Speaking at an economic forum in Vladivostok earlier this month, Russian President Vladimir Putin claimed his country was coping with the West’s economic “aggression”. He warned that instead of having the effect the West desired, the sanctions were eroding the quality of life for Europeans and poorer countries were losing access to food.
Well, they're echoing that sentiment in that oh so witty cartoon ....
When it comes to assessing the impact of economic sanctions, six months is normally not enough time. Indeed, economists believe the real debate on the Russia sanctions goes beyond 2022.
The second challenge is selection of and access to reliable data.
A commonly used figure to measure the impact of sanctions is Gross Domestic Project (GDP) in a targeted country. In April, the International Monetary Fund forecasted the Russian GDP to drop 8.5% in 2022. It has now improved its outlook for the dynamics of Russia’s economy to a fall of 6%.
A similarly indicative figure is inflation rate. But as with GDP, a clear and singular causality between sanctions and inflation is impossible to establish.
According to First Deputy Prime Minister Andrei Belousov, inflation in Russia in 2022 will come in at 12-13%. The actual figure is likely to be higher.
A look at car sales in Russia offers another illustrative example, especially since households tend to try to buy durable goods during periods of high inflation.
Car sales in March 2022 were three times lower than in March 2021. By September 2022, the production of cars in Russia has fallen by three-quarters compared to last year.
A similar dynamic can be observed in the aviation industry. The Russian airline Aeroflot, for instance, has grounded planes because there are no more spare parts.
Equally, the Russian military is reportedly taking chips from dishwashers and refrigerators to fix their military hardware, because they ran out of semiconductors.
This suggests that the system of Western export controls is working. Indeed, according to some estimates, imports in April 2022 collapsed as much as 70-80% year-on-year.
So, where does that leave us?
The sanctions have not stopped Russia from waging war in Ukraine. And, at least for the time being, Putin’s grip on power in Russia itself remains strong.
This means the short-term disruptions from the Russia sanctions may be less than originally hoped for. But there are early signs of significant stress for the Russian economy. Indeed, it is likely this stress will intensify in 2023 and beyond.
More generally, it is important to recognise that limiting an assessment of sanctions to measuring impact and causality is missing the bigger picture.
Short of direct military confrontation, the US, the EU and their allies had few alternatives at their disposal to respond to the Russian aggression. More importantly, perhaps, it is clear that eventually the Ukraine crisis can only be solved diplomatically.
And it is at this point that the sanctions – or the lifting of them – will come in handy as a major political and economic bargaining chip.