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Are sanctions on Russia working?


The international sanctions imposed on Russia since its invasion of Ukraine are unprecedented, yet the war continues. So are these efforts to damage the Russian economy working? NPR's Jackie Northam reports there are signs they are.

JACKIE NORTHAM, BYLINE: The Russian sanctions are wide-ranging, targeting individuals, businesses, imports, exports and commodities. Edward Fishman led the State Department's sanctions policy after Russia invaded Crimea in 2014. He says the sanctions are extremely broad in their scope but were expected to take time to have an impact.

EDWARD FISHMAN: They aren't trying to achieve a psychological change in Putin. They're not trying to make Putin wake up in the morning and decide that Ukraine was not worth the effort. What they're really trying to do is just create attrition in Russia's military industrial complex and its economy writ large.

NORTHAM: Fishman, now with Columbia University's Center on Global Energy Policy, says the international community hit hard shortly after the invasion of Ukraine, zeroing in on Russia's banking system to cut it off from the world.

FISHMAN: I think in my day, the idea of imposing banking sanctions on Sberbank, which is by far the largest bank in Russia, was unthinkable, let alone sanctions on the Central Bank of Russia, which, I would mention, is probably the largest sanctions target in modern history and one that Putin didn't expect would actually come under sanctions.

NORTHAM: Sanctioning Russia's central bank froze almost half of its $635 billion in foreign reserves. The ruble tumbled. But Elina Ribakova with the Institute of International Finance in Washington says the central bank has spent years putting policies in place to defend its financial system from just this type of scenario.

ELINA RIBAKOVA: So 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. We were expecting a much deeper contraction, myself included.

NORTHAM: Russia's economy is expected to contract this year by about 3.5% instead of growth that was expected. There would likely be a bigger drop if it wasn't for oil and gas sales, which make up about half of the government's budget. Maria Demertzis is a senior fellow at Bruegel, a Brussels-based economics think tank.

MARIA DEMERTZIS: Given also the incredible increase in prices of both gas and oil and revenues coming in to the Russian authorities, the Russian coffers have been exorbitant. And that, of course, allows the Russian economy to continue to function.

NORTHAM: But the outlook for Russian oil and gas revenues could change soon. Putin has already cut off most of the natural gas flows to Europe, its largest customer. And there are new EU bans and a price cap on Russian oil. China and India have been on a buying spree of Russian oil but at deeply discounted prices. Meanwhile, Russians are seeing their modern economy suffer tangible setbacks. Thousands of international companies have idled operations or pulled out of Russia completely, taking with them capital investment, technology and expertise. Imports have collapsed, which is having an impact on manufacturing in particular. Fishman points to the auto industry.

FISHMAN: Moscow has had to relax rules to allow domestic cars to be manufactured without airbags and antilock brakes because they can't source these components domestically, and they used to buy them from Europe and United States.

NORTHAM: Russia will also struggle to maintain its fleet of commercial aircraft and trains because of a lack of access to Western components, says Ribakova.

RIBAKOVA: Even in the military, Russia is dependent on the foreign-produced chips, for example, and other types of technology. It needs that to continue to wage the war.

NORTHAM: Russia is trying to set up alternative supply routes from places like China and Turkey. Demertzis says all this is a drag on the country's economy. She says it's in terrible shape, but...

DEMERTZIS: They will survive. They're not going to be eradicated from the world map. But it's going to be a much, much poorer country.

NORTHAM: And there are still more targets for the international community to sanction.

Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.