One year on, financial sanctions have diminished Russia’s capacity to conduct its war of aggression on Ukraine. However, it will take time to gain a full assessment of their impact. Sanctions against apartheid South Africa, often considered the most successful precedent, took several years to have observable effects.
There have been three main types of EU financial sanctions so far. In increasing order of importance, sanctions were placed on individuals (so-called oligarchs), on Russian commercial banks and on the central bank’s reserves. The sanctions on individuals are necessary but not decisive: the people most affected are probably unable to change Russia’s policies, let alone its regime.
The sanctions on commercial banks put sand in Russia’s financial wheels, but they are incomplete. Even after Sberbank was added last summer, almost a third of Russia’s banking sector still remains unaffected by them. That is far too much. The EU should block all remaining Russian banks, including those currently EU-owned, with due waivers for humanitarian and other transactions that the EU views as necessary.
The most important financial sanctions have been the immobilization of about €300 billion of Russia’s foreign reserves worldwide, of which the EU represents an unknown but presumably large share. In 2022, Russia made a lot of money from exports, but its oil and gas revenues are now decreasing and the war costs are rising. At some point, Russia will be financially squeezed. With a large amount of their spare cash blocked, this point will come significantly sooner than if no action had been taken.
Listen to Bruegel's podcast The Sound of Economics, where Giuseppe Porcaro, Elina Ribakova and Nicolas Véron pick up their conversation from last year to reflect on the impact of sanctions against Russia, one year since the outbreak of the war in Ukraine.
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