Nine months into Russian President Vladimir Putin’s war in Ukraine, the damage done to the world’s 11th-largest economy is extensive. Leading Russian banks have been cut out of the global financial system, some $300 billion of central bank reserves are frozen, and hundreds of foreign companies have departed. Parts shortages have hobbled the auto industry and threaten commercial aviation. In the wake of Putin’s mobilization order, tens of thousands of young workers have fled the country. An OECD forecast released last week projects Russia’s economy will contract by 5.6% in 2023.
The economic punishment inflicted on Russia hasn’t stopped the pummeling of Ukraine. But sanctions have weakened Russia’s standing as a world power, dissuaded ostensibly impartial nations from aligning with its government and sowed doubts about Putin’s leadership among Russian elites. Convincing them to press for an end to the war will require the U.S. and Europe to tighten the squeeze even more.
Since February, sanctions have raised the costs of the war, by reducing Moscow’s ability to buy what it needs, while making the market perilous for outsiders. China, India and Turkey are importing Russian crude, but at a steep discount, and Russia has struggled to redirect gas exports once bound for Europe. Russia’s imports of technology it needs to sustain its war machine — let alone spark future innovation — have been effectively cut off for months. Never mind that what it can buy, when it comes to electronics components, is now often faulty. Moscow will adapt, but not swiftly.