In the past year, the United States and many of its allies have slapped a massive level of sanctions on Russia over its invasion of Ukraine.
Prominent Russians, including oligarchs and officials close to Russian President Vladimir Putin, as well as the country's banking, energy and manufacturing sectors and access to global trade have all been targeted.
Yet despite the sanctions — considered unprecedented in terms of scope, speed and coordination — Russia's economy is still functioning, and the Kremlin is still waging war against Ukraine. That's led to questions about whether the sanctions are effective. Though they may not have wrought the kind of economic turmoil in Russia initially predicted, analysts say these measures are causing damage and could have deeper impact going forward.
"The short answer is yes" — the sanctions are effective, says Edward Fishman, who led the State Department's sanctions policy after Russia invaded Crimea in 2014. But he says it depends on what Western nations are aiming for with the measures.
"They aren't trying to achieve a psychological change in Putin. They're not trying to make Putin, you know, wake up in the morning and decide that Ukraine was not worth ... the effort," he says. "What they're really trying to do is just create attrition in Russia's military industrial complex and its economy writ large."
Cutting off Russian banks
The United States, Canada and European countries hit Russia hard with financial sanctions shortly after its invasion of Ukraine in late February. They cut off a number of Russia's biggest banks from the SWIFT system, a messaging service that connects financial institutions around the world. Several banks were later subject to full blocking sanctions.
"I think in my day, the idea of imposing blocking sanctions on Sberbank, which is by far the largest bank in Russia, was unthinkable, let alone sanctions on the Central Bank of Russia," says Fishman, now a scholar at Columbia University's Center on Global Energy Policy. He believes the moves likely surprised Putin.
Sanctioning Russia's Central Bank froze almost half of its more than $630 billion in foreign reserves. Economists thought Russia's economy would pancake.
Moscow erected a financial fortress
But Elina Ribakova, an economist with the Institute of International Finance (IIF) in Washington, says the Central Bank had spent years putting policies in place to defend its financial system from just this type of scenario. She says Russia has used excess energy revenues to build up a "special piggy bank."
The strategy, which analysts dubbed "Fortress Russia," was intended to make the Russian economy sanction-proof — but few economists thought it would work.
"This Fortress Russia strategy, which was talked about and some people laughed about it in the beginning of the 2022 sanctions, it did prove to be at least partially effective," she says. "We were expecting a much deeper contraction, myself included."
Ribakova says that preparation, along with a skilled response by Central Bank officials, helped control the immediate financial crisis from the sanctions, allowing Russia to hold on to more than $250 billion in foreign reserves.
Still, the International Monetary Fund estimates Russia's economy will shrink by 3.4% this year, instead of growing by about that much in 2022 as expected before the war.
Maria Demertzis, a senior fellow at Bruegel, a Brussels-based economic think tank, says there would likely be a bigger drop if it wasn't for oil and natural gas sales, which make up about half of the government's budget.
"Given also the incredible increase in prices of both gas, particularly gas, and oil, the revenues coming in to the Russian authorities and the Russian coffers have been exorbitant," she says. "And that, of course, allowed the Russian economy to continue to function."
But the outlook for Russian oil and gas revenues could soon change. In September, Putin cut off most of the natural gas flows to Europe, Russia's largest customer. And there's a new European Union ban on most Russian oil imports, as well as a price cap on Russian oil.
Oil imports to China, India and Turkey help make up part of the impending loss, but they are paying discounted prices for Russian oil.
Russia is seeing corporate flight
Meanwhile, Russians are seeing their modern economy suffer tangible setbacks. More than 1,000 international companies have idled operations or pulled out of Russia completely, according to a review by the Yale School of Management. The fleeing businesses take with them capital investment, technology and expertise.
Imports of Western-made components have fallen off, which is having an impact on manufacturing, in particular. Columbia's Fishman says the country's key rail and auto manufacturing sectors have seen production decline by half, which also leaves Russian consumers with lower quality goods.
"Moscow has had to relax rules to allow domestic cars to be manufactured without airbags and anti-lock brakes because they can't source these components domestically," he says. "They used to buy them from Europe and the United States, and they can't do that anymore."
Russia is also struggling to obtain Western-made semiconductors, which the IIF's Ribakova says are critical for many industries, from farming to aviation. "Even in the military, Russia is dependent on the foreign-produced chips, for example, and other types of technology," she says. "It needs that to continue to wage the war."
Russia is trying to set up alternative supply routes from places like China, Turkey and Kazakhstan, but they can't replace high-tech imports such as semiconductors.
Bruegel's Demertzis says all the sanctions will be a drag on Russia. She says the economy is in terrible shape, but Russia will survive.
"They're not going to be eradicated from the world map," she says. "But it's going to be a much, much poorer country" in the future.
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