How Has Russia Resisted Sanctions? A Strategic Overview
By Elek Krizsán
Policymakers who implement tools of economic statecraft to coerce behaviour must remain cognisant that the target is a thinking and capable adversary. They have objectives that can confound or run counter to ours. In recent years, sanctions have become the foremost tool of economic statecraft, with the United States and its allies imposing them almost instinctively whenever some international actor engages in undesirable behaviour. There is a wealth of research examining the extent to which sanctions have been effective and the conditions under which they can best influence targets’ behaviour. We must, however, understand how such adversaries can and have responded to sanctions if we are to design sanctions to have real influence.
The United States’ adversaries like Russia, Iran, and China have either come to expect sanctions or have taken measures to reduce their impact if they are ever imposed. These decisions often mean reducing reliance on the United States and its allies so as to minimise the possible scope of sanctions. This could eventually lead to economic systems largely independent of the West’s systems. To evaluate the extent to which it might be possible for adversaries to make themselves invulnerable to Western economic influence, we must understand the strategies and tactics they employ. To begin assessing this risk, I examine Russia’s sanctions response strategies. Russia has not only faced the most severe sanctions regime ever imposed but had nearly a decade’s advance notice, and a playbook to follow that was devised in Iran. With the imposition of sanctions in 2014, and the subsequent ease with which Western governments imposed sanctions, Russia was well aware that it was likely to face sanctions again. Given its preparation time, resources, and motivation, Russia presents a compelling case for a strong and well-developed sanctions response strategy, revealing the key strategies policymakers must counter.
In its response, Russia had first to ensure it could withstand Western sanctions, whether those imposed at the time or that Russia anticipated would be imposed in the future. Thus, beginning in 2014, it built a groundwork to help the nation withstand future sanctions. Success would ensure economic stability and ensure Russia’s resilience in the face of the West’s best efforts. Hence it would present a major political victory that would strengthen Putin’s regime.
Second, Russia had to insulate its decision-making from foreign influence. This was fundamentally intertwined with its first priority. Successfully withstanding sanctions and ensuring Russia could withstand anticipated future sanctions would ensure Russian decision-making would be independent of Western pressures. Russian policy articulates this as improving “economic sovereignty,” or reducing the degree to which Russia’s economy is vulnerable to political pressure by foreign actors.
To achieve these objectives, Russia adopted a multifaceted strategy that has helped it cope with and withstand sanctions. The state reacted to sanctions in the short term with a mix of policies retaliating against the West, helping the economy adapt, and circumventing sanctions. In its long-term response, it sought to reduce dependence on the West through various methods and prepare for future sanctions regimes.
Short-term Strategy
In the immediate aftermath of sanctions, Russia's short-term reactions were driven by objectives distinct from its medium and long-term strategies. The primary goals were to project stability, retaliate against those imposing sanctions, maintain a strong rhetoric to avoid losing face internationally, and crucially, to prevent economic collapse. Politically, Russia took immediate actions such as canceling meetings, imposing airspace restrictions, and sanctioning Western individuals. Economically, the country implemented measures to stabilise its financial system and assert control. These included requiring foreign countries to pay for gas in rubles, imposing controls on foreign exchange, temporarily freezing trading on the stock market, and obligating companies to convert import revenues to rubles. These actions were aimed at mitigating the immediate impact of sanctions and maintaining a semblance of economic and political stability.
Medium-term Strategy
In the medium term, Russia focused on cushioning the impact of sanctions by providing state support to key sectors. This involved turning state resources towards propping up the economy to ensure stability and continuity. To ease the impact of sanctions and mitigate immediate economic shocks, the state invested in key sectors like banking while implementing regulatory changes, such as permitting parallel imports, for others. To circumvent sanctions, Russian firms engaged in several evasive tactics. These included utilising a 'shadow fleet' to continue trading activities, sourcing goods through intermediaries, and legalising parallel imports to maintain the flow of essential products. Additionally, the government implemented measures that allowed companies to conceal information about their operations within Russia, seeking to confound sanctions with reduced transparency. These actions allowed Russian businesses and the economy at large to continue functioning in the medium term.
Long-term Strategy
Russia's long-term strategy to addressing the West’s weaponisation of economic ties has been to eliminate or drastically reduce its economic ties with the West. This approach aims to detach Russia from the systems and connections that enable Western sanctions, thereby protecting its economic sovereignty. One of the primary initiatives has been to reorient trade away from Western countries, similarly to the West's efforts to decouple from China. However, while the West's goal is to secure supply chains, Russia's objective is to safeguard its economic independence. Russia has further sought to insulate itself from Western pressure by institutionalising its medium-term initiatives, which have become key components of Russia’s international economic relationships. Meanwhile, it has implemented specific initiatives attempting to create domestic alternatives to Western systems like a central bank digital currency, establishing alternative payment systems, de-dollarization, and import substitution to produce domestic alternatives to foreign goods. These steps are intended to create a more self-sufficient economy less vulnerable to external pressures.
Russia has also used fiscal policy as a means by which to enhance its resilience with respect to Western sanctions. Russia significantly bolstered its reserves between 2014 and 2022, ensuring that despite the West freezing $300 billion in reserves, Russia's has been able to sustain its current high spending and consistent deficits. Thus Russia fiscal policy has enabled it to maintain continue its economic and strategic initiatives.
Conclusion
Russia’s overarching strategy has been to reposition itself geostrategically in order to reduce its vulnerability to Western economic coercion. This is only truly possible in the long-term, and a decade of preparations has not left Russia invulnerable. However, continued sanctions will ultimately push Russia out of reach of Western economic weapons unless the West can adapt. The West must either persuade Russia’s new partners to make the country a pariah, strengthen Western institutions’ network effects to destroy the allure of alternatives, or find ways to intensify sanctions’ impacts to accelerate their objectives and prevent long-term responses. With years of experience and the availability of willing partners, while Russia has not been able to thrive, it has survived.
