founder of the Center for Analysis and Strategies in Europe (CASE). He added that Putin “doesn’t pay for his war with the dollars or yuan he gets from exports…He pays workers and soldiers roubles that his Central Bank can print.” Russia has also adapted by redirecting trade through a “shadow fleet” and increasing exports to countries like China and India; learn more about Russia’s economic challenges at the Council on Foreign Relations.
Analysts at Oxford Economics note that Russia’s reliance on oil and gas revenues for its federal budget has fallen from over 50% in 2011-2014 to just 25% by mid-2025. Furthermore, Russia possesses substantial financial reserves, with its sovereign fund at 5.9% of GDP as of September. The government is also able to borrow domestically to cover its budget deficit, which is expected to be 2.6% of GDP. The International Monetary Fund provides ongoing analysis of the Russian economy. Kremlin officials maintain the new sanctions will have no impact on Russia’s economy or war strategy.
Experts suggest the situation could persist for years, with Russia continuing to fund the war through domestic resources and potentially relying on discounted oil sales and obscured trade routes.
