research on russian economy

New report | Russia's economy faces growing imbalances as war effort drains resources

Russia's economy under the fog of war

Russia’s war against Ukraine has placed its economy under unprecedented pressure, and this pressure has grown as sanctions continue to take effect. Before the war, the Russian economy was heavily dependent on oil exports, and fluctuations in international oil prices were the main driver of its economic health. Since the full-scale invasion in February 2022, Russia has faced severe sanctions that have disrupted its trade patterns, limited its access to foreign exchange reserves, and restricted the functioning of its financial system.

How the war is reshaping Russia's economic future

The purpose of this report is to assess the current state of the Russian economy in light of the ongoing war and sanctions. It aims to provide a clearer picture of how economic indicators like inflation and GDP growth are affected by Russia’s military actions and how the economy is changing under the weight of sanctions and financial pressure. It also seeks to explore how these changes may affect Russia’s long-term economic outlook, especially in terms of investment, productivity, and growth.

"One of the biggest challenges is obtaining reliable data, as much of Russia's economic reporting has become entangled with wartime propaganda. The Russian government has stopped publishing large swaths of data, and the numbers that are available are often skewed to present a more favorable picture," the researchers note in the report.

Key issues:

• Russian economic statistics should be treated with caution : Official statistics, such as GDP growth and inflation rates, have been manipulated to support the narrative that the Russian economy is stable, but alternative measures suggest a different reality.
• Mounting economic imbalances : An increasingly inconsistent mix of fiscal stimulus and monetary tightening in Russia's economic policies may lead to an economic crisis.
• Dependence on oil prices : The price of oil remains a critical factor for Russia's economic health, with any drop in oil prices directly impacting the country’s foreign exchange revenues, inflation, and overall economic stability.

A shrinking financial cushion

The report warns that the Russian government’s financial reserves, which have been used to finance war expenditures, are depleting rapidly and could run out within a year. Once these reserves are exhausted, the central bank will face pressure to loosen its key interest rate, or even resort to printing more money, leading to potentially high inflation and a weakened ruble.

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This report was written by a team of researchers at SITE, affiliated with the Stockholm School of Economics (SSE).

• Anders Olofsgård , Deputy Director at SITE and Associate Professor at SSE. Email: [email protected]

SITE was set up as a research institute at the Stockholm School of Economics (SSE) in 1989 with the mandate of studying developments in the Soviet Union and Eastern Europe. Today, SITE is a leading research-based policy institute on these issues. SITE has also built a network of research institutes in the region ( FREE Network ) that includes the Kyiv School of Economics (KSE). KSE not only provides a premier economics education to future leaders in Ukraine but is also involved in the analysis of the Ukrainian, as well as the Russian, economy, including analysis of the role of sanctions in limiting Russia’s destructive capacity. KSE has been an important contributor of data and analysis that underlies this report.

Photo: UladzimirZuyeu, Shutterstock

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A Year after the Invasion, the Russian Economy Is Self-Immolating

Economic pressure and a talent drain are driving Russia into permanent irrelevance, write Yale SOM’s Jeffrey Sonnenfeld and Steven Tian.

A vacant commercial building in Moscow on February 10.

• Jeffrey A. Sonnenfeld Senior Associate Dean for Leadership Studies & Lester Crown Professor in the Practice of Management
• Steven Tian Director of Research, Chief Executive Leadership Institute

This commentary originally appeared in Fortune.

A year after Putin’s invasion of Ukraine, some cynics lament that the unprecedented economic pressure campaign against Russia has not yet ended the Putin regime. What they’re missing is the transformation that has happened right before our eyes: Russia has become an economic afterthought and a deflated world power.

Coupled with Putin’s own misfires, economic pressure has eroded Russia’s economic might as brave Ukrainian fighters, HIMARS, Leopard tanks, and PATRIOT missiles held off Russian troops on the battlefield. This past year, the Russian economic machine has been impaired as our original research compendium shows. Here are Russia’s most notable economic defeats:

Russia’s permanent loss of 1,000+ global multinational businesses coupled with escalating economic sanctions

The 1,000+ global companies who voluntarily chose to exit Russia in an unprecedented, historic mass exodus in the weeks after February 2022, as we’ve faithfully chronicled and updated to this day, have largely held true to their pledges and have either fully divested or are in the process of fully separating from Russia with no plans to return.

These voluntary business exits of companies with in-country revenues equivalent to 35% of Russia’s GDP that employ 12% of the country’s workforce were coupled with the imposition of enduring international government sanctions unparalleled in their scale and scope, including export controls on sensitive technologies, restrictions on Russian elites and asset seizures, financial sanctions, immobilizing Russia’s central bank assets, and removing key Russian banks from SWIFT, with even more sanctions planned.

Plummeting energy revenues thanks to the G7 oil price cap and Putin’s punctured natural gas gambit

The Russian economy has long been dominated by oil and gas, which accounts for over 50% of the government’s revenue, over 50% of export earnings, and nearly 20% of GDP every year.

In the initial months following the invasion, Putin’s energy earnings soared. Now, according to Deutsche Bank economists, Putin has lost $500 million a day of oil and gas export earnings relative to last year’s highs, rapidly spiraling downward.

The precipitous decline was accelerated by Putin’s own missteps. Putin coldly withheld natural gas shipments from Europe–which previously received 86% of Russian gas sales–in the hopes freezing Europeans would get angry and replace their elected leaders. However, a warmer-than-usual winter and increased global LNG supply mean Putin has now permanently forfeited Russia’s relevance as a key supplier to Europe, with reliance on Russian energy down to 7%–and soon to zero. With limited pipeline infrastructure to pivot to Asia, Putin now makes barely 20% of his previous gas earnings.

However, Russia’s energy collapse is also triggered by savvy international diplomacy. The G7 oil price cap has achieved the once unimaginable balance of keeping Russian oil flowing into global markets while simultaneously cutting into Putin’s profits. Russian oil exports have held amazingly consistent at pre-war levels of ~7 million barrels a day, ensuring global oil market stability, but the value of Russian oil exports has gone from $600 million a day down to $200 million a day as the Urals benchmark crashed to ~$45 a barrel, barely above Russia’s breakeven price of ~$42 per barrel.

Even countries on the sidelines of the price cap scheme, such as India and China, ride the coattails of the G7 buyers cartel to secure Russian supply at deep discounts of up to 30%.

Talent and capital flight

Since last February, millions of Russians have fled the country. The initial exodus of some 500,000 skilled workers in March was compounded by the exodus of at least 700,000 Russians, mostly working-age men fleeing the possibility of conscription, after Putin’s September partial mobilization order. Kazakhstan and Georgia alone each registered at least 200,000 newly fleeing Russians desperate not to fight in Ukraine.

Moreover, the fleeing Russians are desperate to stuff their pockets with cash as they escape Putin’s rule. Remittances to neighboring countries have soared more than tenfold and they rapidly attracted ex-Russian businesses. For example, in Uzbekistan, the Tashkent IT Park has seen year-over-year growth of 223% in revenue and 440% growth in total technology exports.

Meanwhile, offshore havens for wealthy Russians such as the UAE are booming, with one estimate claiming 30% of Russia’s high-net-worth individuals have fled.

Russia will only become increasingly irrelevant as supply chains continue to adapt

Russia has historically been a top commodities supplier to the world economy, with a leading market share across the energy, agriculture, and metals complex. Putin is fast making Russia irrelevant to the world economy as it is always much easier for consumers to replace unreliable commodity suppliers than it is for suppliers to find new markets.

Supply chains are already adapting by developing alternative sourcing that is not subject to Putin’s whims. We have shown how in several crucial metals and energy markets, the combined output of new supply developments to be opened in the next two years can fully and permanently replace Russian output within global supply chains.

Even Russia’s remaining trade partners apparently prefer short-term, opportunistic spot-market purchases of Russian commodities to capitalize on depressed prices rather than investing in long-term contracts or developing new Russian supply.

It appears Russia is well on its way toward its long-held worst fear: becoming a weak economic dependent of China–its source of cheap raw materials.

The Russian economy is being propped up by the Kremlin

The Kremlin has had to prop up the economy with escalating measures, and Kremlin control is increasingly creeping into every corner of the economy with less and less space left for private sector innovation.

These measures have proven costly. Government expenditures rose 30% year-over-year. Russia’s 2022 federal budget has a deficit of 2.3%– unexpectedly exceeding all estimates despite initially high energy profits, drawdowns and transfers of 2.4 trillion rubles from Russia’s dwindling sovereign wealth fund in December, and asset fire sales of 55 billion yuan this month.

Even these measures of last resort have been insufficient. Putin has been forced to raid the coffers of Russian companies in what he calls “revenue mobilization” as energy profits decline, extracting a hefty 1.25 trillion ruble windfall tax from Gazprom’s corporate treasury with more raids scheduled–and forcing a massive 3.1 trillion ruble issuance of local debt down the throats of Russian citizens in the autumn.

More can be done

Although 2023 will exacerbate each of these trends and further batter the Russian economy, there is even more that can be done to grease the skids.

A crackdown on sanctions evasion and smugglers, perhaps through secondary sanctions in the case of Turkey and other chronic offenders, will ensure that bad actors do not feed Putin’s war machine.

Sanctions provisions across technology, financial institutions, and commodity exports can be escalated. Pressure on companies remaining in Russia to fully and immediately exit the country must be maintained. Some $300 billion in frozen foreign exchange reserves could be seized and committed to the reconstruction of Ukraine

Tightening these screws will help improve the chances that before this time next year, Russia will realize it does not need Putin, just as the world has already realized it does not need Russia.

Only then will the Russian economy and people stand a chance of returning to prosperity.

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Russia Economic Report

December 1, 2021: 46th Issue of the Russia Economic Report

Download PDF |  Press Release

The World Bank’s Russia Economic Report analyzes recent economic developments, presents the medium-term economic outlook, and provides an in-depth analysis of a particular topic.

Economic Developments

Global activity is now moderating after a strong recovery from the pandemic-induced recession. Following a sharp rebound in the second half of 2020, the pace of global growth eased in the first half of 2021, held back by renewed COVID-19 outbreaks. Growth in trade has lost momentum amid easing of global economic activity and persistent supply bottlenecks.

Russia’s economy saw a strong rebound in the first half of 2021 and is expected to grow by 4.3 percent this year. However, the momentum weakened in the second half of the year.

As COVID-19 restrictions were eased in Russia in late 2020 and early 2021, consumer demand surged ahead in the second quarter, supported by savings built up over 2020 and rapid credit growth. Investment in Russia was also strong in the second quarter of 2021 and the current account surplus reached multiyear highs on elevated commodity prices and low outbound tourism and reached $82 billion by September 2021.

However, by autumn it became clear that a damaging new pandemic wave was underway which, with relatively low vaccination rates, is a risk to both economic activity and human health. With new COVID control measures and the consumer rebound fizzling out, economic activity cooled in the third quarter.

Inflation has been on the rise throughout 2021 as Russia copes with high demand, rising commodity prices and supply bottlenecks. The Central Bank of Russia (CBR) was one of the first central banks to begin tightening monetary policy in 2021 as inflation moved above the CBR’s target rate from December 2020. Since March, it has raised rates six times, by a total of 325 basis points to stand at 7.5 percent at end-October. This move has helped maintain real interest rates around zero and shift monetary policy from an accommodative to a neutral stance.

The Russian banking sector has proven resilient throughout the COVID-19 pandemic so far, as economic recovery now helps improve balance sheets, while rapid credit growth has begun to ease.

Over the first nine months of the year, Russia’s federal budget has seen impressive increases in revenues; oil and gas revenues were up by 60 percent, and VAT and income taxes by around 30 percent each. The overall budget deficit, on a four-quarter rolling basis, shrank from 3.8 percent at end-2020 to around 1 percent in the third quarter of 2021.High oil and gas revenues meant the CBR purchased $35 billion of foreign exchange on behalf of the government during January to November 2021, to be channeled to the National Wealth Fund in 2022.

Labor markets have also recovered. Job postings from employers in 2021 jumped up 24 percent year-on-year in the second quarter and the ratio of unemployed people to job posts has fallen.

Real wage growth, which was maintained just above 2 percent in 2020, has continued this year, at an average of 2.5 percent to end-August.

Economic Outlook

As the world moves into the third year of the COVID-19 pandemic, global growth is expected to moderate next year to 4.3 percent. Inflation is expected to ease gradually over 2022, but inflation rates are likely to remain above the target level for most of the year.

Growth in Russia is forecast at 2.4 percent in 2022, on the back of a continually strong oil sector, before slowing down to 1.8 percent in 2023. With vaccination rates still low, COVID-19 control measures may be called for next year, which will weigh significantly on growth.

Uncertainty around inflation remains high. Should inflation prove more persistent than expected, or if the economy faces headwinds, including from the Federal Reserve’s planned unwinding of quantitative easing in the United States, monetary policy may need to be tightened for longer, which may also adversely affect the growth outlook.

Russia’s longer-term economic prospects will depend on a number of factors. Among these, Russia continues to face relatively low potential growth which, unless addressed, will impede its ability to achieve high-level development goals and, raise incomes and living standards. Success will depend on strengthening frameworks and market-based incentives for firms to compete, innovation and building value, both domestically and through links to global value chains.

Another factor that will impact Russia’s economy in the longer-term, is the country’s new Low-Carbon Development Strategy, released by the Government on October 29, 2021. Presenting an opportunity to spur green growth, it sets out a much more ambitious scenario of climate change mitigation, which would see a 70 percent reduction in net emissions by 2050 and net carbon neutrality 10 years after that.

The strategy sets out to raise growth at the same time as greening the economy, targeting average growth of at least 3 percent per year. This ambitious twin goal of growing and greening will call for a simultaneous focus on addressing pre-existing economy-wide constraints to growth and competitiveness, while limiting the costs of green transition and taking full advantage of the opportunities it may afford.

Special Focus on Russia’s Green Transition: Pathways, Risks and Robust Policies

While a much remains uncertain about the global green transition, the pace of change is likely to gain momentum as more countries announce plans to become carbon neutral. So far, more than 60 countries, representing over 80 percent of the world economy, have expressed aspirations to reach carbon neutrality in the coming decades. There are signs of concrete policy changes in some countries around the world. It is in this context that Russia has stated its ambitions to become carbon neutral by 2060.

The special topic in this report presents scenarios and options for Russia to identify appropriate risk management approaches to the green transition of its economy. In an uncertain and changing global environment, proactive domestic policy action on climate change is an effective and robust strategy for managing risks that might otherwise impose a more disorderly and costly transition on Russia. Global green transition can also offer an opportunity to transform the economy for the better and thereby create potential for higher and more diversified growth.  

The report notes that green transition calls for an overhaul of policy frameworks to change entrenched investment decisions and behavior of firms and households. Carbon pricing is a central enabler. Taking various forms – usually a tax or a tradeable permit system - carbon pricing ensures market-based incentives for all actors to account for the social cost of carbon emissions.

A successful transition will also require broader diversification of the assets of the country – including human capital, renewable natural capital, and a shift to “green” produced capital. Resources raised from carbon pricing can support this ambition, but just as important will be investing in softer assets, such as institutions, governance, innovation and entrepreneurship. This would be part of a broader reform agenda to enable the emergence of a more dynamic, competitive, and innovative private sector to take the leading role in creating an internationally competitive low-carbon Russian economy.

In its forthcoming Russia Climate Change and Development Report, the World Bank will cover sectoral challenges and opportunities, economywide enablers, and the inclusion and social aspects of green transition.

Accompanying this edition of the Russia Economic Report, a special report on consumer energy subsidies in Russia analyzes how these significant resources can also lead to increased emissions and reduced economic efficiency. New estimates by the World Bank show that Russia’s consumer subsidies on electricity, gas and petroleum amounted to 1.4 percent of GDP in 2019. By redeploying these resources, the authorities could increase GDP and ensure that no consumers are left worse off, while at the same time reducing emissions and moving forward with Russia’s ambitious goal of greener economic development.

Download the full report (PDF)

Previous Russia Economic Reports

Russia's economic recovery gathers pace.

Russia Economic Report 45 The World Bank, May 2021

Download PDF  |  Press Release

Russia's Economy Loses Momentum Amidst COVID-19 Resurgence; Awaits Relief from Vaccine

Russia Economic Report 44 The World Bank, December 2020

Recession and Growth under the Shadow of a Pandemic

Russia Economic Report 43 The World Bank, July 2020

Weaker Global Outlook Sharpens Focus on Domestic Reforms

Russia Economic Report 42 The World Bank, December 2019

Modest Growth; Focus on Informality

Russia Economic Report 41 The World Bank, June 2019

Russia’s Economy: Preserving Stability, Doubling Growth, Halving Poverty – How?

Russia Economic Report 40 The World Bank, December 2018

Download PDF  |  Press Release

The Russian Economy: Modest Growth Ahead

Russia Economic Report 39 The World Bank, May 2018

Russia's Recovery: How Strong are its Shoots?

Russia Economic Report 38 The World Bank, November 2017

From Recession to Recovery

Russia Economic Report 37 The World Bank, May 2017

Download PDF | Press Release

Earlier Russia Economic Reports can be downloaded through the  World Bank's Documents & Reports.

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An economic catastrophe is lurking beneath Russia’s GDP growth as Putin ‘throws everything into the fireplace’

Even as Ukrainian advances in the Kursk region pierce Russia’s aura of military invincibility, resurgent cynics have painted an unrealistically optimistic picture of a supposedly resilient Russian economy despite sanctions and the exit of over 1,000 global multinational corporations .

This misleading narrative attributes Russia’s apparent economic continuity to aggressive government spending and efforts to shield the population from restrictive monetary policies through extreme fiscal stimulus. However, this rosy outlook is fundamentally flawed, except for one crucial observation: Russia is indeed engaged in unsustainable spending practices.

The reality of Russia’s economic situation is far more complex and concerning than some would have you believe. The productive core of the Russian economy has been severely compromised, with the government’s spending spree bearing a striking resemblance to Keynes’ famous metaphor of digging trenches and filling them with dirt—a superficial attempt to prop up GDP figures without creating genuine economic value, improving the lives of the Russian people, or improving Russian productivity. Financial, production, and human resources have been redirected en masse to the defense sector, leaving the civilian sector struggling to meet growing consumer demand. This imbalance—cannibalizing the rest of the Russian economy to fund Putin’s war—has fueled inflation, further exacerbated by the depreciation of the ruble and rising import costs.

Simply put, Putin’s administration has prioritized military production over all else in the economy, at substantial cost. While the defense industry expands, Russian consumers are increasingly burdened with debt, potentially setting the stage for a looming crisis. The excessive focus on military spending is crowding out productive investments in other sectors of the economy, stifling long-term growth prospects and innovation.

It’s crucial to approach Russian economic data with skepticism. As we’ve repeatedly highlighted , the country’s statistical services have a documented history of distorting economic indicators , making it challenging to accurately assess the true state of the economy. In light of these factors, the apparent resilience of the Russian economy is more illusion than reality, especially on the following key fronts.

Mortgaging the future to pay for Putin’s war today

Despite increases in Russian budget revenues, mostly the result of a devalued ruble, continuously growing inflation (hence growing revenues from sales tax), and new levies and taxes all over the economy: a rise in the excise duty on cigarettes and cars, a windfall tax on the metallurgical and fertilizer sector, a tax on the sale of Russian assets by Western companies, and many more—the Russian budget still finds itself running a 2% deficit of GDP, which is significant by Russian standards. Russia is fast running through the reserves that it accumulated over the 2000s and 2010s—or at least the half that is not frozen in the West and being repurposed to help Ukraine by the G7 governments. Today, the total distributable liquid assets remaining in Russia are just short of $100 billion. Putin’s cronies point to sizable yuan-denominated holdings stored with the Chinese Central Bank, ignoring the unenviable reality that this means China holds disproportionate sway over the future of Russian finances .

The biggest revenue item for Russia has always been oil and gas sector proceeds, which constitute one-third of the total budget revenues. The only reason why we see these revenues growing (still below expectations) is due to significantly higher taxes imposed on oil and gas producers, which cannibalizes their productive assets and impedes their ability to reinvest in future production, mortgaging the future to pay for Putin’s war today.

Russia has implemented a mineral extraction tax on its oil and gas giants and increased the corporate tax rate for Novatek , its only LNG producer, from 20% to 34%, while increasing the overall corporate tax rate by 25% across the board effective January 2025. Measures like these, paired with Western sanctions and the voluntary withdrawal of global multinational businesses, stifle investment critical to the future of the Russian economy. Moreover, key development projects such as Arctic LNG-2 have been brought to a halt due to the exit of companies like Linde, Baker Hughes, and Technip, along with sweeping U.S. sanctions.

Over the past months, Russian crude has been trading at an average $10 discount compared to benchmark Brent oil prices, and natural gas prices returned largely to depressed pre-war levels, as we clearly see reflected in the poor economic performance of the Russian state giants. Gazprom’s net loss amounted to 480.6 billion rubles for the period from January to June 2024, compared to a net loss of 255 billion rubles in the same period last year—a record for poor performance. Additionally, the net sales of foreign currencies by the largest exporters fell to $11.5 billion in July from $14.5 billion in June.

The only reason why the budget revenues continue to increase is because of harmful inflation and the overall labor shortage in Russia—partially thanks to the exodus of millions of educated Russian workers following Putin’s invasion—which translates to insatiable wage pressure and spikes in the prices of manufactured goods. Russia is bleeding dry its private sector, which has a hard time competing against the defense sector wages. None of that is sustainable in the longer term. The Russian budget is effectively an act of desperation in wartime. Putin is throwing everything into the fireplace—and it’s completely unsustainable.

The Kremlin is forcing the increasingly heavy costs of its war on the Russian population

The Kremlin’s approach to social welfare and resource allocation during wartime reveals a stark contrast between military spending and civilian welfare. While the government has poured an estimated 2.75 to 3 trillion rubles (equivalent to 1.4-1.6% of Russia’s expected GDP in 2024) into payments for soldiers, the wounded, and families of the deceased, the civilian population faces a different reality. These military payments, amounting to 3.4-3.7% of all consumer spending by Russians in 2023, have further increased inflationary pressures. However, Russia’s war Keynesianism masks the true wretched state of welfare for the broader population. Announced increases in pensions and public sector salaries often fail to materialize, with public sector salary increases implemented in merely 13% of Russian regions , despite Putin’s decrees—exposing a huge gap between propaganda and reality.

The methodology for calculating these salaries is manipulated through procedural tricks, such as reducing employee numbers through sleight of hand. Consequently, 60% of Russian physicians report that their salaries are insufficient to meet basic needs, with 80% working multiple jobs to make ends meet . Meanwhile, Russia has experienced a massive brain drain, losing over a million highly educated individuals, 86% of whom are under the age of 45 and 80% college degree holders, according to a French Institute of International Relations report.

Notwithstanding the political repressions imposed by the Kremlin, there is a strong economic rationale for this dramatic talent flight. IT workers’ salaries in Russia have decreased by 15-25% in 2024, down to 150,000 rubles , driven in part by the exodus of global multinational companies from the country.

The redistribution of welfare is clearly targeted, prioritizing military expenditures over civilian needs and effectively shifting the economic burden of the war onto the broader Russian population while creating an illusion of economic stability through military spending for a tiny subsection of beneficiaries.

Unsustainable monetary policy and trade weakness are revealing structural flaws in Russia’s economy

The inflationary pressures on the Russian economy remain high, despite the Russian Central Bank setting an interest rate of 18%. An annualized rate of price increases from May to July stands at 10%, driven significantly by war spending. This economic militarization is accelerating inflation in a fundamental way: increased production of military goods boosts employment and wages, but the resulting surge in demand isn’t matched by a corresponding increase in consumer goods production. Normally, such an imbalance would be offset by increased imports. Under current conditions, this correction isn’t occurring. In fact, according to the Russian Central Bank’s preliminary estimate, imports in May 2024 were 10% lower than in May 2023 , exacerbating the supply-demand mismatch.

The business environment is rapidly deteriorating, with the Russian Central Bank’s assessment showing an almost crisis-like 4.75-point monthly decline . Labor shortages are driving unsustainable wage growth, especially in the military-industrial complex, creating an inflationary wage spiral. While seemingly positive for workers, wage growth is outpacing the minimal productivity gains in Russia while fueling further inflation, which is borne by those very workers as they live their everyday lives. Russian businesses, having levered up in expectation of rate cuts, now face a harsh reality in an increasingly closed economy where such cuts are unlikely. The increase in output is not structural but driven by idiosyncrasies such as the completion of large metalworking orders , predominantly concentrated in the state-controlled armaments industry. All these factors combine to create a self-reinforcing cycle of inflation and economic instability, pointing towards an impending downturn and threatening to destabilize the entire economic structure.

The notion that increased interest rates will attract Indian and Chinese investors to Russia is also fundamentally flawed. In reality, Russian treasuries have become toxic assets, and the country teeters on the brink of financial insolvency. The country has become completely cut off from global financial markets and pools of capital. Simply put, no investor from anywhere in the world wants to purchase Russian securities. The only buyers of Russian sovereign bonds at scale are Russian financial institutions, making it impossible for Russia to finance its large deficits. Furthermore, it has become impossible for Russian companies to tap into global debt or equity markets to raise desperately needed funds. The idea that ruble-yuan transactions could form the foundation of a new, non-dollar financial world order, as many Putin cronies optimistically predict, is laughable, with a vast majority of global trade transacted in the dollar.

Moreover, China is not helping Russia financially, contrary to popular belief and no matter whatever political rhetoric the two countries may engage in. The stark disparity in interest rates between Russia and China illustrates the misalignment of their economies. While the interest rate on overnight yuan transactions in Russia hovers near 20%, Chinese banks lend to each other at rates closer to 2%. This gulf in lending rates represents a fundamental disconnect between the two economies. Furthermore, the fact that 80% of Russia’s yuan transactions are being reversed due to fears of secondary sanctions from Chinese financial institutions underscores the reluctance of these institutions to engage with Russia. Even direct commodity payments, traditionally a staple of Russian-Chinese trade, are being frozen, according to Bloomberg reports . This paints a clear picture: Chinese financial institutions are unwilling to lend to Russia, effectively isolating it from a key potential ally, out of their own pragmatic financial self-interest, regardless of the rhetoric of political leaders.

Similarly, the hope of Putin’s cronies that investors from India and China would seamlessly replace Western oil and gas companies in Russia has also proven to be unrealistic. Indian investment in Russia has stagnated and totaled a mere $14 bln by the end of 2023 , close to pre-war levels, while the overall value of greenfield foreign direct investments from all countries decreased from $14.9 bln in 2021 to a meager $300 million in 2022.

The current climate of fear surrounding secondary sanctions and stringent wartime regulations has deterred significant investment out of pure financial self-interest. Even Chinese companies that had previously shown interest, such as Sinopec , have suspended operations and investment talks in Russia.

The forced pivot to Chinese technology has also proven costly for Russia. Novatek, for instance, reported a staggering $4 billion increase in capital expenditures for its Arctic LNG-2 project, attributed to the necessity of replacing Western equipment with Chinese alternatives.

It appears that China, India, and other Global South nations are more interested in buying discounted Russian energy than in making substantial investments in the country’s economy. Russians themselves were not capable of filling the economic niches left by the 1,000 multinationals with combined assets of over $220 billion that curtailed their operations in Russia.

For all the government spending, the rest of the economy is stagnant. The contribution of import substitution schemes to economic growth remains modest at best. Every Russian company that has tried to step into the vacated footsteps of Western predecessors still lacks crucial know-how and access to capital, being completely cut off from global capital markets. And Western pundits don’t understand that oil is now being sold at breakeven prices given Russia’s highly inefficient production costs and high transportation costs to its now-more-distant customers while natural gas remains virtually unsold.

The financial strain is not limited to cross-border trade and investment—it’s increasingly evident in the domestic credit market as well. Russians are facing growing difficulties in obtaining personal loans, a trend that signals deepening economic troubles at the household level. In July, the approval rate for unsecured consumer loan applications plummeted to a year-to-date low of 36%, down from 41% in June. This means that nearly two-thirds of Russians seeking cash loans are being turned away empty-handed, a stark indication of the tightening lending policies of Russian banks.

In conclusion, the apparent resilience of the Russian economy is largely illusory, built on a precarious foundation of unsustainable government spending and short-term market factors. The recent ostensible growth spurt masks deep-seated structural weaknesses. As unsustainable stimulus inevitably fades, Russia faces an unenviable perfect storm of challenges: the exhaustion of foreign exchange reserves, an irreversibly strained labor market, rising inflation outside the control of the central bank, and the heavy burden of military expenditures for years to come.

The government’s approach has redirected resources away from productive sectors, cannibalizing the rest of the Russian economy to fund Putin’s war and stifling long-term growth prospects and innovation. With the economy having absorbed the wartime stimulus through credit expansion and increased investment into the defense industry, it now stands at a precipice. A significant economic slowdown or recession appears not just possible but increasingly probable.

Russia is set on a long-term trajectory of structural challenges under the weight of sanctions and elevated government spending—and the true cost of its economic policies is becoming ever more apparent. A looming economic catastrophe driven by the fundamental flaws in Russia’s current strategy will likely set the stage for severe long-term consequences that will play out in the years ahead.

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The Contemporary Russian Economy

A Comprehensive Analysis

• © 2023
• Marek Dabrowski 0

Bruegel, Brussels, Belgium

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• Provides a comprehensive and wide-ranging overview of the Russian economy in the 2020s
• Studies the Russian economy comparatively with other emerging-market and advanced economies
• Provides a benchmark for students to assess Russia's strengths, weaknesses, and future challenges

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About this book

This textbook offers a wide-ranging, comprehensive analysis of the contemporary Russian economy (as it functions in the early 2020s) concentrated on the economy, economic policy, and economic governance. Chapters cover recent Russian economic history, the economic geography of Russia, natural resources, population, major sectors and industries, living standards and social policy, institutions, governance, economic policy, and Russia's role in the global economy. The book will provide a comparative cross-country context, analysing how the Russian economy and its institutions perform compared to its peers to help students and instructors understand Russia’s strengths, weaknesses, and future challenges. Prepared by a team of leading Russian and international experts on the respective topics, this textbook will be of interest to those studying Russian economics. It will be valuable reading for undergraduate and graduate students of Russian studies, the Russian economy, Russian politics,the economics of transition, the economics of emerging markets, and international relations.

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Russian Economy

• Russian economic policy
• regional development
• social policy
• institutions and governance
• natural resources
• Russian studies
• the economics of transition
• the economics of emerging markets
• contemporary Russian economic history
• economic geography of Russia
• Russia's role in the global economy

Table of contents (19 chapters)

Front matter, natural and human resources, natural resources, geography, and climate.

• Leonid Limonov, Denis Kadochnikov

Human Resources

• Irina Denisova, Marina Kartseva

Historical Roots

Capitalist industrialisation and modernisation: from alexander’s reforms until world war i (the 1860s–1917).

• Carol Scott Leonard

The Soviet Economy (1918–1991)

Institutions and their transformation, constitutional foundations of the post-communist russian economy and the role of the state.

• Christopher A. Hartwell

Business and Investment Climate, Governance System

Marek Dabrowski

Evolution of Ownership Structure and Corporate Governance

• Alexander Radygin, Alexander Abramov

Major Sectors and Regional Diversity

Structural changes in the russian economy since 1992.

• Svetlana Avdasheva

Energy Sector

• Przemyslaw Kowalski

Agriculture

• Eugenia Serova

Regional Diversity

• Leonid Limonov, Olga Rusetskaya, Nikolay Zhunda

Russia in the Global Economy

Russia in world trade.

• Arne Melchior

Foreign Investment

• Kalman Kalotay

Sanctions and Forces Driving to Autarky

• Marek Dabrowski, Svetlana Avdasheva

Editors and Affiliations

About the editor.

Marek Dabrowski  is a Non-Resident Scholar at Bruegel, Brussels, Professor of the Higher School of Economics in Moscow, and Co-founder and Fellow at CASE - Center for Social and Economic Research in Warsaw. He was a co-founder of CASE (1991), former Chairman of its Supervisory Council and President of Management Board (1991-2011), Chairman of the Supervisory Board of CASE Ukraine in Kyiv (1999-2009 and 2013-2015), and Member of the Board of Trustees and Scientific Council of the E.T. Gaidar Institute for Economic Policy in Moscow (1996-2016).

Bibliographic Information

Book Title : The Contemporary Russian Economy

Book Subtitle : A Comprehensive Analysis

Editors : Marek Dabrowski

DOI : https://doi.org/10.1007/978-3-031-17382-0

Publisher : Palgrave Macmillan Cham

eBook Packages : Economics and Finance , Economics and Finance (R0)

Copyright Information : The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023

Softcover ISBN : 978-3-031-17381-3 Published: 02 January 2023

eBook ISBN : 978-3-031-17382-0 Published: 01 January 2023

Edition Number : 1

Number of Pages : XXXVII, 410

Number of Illustrations : 71 b/w illustrations

Topics : International Economics , Economy-wide Country Studies , Economic Growth , Russian, Soviet, and East European History , Political Economy/Economic Systems

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Articles on Russian economy

Displaying 1 - 20 of 35 articles.

Ukraine’s cross-border incursion challenges Moscow’s war narrative – but will it shift Russian opinion?

Peter Rutland , Wesleyan University

Russia has become so economically isolated that China could order the end of war in Ukraine

Renaud Foucart , Lancaster University

How Russia has managed to shake off the impact of sanctions – with a little help from its friends

Keith A. Preble , Miami University and Charmaine N. Willis , Skidmore College

Russia’s economy is now completely driven by the war in Ukraine – it cannot afford to lose, but nor can it afford to win

Q&A with Sergei Guriev: ‘The optimistic scenario is the departure of Vladimir Putin in whatever way’

Sergei Guriev , Sciences Po

Empire building has always come at an economic cost for Russia – from the days of the czars to Putin’s Ukraine invasion

Christopher A. Hartwell , ZHAW School of Management and Law and Paul Vaaler , University of Minnesota

More corrupt, fractured and ostracised: how Vladimir Putin has changed Russia in over two decades on top

Matthew Sussex , Australian National University

Prigozhin revolt raised fears of Putin’s toppling – and a nuclear Russia in chaos

Gregory F. Treverton , USC Dornsife College of Letters, Arts and Sciences

How Russia is shifting to a war economy in the face of international sanctions

Christoph Bluth , University of Bradford

Ukraine war: life on Russia’s home front after ten months of conflict

Alexander Titov , Queen's University Belfast

‘Great resignation’ appears to be hastening the exodus of US and other Western companies from Russia

Steven Kreft , Indiana University and Elham Mafi-Kreft , Indiana University

Russia faces first foreign default since 1918 – here’s how it could complicate Putin’s ability to wage war in Ukraine

Michael A. Allen , Boise State University and Matthew DiGiuseppe , Leiden University

Russian ruble’s recovery masks disruptive impact of West’s sanctions – but it won’t make Putin seek peace

The cost of war: how Russia’s economy will struggle to pay the price of invading Ukraine

Meet Russia’s oligarchs, a group of men who won’t be toppling Putin anytime soon

Stanislav Markus , University of South Carolina

How Vladimir Putin’s security obsession has eroded Russian living standards

Richard Foltz , Concordia University

Ukraine: why the sanctions won’t topple Putin

Sergey V. Popov , Cardiff University

Ordinary Russians are already feeling the economic pain of sanctions over Ukraine invasion

US-EU sanctions will pummel the Russian economy – two experts explain why they are likely to stick and sting

David Cortright , University of Notre Dame and George A. Lopez , University of Notre Dame

How Joe Biden could increase pressure on Vladimir Putin if their June 16 meeting fails to deter Russia’s ‘harmful’ behavior

Scott L. Montgomery , University of Washington

Related Topics

• Biden administration
• Russian central bank
• Russia sanctions
• Ukraine invasion 2022
• Vladimir Putin

Top contributors

Co-Director of the Centre for Russian, European and Eurasian Studies, University of Birmingham

Senior Lecturer in Economics, Lancaster University Management School, Lancaster University

Professor of Government, Wesleyan University

Senior Lecturer in Economics, Cardiff University

Professor of International Relations and Security, University of Bradford

PhD Candidate, KU Leuven

Professor in The Division of Global Affairs and The Department of Political Science, Rutgers University - Newark

Professor of International Management & Political Economy, Loughborough University

Professor of International Political Economy, University of California, Santa Barbara

Professor of IPE, Director of City Political Economy Research Centre (CITYPERC), City St George's, University of London

Associate Professor of Security and International Relations, University of Staffordshire

Senior lecturer, St Petersburg State University

Associate Professor of International Business, University of South Carolina

Clinical Associate Professor of Business Economics, Indiana University

Assistant Professor, Economics, University of Pittsburgh

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Addressing a crowd of activists on Friday in Tula, the capital of Russia’s arms industry, Vladimir Putin crowed that the country’s economy had defeated western sanctions imposed after his invasion of Ukraine.

“They predicted decline, failure, collapse — that we would stand back, give up, or fall apart. It makes you want to show [them] a well-known gesture, but I won’t do that, there are a lot of ladies here,” Putin said to a round of applause. “They won’t succeed! Our economy is growing, unlike theirs.”

Russia’s president gloated that Russia’s economy had not only withstood an onslaught of sanctions from western countries — but was now bigger than all but two of them. He was referring to the World Bank’s ranking of GDP by purchasing power parity, by which Russia slightly edges ahead of Germany. “All of our industry did their part,” he said.

On Tuesday, the IMF appeared to concur with Russia’s president. The IMF revised its own GDP growth forecast for Russia to 2.6 per cent this year, a 1.5 percentage point rise over what it had predicted last October.

The Russian economy’s resilience has stunned many economists who had believed the initial round of sanctions over the invasion of Ukraine nearly two years ago could cause a catastrophic contraction.

Instead, they say, the Kremlin has spent its way out of a recession by evading western attempts to limit its revenues from energy sales and by ramping up defence spending.

Russia is directing a third of the country’s budget — Rbs9.6tn in 2023 and Rbs14.3tn in 2024 — towards the war effort, a threefold increase from 2021, the last full year before the invasion. This includes not only producing hardware, but also giving war-related social payments to those who fight in Ukraine and their families, as well as some spending on the occupied territories.

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The significant increase in military expenditure marks “a striking break with Russia’s post-Communist development to date”, a recent Stockholm International Peace Research Institute (SIPRI) paper concluded.

Putin’s own top economic officials have warned a surge in public spending comes at the risk of a major overheating of the economy in the near future. But for the time being, it is keeping growth robust.

All of this would have been impossible if Russia had not continued to generate colossal revenues from its energy resources, despite sanctions.

In 2023, Russia’s energy revenues reached Rbs8.8tn — a decline of about a quarter from the record-breaking result in 2022 but above the average for the past ten years. Despite this, the state has had to resort to increasingly irregular methods to generate revenue from one-off taxes and levies, including “voluntary donations” western businesses have to pay when leaving Russia.

“The regime is resilient because it sits on an oil rig,” says Elina Ribakova, a non-resident senior fellow at the Peterson Institute for International Economics. “The Russian economy now is like a gas station that has started producing tanks.”

As he announced Russia’s staggering military spending to lawmakers in September, finance minister Anton Siluanov used a Soviet slogan from the second world war to describe the Kremlin’s approach to the budget.

“Everything for the front, everything for victory,” Siluanov said.

The Kremlin’s shift to what Vasily Astrov, a senior economist at the Vienna Institute for International Economic Studies (WIIW), calls “military Keynesianism” is a radical break from the conservative macroeconomic policy of Putin’s first two decades in power.

Technocrats like Siluanov and central bank governor Elvira Nabiullina helped steer Russia through multiple financial crises by aggressively targeting inflation, shoring up the country’s banking system, building up foreign currency reserves, and attempting to rein in additional spending.

That approach also proved crucial in mitigating the initial impact of the sanctions at the war’s outset, when western countries froze $300bn of Russia’s sovereign reserves and the Kremlin imposed currency controls to halt an exodus of capital and a run on the banks.

“The economic bloc [the finance ministry and central bank] keeps saving the regime. They have proven to be much more useful for Putin than the generals,” says Alexandra Prokopenko, a former Russian central bank official.

Avoiding a bigger contraction in the economy allowed the Kremlin to pivot to fuelling growth through spending, Astrov says. Although the authorities officially continue to refer to the war in Ukraine as a “special military operation”, the entire country’s economy has shifted to producing for the war.

Addressing a group of arms producers on Friday, Putin said they were “guaranteed to be filling orders for years to come” as Russia ramped up its weapons production and said the defence ministry was paying suppliers 80 per cent of the costs in advance.

The drive to produce more missiles, artillery, and drones in particular, is paying dividends for Russia on the battlefield at a time when Ukraine is struggling to secure funding for the advanced western weaponry Kyiv needs to beat back the invasion.

Putin and other top Russian officials have made a point of complaining that even the recent surge in production is insufficient. On Wednesday, defence minister Sergei Shoigu gave a public dressing down to the head of one of Russia’s weapons manufacturers over what he said was a lag in production of a “promising new artillery system”.

“If we have the chance, then we need to make use of it,” Shoigu said.

Ukraine’s army chief Valery Zaluzhny admitted this week that Kyiv and its allies had not done enough to improve Ukraine’s capabilities at a time when Russia’s ability to reinvest in its own defence industry had given it a significant firepower advantage.

The Russian finance ministry estimates that war-related fiscal stimulus in 2022-23 was equivalent to around 10 per cent of GDP. In that same period, war-related industrial output has risen 35 per cent while civilian production has remained flat, according to research published by the Bank of Finland Institute for Emerging Economies. Putin claimed on Friday that civilian production had increased by 27 per cent since the start of the war, but did not cite a source for the figure.

“The verities of economic policy cease to apply when a government prioritises war over all else. Russia’s decision [to dispense] with two decades of prudent economic policies caught many by surprise, not just forecasters,” the Bank of Finland researchers wrote in their most recent forecast for Russia.

Economists and even some of the Kremlin’s own top technocrats have warned, however, that the rampant spending is already exposing new cracks in the Russian economy. Instead of lessening its dependence on oil and gas export sales, which make up about a third of budget income, Putin’s wartime drive has created a new addiction: military production.

“The longer the war lasts, the more addicted the economy will become to military spending,” WIIW economists wrote in their January paper. “This raises the spectre of stagnation or even outright crisis once the conflict is over,” they added.

The growth is already creating imbalances that could become more pronounced over time. This is particularly noticeable on Russia’s labour market, where Russia’s army and its weapons factories are sucking in a growing number of workers on inflated wages — Putin said on Friday that Russia had created 520,000 new jobs in the industry — to man the round-the-clock shifts needed to achieve defence production targets.

This has created labour shortages in civilian industry amid an already bleak demographic outlook exacerbated by the war. Russia mobilised 300,000 men into the army in 2022 and claims to have recruited a further 490,000 in 2023. At least as many more, meanwhile, have fled the country to avoid being sent to the front.

“The greatest shortage of personnel is observed in the machine-building and chemical industries, many enterprises are forced to work in several shifts to fulfil orders received from the state,” analysts from the Gaidar Institute in Moscow wrote in December 2023.

To compete for labour against military production — which offers an exemption from the draft in addition to generous wages — the civilian sector has also had to increase salaries, which in turn drives domestic demand but adds to inflationary pressures.

If the sanctions have failed to stop Russia from spending, however, the restricted access to international markets has driven up the cost of imports, creating another potential economic trap for the Kremlin.

The circuitous routes goods now take to Russia are hitting consumers hard and weakening the rouble, which lost around 30 per cent of its value against the dollar in 2023.

“The huge budget expenses combined with Russia’s isolation . . . create an effect that’s like when you put dough in a plastic container,” says Prokopenko, a non-resident fellow at the Carnegie Russia Eurasia Center in Berlin. “It rises until it runs into the roof, and then there’s nowhere to go.”

The surge in public spending has driven inflation up to 7-7.5 per cent, prompting the central bank to raise the key interest rate to 16 per cent — a higher rate even than in Ukraine.

Following the rate rise, central bank governor Nabiullina warned the spending ran the risk of overheating Russia’s economy. “Trying to use dovish fiscal policy to grow beyond our potential will drive price growth [inflation] that’s going to eat more and more into savings and wage growth. And there won’t be any real growth in household wealth as a result,” she said.

The pace of growth may also not be sustainable even if Russia keeps up its current level of military spending, economists say.

Even analysts from the state-owned Russian Academy of Sciences say limited capacity means key sectors of the economy are already showing “signs of a slowdown”. These include a decline in railway transport loading, which is one of the primary indicators of an economic recession, they wrote in a note.

Other economists argue that Russia’s economy would have grown in consecutive years at a much more sustainable level if Putin had not ordered the full-scale invasion of Ukraine.

“2022 began from a very optimistic note, and the growth even surpassed most expectations. I would have expected that both in 2022 and 2023, we could have anticipated an annual GDP growth of around 3 per cent,” says Ruben Enikolopov, a research professor with Pompeu Fabra University (UPF) in Barcelona.

Data visualisation by Keith Fray

Letter in response to this article :

Even after the war ends, Moscow may pose a threat  /  From Abigail MacCartney, Oakham, Leicestershire, UK

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Economy of Russia - statistics & facts

The impact of the war in ukraine on the russian economy, energy sector is crucial to the russian economy, key insights.

Detailed statistics

Gross domestic product (GDP) per capita in Russia 2029

Gross domestic product (GDP) growth rate in Russia 2019-2029

Monthly inflation rate in Russia 2022-2024

Editor’s Picks Current statistics on this topic

Wages & Salaries

Average nominal wage per month in Russia 1995-2023

Unemployment rate in Russia monthly 2020-2024

Government Finances

National debt in Russia 2011-2023

Further recommended statistics

Gross domestic product.

• Basic Statistic Countries with the largest gross domestic product (GDP) 2024
• Basic Statistic Gross domestic product (GDP) in Russia 2029
• Basic Statistic Gross domestic product (GDP) per capita in Russia 2029
• Basic Statistic Gross domestic product (GDP) growth rate in Russia 2019-2029
• Basic Statistic Gross domestic product (GDP) growth rate in Russia quarterly 2018-2024
• Basic Statistic Gross domestic product (GDP) growth rate in Russia monthly 2019-2024
• Basic Statistic Value added by selected industries as a GDP share in Russia 2023
• Basic Statistic Oil and gas sector as a share of GDP in Russia quarterly 2017-2023

Countries with the largest gross domestic product (GDP) 2024

The 20 countries with the largest gross domestic product (GDP) in 2024 (in billion U.S. dollars)

Gross domestic product (GDP) in Russia 2029

Russia: Gross domestic product (GDP) in current prices from 1997 to 2029 (in billion U.S. dollars)

Russia: Gross domestic product (GDP) per capita in current prices from 1997 to 2029 (in U.S. dollars)

Russia: Real gross domestic product (GDP) growth rate from 2019 to 2029 (compared to the previous year)

Gross domestic product (GDP) growth rate in Russia quarterly 2018-2024

Russia: Growth of the real gross domestic product (GDP) from 1st quarter 2018 to 1st quarter 2024 (compared to the same quarter of the previous year)

Gross domestic product (GDP) growth rate in Russia monthly 2019-2024

Year-over-year gross domestic product (GDP) growth rate in Russia from January 2019 to January 2024

Value added by selected industries as a GDP share in Russia 2023

Share of gross value added in the gross domestic product (GDP) in Russia in 2023, by industry

Oil and gas sector as a share of GDP in Russia quarterly 2017-2023

Share of the oil and gas industry in the gross domestic product (GDP) of Russia from 1st quarter 2017 to 2nd quarter 2023

Government finances

• Basic Statistic Government expenditure relative to gross domestic product (GDP) in Russia 2029
• Basic Statistic National debt in relation to gross domestic product (GDP) in Russia 2029
• Premium Statistic National debt in Russia 2011-2023
• Premium Statistic External debt relative to gross domestic product (GDP) in Russia 2013-2022
• Basic Statistic Federal budget income and spending in Russia 2014-2023
• Premium Statistic Budget balance in Russia quarterly 2016-2023
• Premium Statistic Oil and gas revenue share in consolidated budget in Russia 2023-2026

Government expenditure relative to gross domestic product (GDP) in Russia 2029

Russia: Ratio of government expenditure to gross domestic product (GDP) from 2019 to 2029

National debt in relation to gross domestic product (GDP) in Russia 2029

Russia: National debt in relation to gross domestic product (GDP) from 2019 to 2029

National debt in Russia from January 2011 to July 2023 (in billion Russian rubles)

External debt relative to gross domestic product (GDP) in Russia 2013-2022

Foreign debt to gross domestic product (GDP) ratio in Russia from 2013 to 2022

Federal budget income and spending in Russia 2014-2023

Income and expenditure of the federal budget of Russia from 2014 to 2023 (in trillion Russian rubles)

Budget balance in Russia quarterly 2016-2023

Budget balance (surplus or deficit) in Russia from 1st quarter 2016 to 2nd quarter 2023 (in billion Russian rubles)

Oil and gas revenue share in consolidated budget in Russia 2023-2026

Forecast share of oil and gas revenue in the federal budget in Russia from 2023 to 2026

Employment & wages

• Basic Statistic Unemployment rate in Russia monthly 2020-2024
• Basic Statistic Unemployment rate in Russia quarterly 2019-2024, by region
• Basic Statistic Youth unemployment rate in Russia in 2023
• Premium Statistic Monthly minimum wage in Russia and its major cities 2024
• Premium Statistic Average nominal wage per month in Russia 1995-2023

Russia: Unemployment rate from September 2020 to January 2024

Unemployment rate in Russia quarterly 2019-2024, by region

Average unemployment rate in Russia from 3rd quarter 2019 to 2nd quarter 2024, by federal district

Youth unemployment rate in Russia in 2023

Russia: Youth unemployment rate from 2004 to 2023

Monthly minimum wage in Russia and its major cities 2024

Monthly minimum wage in Russia and its largest cities as of January 1, 2024 (in Russian rubles)

Average monthly nominal wage in Russia from 1995 to 2023 (in Russian rubles)

Inflation and CPI

• Basic Statistic Inflation rate in Russia 2029
• Basic Statistic Monthly inflation rate in Russia 2022-2024
• Basic Statistic Year-over-year inflation rate in Russia in December 2012-2023
• Premium Statistic Inflation rate in Russia quarterly 2005-2024
• Premium Statistic Average food prices in Russia 2013-2022, by product
• Premium Statistic Industrial sector PPI in Russia 2023, by economic activity

Inflation rate in Russia 2029

Russia: Inflation rate from 1997 to 2029 (compared to the previous year)

Russia: Inflation rate from April 2022 to April 2024 (compared to the same month of the previous year)

Year-over-year inflation rate in Russia in December 2012-2023

Inflation rate in Russia from December 2012 to December 2023 (compared to December of the previous year)

Inflation rate in Russia quarterly 2005-2024

Year-over-year change in the Consumer Price Index (CPI) in Russia from 1st quarter 2005 to 1st quarter 2024

Average food prices in Russia 2013-2022, by product

Average consumer price of selected food products in Russia from 2013 to 2022 (in Russian rubles)

Industrial sector PPI in Russia 2023, by economic activity

Year-over-year Producer Price Index (PPI) in Russia in September 2023, by industrial sector (compared to the corresponding period of the previous year)

Income & expenditure

• Premium Statistic Average monthly income per capita in Russia 1995-2023
• Premium Statistic Real disposable income growth in Russia 2014-2023
• Premium Statistic Disposable income distribution in Russia 2022, by spending and savings
• Premium Statistic Population income level distribution in Russia 2014-2023
• Premium Statistic Population share in Russia 2013-2023, by monthly per capita income
• Basic Statistic Population under the poverty line in Russia 1995-2023

Average monthly income per capita in Russia 1995-2023

Average monthly income per capita in Russia from 1995 to 2023 (in Russian rubles)

Real disposable income growth in Russia 2014-2023

Year-over-year real disposable income growth of the population in Russia from 2014 to 2023

Disposable income distribution in Russia 2022, by spending and savings

Distribution of disposable population income in Russia in 2022, by expenditure and savings

Population income level distribution in Russia 2014-2023

Total monetary income distribution in Russia from 2014 to 2023, by 20-percent population group

Population share in Russia 2013-2023, by monthly per capita income

Population distribution by average monthly per capita money income in Russia from 2013 to 2023

Population under the poverty line in Russia 1995-2023

Population with an income below the subsistence minimum in Russia from 1995 to 2023 (in millions)

Industrial production

• Premium Statistic Russia: industrial production index 2014-2023
• Basic Statistic Manufacturing PMI in Russia monthly 2020-2023
• Basic Statistic Goods and services output index in Russia 2015-2022
• Premium Statistic Industrial production value in Russia 2016-2022, by sector
• Premium Statistic Manufacturing production value in Russia 2022, by product category

Russia: industrial production index 2014-2023

Year-over-year industrial production index (IPI) in Russia from 2014 to 2023

Manufacturing PMI in Russia monthly 2020-2023

Purchasing Managers Index (PMI) for manufacturing in Russia from January 2020 to July 2023

Goods and services output index in Russia 2015-2022

Index of output of goods and services in Russia from 2015 to 2022

Industrial production value in Russia 2016-2022, by sector

Value of shipped own produced goods, works performed, and services rendered in Russia from 2016 to 2022, by economic sector (in trillion Russian rubles)

Manufacturing production value in Russia 2022, by product category

Value of shipped own produced goods, works performed, and services rendered by the manufacturing industry in Russia in 2022, by product category (in billion Russian rubles)

Business enterprise

• Premium Statistic Number of newly registered businesses in Russia 2014-2029
• Basic Statistic Legal entity count in Russia 2015-2024
• Basic Statistic Legal entity distribution in Russia 2024, by industry
• Basic Statistic Individual entrepreneur count in Russia 2015-2024
• Basic Statistic Russia Small Business Index (RSBI) monthly 2020-2024
• Premium Statistic Most profitable companies in Russia 2021

Number of newly registered businesses in Russia 2014-2029

Number of newly registered businesses in Russia from 2014 to 2029 (in thousands)

Legal entity count in Russia 2015-2024

Number of legal entities in Russia from 2015 to 2024 (in millions)

Legal entity distribution in Russia 2024, by industry

Share of legal entities in Russia as of 2024, by economic sector

Individual entrepreneur count in Russia 2015-2024

Number of individual entrepreneurs in Russia from 2015 to 2024 (in millions)

Russia Small Business Index (RSBI) monthly 2020-2024

Russia Small Business Index (RSBI) from January 2020 to June 2024

Most profitable companies in Russia 2021

Leading companies in Russia in 2021, by net profit (in billion Russian rubles)

Foreign trade

• Premium Statistic External merchandise trade value in Russia 2012-2023
• Premium Statistic Leading export partners of Russia 2022, by value
• Premium Statistic Commodity structure of exports in Russia January 2024
• Premium Statistic Leading import partners of Russia 2022, by value
• Premium Statistic Commodity structure of imports in Russia January 2024

External merchandise trade value in Russia 2012-2023

Merchandise export and import value and trade balance in Russia from 2012 to 2023 (in billion U.S. dollars)

Leading export partners of Russia 2022, by value

Export value of goods from Russia in 2022, by major country of destination (in billion U.S. dollars)

Commodity structure of exports in Russia January 2024

Export value distribution in Russia in January 2024, by commodity

Leading import partners of Russia 2022, by value

Import value of goods in Russia in 2022, by major country of origin (in billion U.S. dollars)

Commodity structure of imports in Russia January 2024

Import value distribution in Russia in January 2024, by commodity

Further indicators

• Premium Statistic Gross national income (GNI) in Russia 2014-2023
• Premium Statistic Inward flows of FDI in Russia 2011-2022
• Basic Statistic Labor productivity index in Russia 2022, by industry
• Premium Statistic Consumer Confidence Index (CCI) in Russia monthly 2014-2023
• Premium Statistic Human development index of Russia 1990-2022
• Basic Statistic U.S. dollar & euro to Russian ruble exchange rate monthly 2008-2024

Gross national income (GNI) in Russia 2014-2023

Annual gross national income (GNI) volume in Russia from 2014 to 2023 (in billion U.S. dollars)

Inward flows of FDI in Russia 2011-2022

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U.S. Department of the Treasury

As russia completes transition to a full war economy, treasury takes sweeping aim at foundational financial infrastructure and access to third country support.

Over 300 new sanctions issued across Treasury and State

Foreign financial institutions that support Russia’s war economy face greater risk of sanctions

WASHINGTON — As President Biden and Group of Seven (G7) Leaders prepare to meet this week in Italy, the U.S. Department of the Treasury is issuing sweeping new measures guided by G7 commitments to intensify the pressure on Russia for its continued cruel and unprovoked war against Ukraine. Today’s actions ratchet up the risk of secondary sanctions for foreign financial institutions that deal with Russia’s war economy; restrict the ability of Russian military-industrial base to take advantage of certain U.S. software and information technology (IT) services; and, together with the Department of State, target more than 300 individuals and entities both in Russia and outside its borders—including in Asia, the Middle East, Europe, Africa, Central Asia, and the Caribbean—whose products and services enable Russia to sustain its war effort and evade sanctions. 

“Russia’s war economy is deeply isolated from the international financial system, leaving the Kremlin’s military desperate for access to the outside world,” said Secretary of the Treasury Janet L. Yellen. “Today’s actions strike at their remaining avenues for international materials and equipment, including their reliance on critical supplies from third countries. We are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services. Every day, Russia continues to mortgage its future to sustain its unjust war of choice against Ukraine.” 

Treasury is targeting the architecture of Russia’s financial system, which has been reoriented to facilitate investment into its defense industry and acquisition of goods needed to further its aggression against Ukraine. Treasury is also targeting more than a dozen transnational networks laundering gold for a designated Russian gold producer, supporting Russia’s production of unmanned aerial vehicles (UAVs), and procuring sensitive and critical items such as materials for Russia’s chemical and biological weapons program, anti-UAV equipment, machine tools, industrial machinery, and microelectronics. Today’s action also takes further steps to limit Russia’s future revenue from liquefied natural gas. 

The State Department is targeting over 100 entities and individuals engaged in the development of Russia’s future energy, metals, and mining production and export capacity; sanctions evasion and circumvention; and furthering Russia’s ability to wage its war against Ukraine.

NEW SECONDARY SANCTIONS RISK 

On December 22, 2023, President Biden expanded Treasury’s tools to disrupt and degrade Russia’s war machine by authorizing Treasury to impose sanctions on foreign financial institutions for aiding Russia’s military-industrial base. Today, Treasury is broadening the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order (E.O.) 14024. This means that foreign financial institutions risk being sanctioned for conducting or facilitating significant transactions, or providing any service, involving any person blocked pursuant to E.O. 14024, including designated Russian banks such as  VTB Bank Public Joint Stock Company (VTB) and  Public Joint Stock Company Sberbank of Russia (Sberbank). This expanded definition reflects Treasury’s assessment that Russia has re-oriented its economy and marshalled all parts of its government toward supporting its reprehensible war effort. Foreign financial institutions face sanctions risk for continuing to facilitate transactions involving Russia’s military-industrial base. Financial institutions should review  OFAC’s updated sanctions advisory for practical guidance on how to identify sanctions risks and implement corresponding controls.

FOREIGN LOCATIONS OF DESIGNATED RUSSIAN BANKS

To help clarify the risk foreign financial institutions face by conducting or facilitating significant transactions or providing any service involving Russia’s designated banks, OFAC has updated the Specially Designated Nationals and Blocked Persons List (SDN List) information for five sanctioned Russian financial institutions, to include the addresses and aliases of their foreign locations. 

Specifically, OFAC has updated the listings for  Promsvyazbank Public Joint Stock Company to include its locations in Beijing, People’s Republic of China (PRC), Bishkek, Kyrgyz Republic, and New Delhi, India; for  State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank to include its locations in Beijing, PRC and Mumbai, India; for Sberbank to include its locations in Beijing, PRC and New Delhi and Mumbai, India; for VTB to include its locations in New Delhi, India, and Beijing and Shanghai, PRC; and for  VTB Capital Holdings Closed Joint Stock Company to include its location in Hong Kong, PRC.

SOFTWARE AND IT-RELATED SERVICES PROHIBITIONS

In coordination with the U.S. Department of Commerce and in line with G7 efforts to disrupt the Russian military-industrial base’s reliance on foreign IT systems, Treasury has taken steps to restrict the Russian military-industrial base’s access to certain software and IT-related services. To implement this policy, Treasury, in consultation with the Department of State, has issued a  new determination under Executive Order (E.O.) 14071, which prohibits the supply to any person in the Russian Federation of (1) IT consultancy and design services; and (2) IT support services and cloud-based services for enterprise management software and design and manufacturing software. The determination will take effect on September 12, 2024. 

The United States strongly supports the free flow of information and communications globally, and these actions are not intended to disrupt civil society and civil telecommunications.  Despite the new prohibitions, OFAC continues to maintain authorizations for certain telecommunication and internet-related transactions, as well as humanitarian transactions, under General Licenses  6D and  25D , which mitigate the impacts to Russian civil society and protect public access to information communications technology.  

RUSSIAN FINANCIAL INFRASTRUCTURE

The Moscow Exchange (MOEX) operates Russia’s largest public trading markets for equity, fixed income, derivative, foreign exchange, and money market products, as well as Russia’s central securities depository and the country’s largest clearing service provider. U.S.-designated Russian President Vladimir Putin has approved a series of measures to further attract capital through MOEX from both Russian and non-Russian persons from “friendly countries”—expanding opportunities for both Russians and non-Russians to profit from the Kremlin’s war machine by making investments in Russian sovereign debt, Russian corporations, and leading Russian defense entities, including U.S.-designated State Corporation Rostec , Public Joint Stock Company United Aircraft Corporation (UAC), Kamaz Publicly Traded Company (Kamaz), Irkut Corporation Joint Stock Company , Uralvagonzavod , and Joint Stock Company Russian Helicopters .

The National Clearing Center (NCC) is the central counterparty and clearing agent for, and a subsidiary of, MOEX. NCC is supervised by the Central Bank of the Russian Federation (CBR).

The Non-Bank Credit Institution Joint Stock Company National Settlement Depository  (NSD) is Russia’s central securities depository and is a subsidiary of MOEX. NSD provides bank account services, registration of over-the-counter trades, and liquidity management services. The European Union (EU) previously sanctioned NSD in June 2022.

Gas Industry Insurance Company Sogaz (Sogaz) is an insurance company that provides insurance to Russian military personnel and personnel of leading defense entities, including U.S.-designated UAC, Joint Stock Company Experimental Design Bureau Novator , and Federal State Enterprise Ya M Sverdlov Plant . Sogaz has also been sanctioned by Australia, Canada, the EU, New Zealand, and the United Kingdom (UK).

Joint Stock Company Russian National Reinsurance Company (RNRC) is a Russian state-owned reinsurance provider that was created in 2016 to provide protection for sanctioned persons. RNRC has also been sanctioned by the EU and UK.

MOEX, NCC, NSD, Sogaz, and RNRC were designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy. Sogaz was also designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy. 

SANCTIONS EVASION, CIRCUMVENTION, AND BACKFILL

Russia relies on complex transnational supply chains to feed its war machine and enable production of materiel to sustain its war effort. Similar networks also attempt to evade sanctions using convoluted schemes to move money and other valuable goods and assets. Today’s action targets more than a dozen of these types of networks, designating more than 90 individuals and entities across Russia, Belarus, the British Virgin Islands, Bulgaria, Kazakhstan, the Kyrgyz Republic, the PRC, Serbia, South Africa, Türkiye, and the United Arab Emirates (UAE).  

For more information on these targets, please see Annex 1 .

RUSSIA’S DOMESTIC WAR ECONOMY

Russia has transformed into a war economy in which companies across the spectrum of Russian industry contribute to Russia’s war effort. Today’s action reflects the intricate landscape of Russia’s domestic war economy by targeting more than 100 entities that operate or have operated in the defense and related materiel, manufacturing, technology, transportation, or financial services sectors of the Russian Federation economy.

For more information on these targets, please see Annex 2 .

LIMITING RUSSIA’S FUTURE REVENUE FROM LIQUEFIED NATURAL GAS

Guided by commitments made by President Biden and G7 leaders to limit Russia’s future energy revenues and impede Russia’s development of future energy projects, today Treasury is targeting entities involved in three liquefied natural gas (LNG) projects that Russia hopes to bring online in the future: the Obsky LNG, Arctic LNG 1, and Arctic LNG 3 projects. Today’s action also includes designations of three entities involved in either construction of natural gas-related projects or manufacturing specialized equipment for LNG transportation, as well as the identification of seven under-construction LNG vessels. 

For more information on these targets, please see Annex 3 .

ANNEX 1: SANCTIONS EVASION, CIRCUMVENTION, AND BACKFILL

Aero-hit network.

Limited Liability Company Aero-HIT (Aero-HIT) is a Khabarovsk, Russia-based company that has purchased equipment and components to produce several modifications of the Veles multi-rotor first person view strike drone. Aero-HIT-manufactured Veles drones have been used by Russian forces based in Kherson against Ukrainian targets. The Veles drones can be used as an attack drone, as optical reconnaissance devices, or as part of an electronic reconnaissance system. Russia-based Andrei Andreevich Anisimov (Anisimov) is the Director General of Aero-HIT. In his capacity as Director General, Anisimov has worked to expand production of unmanned aerial vehicles (UAVs) for use by Russian forces. PRC-based Shenzhen Huasheng Industry Co Ltd has contracted with Aero-HIT to supply UAV components for Aero-HIT. Russia-based Obshchestvo S Organichennoi Otvetstvennostyu Renovatsio-Invest (Renovatsio-Invest) procured PRC-manufactured UAVs on behalf of Aero-HIT. Renovatsio-Invest has also attempted to provide similar services of procuring PRC-manufactured UAVs to other entities in the Russian military-industrial base. 

Aero-HIT, Anisimov, Shenzhen Huasheng Industry Co Ltd, and Renovatsio-Invest were designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy.

Russian Machine Tool Evasion Network

Russia-based Newton-ITM  is a supplier and producer of metalworking equipment and high-precision parts for the aerospace industry. Russian national Dmitrii Vladimirovich Alikhanov  (Alikhanov) is the director of Newton-ITM. Alikhanov has worked with European machine tool manufacturers to illicitly procure machinery for Russian end-users. Alikhanov has used Kyrgyz Republic-based Obshchestvo s Ogranichennoy Otvestvennostyu Nova Proekt  (Nova Proekt) as a falsified end-user to procure machine tools for Russian end-users.A number of foreign intermediaries, including Türkiye-based Safes Lojistik Ithalat Ihracat Sanayi Ticaret Limited (Safes Lojistik), PRC-based Chongqing Fagima Electromechanical Equipment Co Ltd (Chongqing Fagima), and Hong Kong-based GBL International Logistics Co Ltd (GBL), helped to ship foreign-origin machine tools to Newton-ITM.

Newton-ITM, Alikhanov, Nova Proekt, Safes Lojistik, Chongqing Fagima, and GBL were designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy.

Russian Intelligence Procurement Network

Russia-based Silk Way Rally Association (Silk Way) holds an annual off-road rally race that the U.S.-designated Russian  Main Intelligence Directorate (GRU) uses as a front for intelligence operations. The GRU has given awards to Russian national Bulat Akhatovich Yanborisov  (Bulat), the head of Silk Way, for his work. Bulat appears to use his properties in Europe as transit points for GRU officers. Bulat, who is Silk Way’s CEO and general director, alongside his son Amir Bulatovich Yanborisov (Amir), use Silk Way’s logistical infrastructure to procure anti-UAV and radioelectronic warfare equipment for use on the battlefield in Ukraine.

Silk Way, Bulat, and Amir were designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy. 

Nikolai Levin Network

U.S.-designated OOO Mayak (Mayak) assists Russian companies in circumventing sanctions through Mayak’s trading houses and consolidated warehouses in Europe, delivering parallel imports from Europe, Türkiye, and the UAE. Russian national Nikolai Aleksandrovich Levin (Levin) is the General Director and owner of Mayak and has used a network of companies to facilitate the import of U.S. and foreign electronics, industrial materials, and other goods into Russia. Levin is the Director and owner of Serbia-based Bassire Group DOO Beograd (Bassire Group) and is the sole executive of Thailand-based NAL Solutions Company Limited (NAL Solutions). Türkiye-based Expert Machinery Kimyasal Urunler Ticaret Limited Sirketi  (Expert Machinery) is co-owned by Levin and has sent over $500,000 worth of high priority HS code goods to Mayak and Russia-based OOO TAV (TAV), including machines for the reception, conversion, and transmission of data and integrated electronic circuits. TAV buys and delivers imported goods and offers all types of cargo transportation all over Russia and is owned by Russian national Aleksandr Vasilyevich Tanchev  (Tanchev). Tanchev is the Director of Hong Kong-based Tavit Hong Kong Co Limited (Tavit), which has sent over $2 million worth of U.S.-made goods to Mayak. 

Levin, Expert Machinery, and Tavit were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy. TAV and Tanchev were designated pursuant to E.O. 14024 for operating or having operated in the transportation sector of the Russian Federation economy. Bassire Group and NAL Solutions were designated pursuant to E.O. 14024 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Levin.

Sudakov Gold Laundering Network  

Russian national Andrey Dmitriyevich Sudakov (Sudakov), an employee of U.S.-designated Russian state-owned gold producer  Public Joint Stock Company Polyus (Polyus), and his Hong Kong-based associate Mu Xiaolu (Mu), engaged in a complex, multi-layered laundering scheme whereby payments from the sale of Russian-origin gold were converted into fiat currency and cryptocurrencies through numerous UAE and Hong Kong-based front companies. The scheme used numerous Hong Kong-based trading companies, including Holden International Trading Limited (Holden) and Taube Precious HK Limited (Taube) to route payments related to gold sales through foreign financial institutions back into the Russian financial system. The scheme also used UAE-based front company Red Coast Metals Trading DMCC (Red Coast) to obfuscate payments from the sale of Russian-origin gold. Additionally, the scheme involved Hong Kong-based VPower Finance Security Hong Kong Limited (VPower) to transport the Russian-origin gold. 

Sudakov, Mu, Holden, Red Coast, Taube, Red Coast, and VPower were designated pursuant to E.O. 14024 for operating or having operated in the metals and mining sector of the Russian Federation economy.

Chichenev Microelectronics Procurement Network

Alexey Chichenev (Chichenev) is a Russian national who manages a large-scale microelectronics procurement network based in Hong Kong. Chichenev has used his network of Hong-Kong based import-export companies, including Superchip Limited (Superchip) and Kvantek Limited  (Kvantek), to ship millions of dollars’ worth of electronic integrated circuits and other high-priority technology items to Russia. Chichenev is the director and 100 percent owner of Superchip. Chichenev is also the director of Olax Finance Limited , Saril Overseas Limited ,   and Bargawine (Hong Kong) Limited .

Superchip and Kvantek were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy. Chichenev was designated pursuant to E.O. 14024 for being or having been a leader, official, senior executive officer, or member of the board of directors of Superchip. Olax Finance Limited, Saril Overseas Limited, and Bargawine (Hong Kong) Limited were designated pursuant to E.O. 14024 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Chichenev.

Elecom Network

Limited Liability Company Elecom  (LLC Elecom) is a Russia-based electronic component manufacturer that has imported high-priority items, including electronic integrated circuits, from foreign companies. Pako International Trading (Pako International) is a Hong Kong-based company that has shipped high-priority items, including electronic integrated circuits and transformers, to Russian companies including   LLC Elecom   and U.S.-designated  Limited Liability Company Promelektro Engineering (Promelektro Engineering). Valetudo Limited  (Valetudo) is a Hong Kong-based company that has shipped high-priority items, including electronic integrated circuits and capacitators, to Russian companies including LLC Elecom and Promelektro Engineering. LLC Elecom, Pako International, and Valetudo were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

Training the Wagner Group

Brett Warrick Mac Donald  (Mac Donald) and Shaun Louw (Louw) are South African nationals who, throughout mid-2023, arranged and oversaw the execution of a training program on survival techniques for U.S.-designated  Private Military Company ‘Wagner’ (the Wagner Group) personnel in the Central African Republic. Mac Donald and Louw were designated pursuant to E.O. 14024 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the Wagner Group, a person whose property and interests in property are blocked pursuant to E.O. 14024.

Unmanned Systems Procurement Network

Russia-based Limited Liability Company Unmanned Systems (Unmanned Systems) is a designer and manufacturer of unmanned aircraft systems that have been used as reconnaissance drones by the Russian military. Russia’s military industrial base uses Unmanned Systems and an extensive network of Russian and foreign intermediary companies to purchase microelectronics and high-tech equipment produced abroad. Hong Kong-based Infinite Force Cargo Service HK Limited (Infinite Force) has sent camera lenses for unmanned aircraft to Unmanned Systems as well as high-priority items such as electronic integrated circuits, tantalum capacitors, and multilayer ceramic capacitors to other Russian end-users, including U.S.-designated  Silkway Limited Liability Company .PRC-based Shanghai Transit International Forwarding Agency Co Ltd (Shanghai Transit)offers delivery via its own container trains to various Russian cities. Shanghai Transit has provided over $180,000 worth of high-priority items, including electronic integrated circuits, tantalum capacitors, and multilayer ceramic capacitors, to Russia-based end-users, including those supplying equipment to Unmanned Systems. 

Unmanned Systems was designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy. Infinite Force and Shanghai Transit were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy. 

ARP Investments 

Russia-based Limited Liability Company Severnaya Zvezda  (Severnaya Zvezda)   is a producer and supplier of semiconductors and tantalum capacitors critical to Russia’s war effort. Severnaya Zvezda’s principal supplier is British Virgin Islands-based ARP Investments Limited  (ARP), which has made hundreds of shipments of electronic components to Russia since February 2022. ARP has engaged in transactions with U.S.-designated, Serbia-based  Kominvex DOO Beograd (Kominvex). Kominvex’s transactions exhibited typologies indicative of possible trade-based money laundering.

Severnaya Zvezda and ARP were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

Elekkom Logistik Network

Russia-based Elekkom Logistik is an official distributor, dealer, and partner of leading foreign and domestic manufacturers of electro-technical products. Elekkom Logistik is part of a wide network of intermediaries supplying the Russian defense industry with foreign-made electronic components and materials used in the production of UAVs and has worked to procure ATXMEGA256A3-AU microchips. PRC-based Shenzhen Youxin Technology Co Ltd (Shenzhen Youxin) has provided more than half a million dollars’ worth of electronic integrated circuits, tantalum capacitors, and multilayer ceramic capacitors to Elekkom Logistik, in addition to chips found in Russian reconnaissance UAVs. 

Elekkom Logistik and Shenzhen Youxin were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

UAV Proliferation 

KVAND ISOOO is a Belarus-based developer of drone technology that has designed and tested loitering munition UAVs, and has jointly designed and tested surveillance UAVs with the Belarusian government.  KVAND IS OOO has shipped drone technology to the Russian defense establishment. Siarhei Tytsyk is the co-owner and director of KVAND IS OOO. Additionally, Freshvale EOOD , a Bulgaria-based UAV manufacturer, marketed Russian UAVs with offensive capabilities, such as weapons systems and missiles to an African country. KVAND IS and Freshvale EOOD were designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy. Siarhei Tytsyk was designated pursuant to E.O. 14024 for being or having been a leader, official, senior executive officer, or member of the board of directors of KVAND IS OOO.  

Ostec Group Sanctions Evasion Network

In May 2022,  OFAC sanctioned entities comprising the Ostec Group , a Russian technology consortium and military contractor that supports Russian producers of various missile systems and aerial bombs, alongside its principal suppliers in Europe. Following those designations, new routes have emerged to attempt to enable the Ostec Group to acquire much-needed technology and equipment. 

Russia-based Fabcenter LLC  (Fabcenter), which shares a location with the Ostec Group and whose general director and owner has worked for the Ostec Group for more than a decade, has become a major recipient of goods in Ostec Group’s stead. Fabcenter is a construction company that specializes in the design and construction of production facilities and cleanrooms for the electronics industry.

The Ostec Group’s suppliers have shifted to sending goods—primarily semiconductor production machines, soldering and welding machines, and other technology and equipment—to Fabcenter after previously shipping to Ostec Group entities like U.S.-designated  Ostec-Arttool Ltd, Ostec SMT Ltd, and Ostec-Integra Ltd .

Kazakhstan-based KBR Tekhnologii TOO  (KBR Tekhnologii)   has made hundreds of shipments to Fabcenter, Ostec-Arttool Ltd, Ostec-SMT Ltd, and Ostec-Integra Ltd. The co-founder of KBR Technologies is a longtime employee of U.S.-designated  Evgueni Kostiouk , the owner of one the Ostec Group’s previous top suppliers, U.S.-designated  Inter-Trans Spolka z Ograniczona Odpowiedzialnoscia . 

Türkiye-based Alptech Makina Sanayi Limited Sirketi  (Alptech) and Hong Kong-based New Horizons Trading Limited  (New Horizons) have made hundreds of shipments to Fabcenter and dozens of shipments to Ostec-Arttool Ltd. KBR Technologies, Alptech, and New Horizons were all established between May and August 2022.

Other Russia-based companies that have received shipments from KBR Technologies, Alptech, and New Horizons include Kseoprom , which manufactures materials and equipment related to the production of electronics; manufacturing equipment wholesaler Niceberg Limited Liability Company  (Niceberg), established in June 2023; and manufacturing equipment wholesaler Powertech Limited Liability Company  (Powertech), established in July 2023.

Fabcenter was designated pursuant to E.O. 14024 for operating or having operated in the construction sector of the Russian Federation economy. KBR Tekhnologii was designated for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Fabcenter, Ostec-Arttool Ltd, Ostec-SMT Ltd, and Ostec-Integra Ltd. Alptech and New Horizons were designated for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Fabcenter and Ostec-Arttool Ltd. Kseoprom, Niceberg, and Powertech were designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy.

DP Microchip Network

Russia-based Design Partner Microchip LLC  (DP Microchip) imports electronic components, including high-priority Harmonized System (HS) code goods. DP Microchip collaborated with multiple U.S.-designated entities in Russia to procure electronic components from outside of Russia. Türkiye-based Platform Endustriyel Gida Insaat Elektronik Ve Madencilik Dis Ticaret Limited Sirketi  (Platform Endustriyel) and Onyad Bilgisayar Ticaret Limited Sirketi  (Onyad Bilgisayar) and PRC-based Yiwu Xinglu Import and Export Co Ltd (Yiwu Xinglu) have together made dozens of shipments of integrated circuits and other electronics to DP Microchip.

DP Microchip, Platform Endustriyel, Onyad Bilgisayar, and Yiwu Xinglu were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

AK Microtech’s PRC Intermediaries

On July 20, 2023, OFAC designated Russia-based  Limited Liability Company AK Microtech (AKM), which specializes in transferring foreign semiconductor technology to Russian microelectronics production companies, including entities that provide microelectronics to the Russian defense industry. On September 14, 2023, OFAC designated AKM’s owner and director,  Andrei Rostislavovich Khokhlun (Khokhlun), and another Russia-based company owned by Khokhlun,  Limited Liability Company Keko R (Keko R).

PRC-based Hangzhou Keming Intelligent Technology Co Ltd  (HKIT) has made dozens of shipments to AKM as well as shipments to Keko R. The shipments have included technology such as film used in the production of electronic components.

PRC-based Shenzhen C S Im Export Ltd  (Shenzhen CSI) is a prolific supplier of technology to AKM, including high-priority items such as machines and apparatus for the manufacture of boules or wafers and electrical transformers, static convertors, and inductors. Shenzhen CSI has helped AKM divert technology to Russia.

PRC national Ting Chen  (Chen) is the managing director and owner of Shenzhen CSI. Chen was also involved in a sanctions evasion scheme in which AKM sought to acquire technology via Shenzhen CSI. Chen also owns Hong Kong-based Way Good Technology Limited  (Way Good).

Hong Kong-based Kekotech Equipment Limited  (Kekotech) has also been used to provide goods to AKM. In addition to Shenzhen CSI, Chen is also affiliated with Kekotech.

PRC national Lap Shun Lee (Lee) has represented Shenzhen CSI in many of its dealings with AKM, including schemes in which AKM sought to evade sanctions against Russia.

HKIT, Shenzhen CSI, Chen, and Lee were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy. Way Good was designated pursuant to E.O. 14024 for being owned or controlled by, or having acted for or purported to act for or on behalf of, directly or indirectly, Chen. Kekotech was designated pursuant to E.O. 14024 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, AKM, a person whose property and interests in property are blocked pursuant to E.O. 14024.

Maksim Ermakov

Maksim Yuryevich Ermakov  (Ermakov), previously designated pursuant to E.O. 14024, ran a procurement network to obtain microchips for Russian state-owned enterprises, including a state-owned technology company that makes electronic warfare systems for the Russian military. Ermakov was designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy. Ermakov has also been sanctioned by the UK.

Chimmed Group Network

Chimmed Group is the leading group of Russian companies that supplies Russian customers with a wide range of chemicals and lab equipment. Chimmed Group maintains an extensive network of members and affiliates to procure U.S.- and Western-origin equipment and consumables for Russian entities connected to the country’s biological and chemical weapons programs, including the  Federal State Budgetary Establishment 33 Central Scientific Research Test (33rd TSNII),  Federal State Budgetary Establishment 27 Scientific Center (27th Scientific Center), and  Federal State Budgetary Institution 48 Central Scientific and Research Institute (48th TSNII). Chimmed Group also supplies materials—including raw materials that can be used for the production of chemical and biological weapons—to special laboratories that are a part of the  Federal Security Service (FSB) that were implicated in the poisoning of Alexey Navalny. 

Russia-based Obshchestvo S Ogranichennoi Otvetstvennostyu Torgovy Dom Khimmed (TD Khimmed) and Obshchestvo S Ogranichennoi Otvetstvennostyu Analiticheskaya Manufaktura (Analiticheskaya Manufaktura) are affiliates of the Chimmed Group.  Analiticheskaya Manufaktura attempted to provide equipment to the 48th TSNII. Russia-based companies Obshchestvo S Ogranichennoi Otvetstvennostyu Rusmedtorg (Rusmedtorg) and Obshchestvo S Ogranichennoi Otvetstvennostyu Medstandart (Medstandart) have been closely associated with the Chimmed Group and share a delivery address. Individuals associated with the Chimmed Group purchased biological goods via Medstandart and chemicals via Rusmedtorg. Medstandart has supplied U.S. origin reagents to the Chimmed Group and attempted to provide laboratory goods to the 33rd TSNII.  

Russia-based Obshchestvo S Ogranichennoi Otvetstvennostyu Elyuentlaboratoriz  (Elyuentlaboratoriz) procured U.S.- and Western-origin equipment and consumables for the 27th Scientific Center and 48th TSNII. 

Türkiye-based Biopharmist Medikal Urunler Dis Ticaret LTD STI (Biopharmist) exported laboratory items to affiliates of the Chimmed Group, including Elyuentlaboratoriz, Rusmedtorg, and Medstandart .  

Chimmed Group, TD Khimmed, Analiticheskaya Manufaktura, Rusmedtorg, Medstandart, Elyuentlaboratoriz, and Biopharmist were designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy.

Intermediaries Supplying Laser Companies 

Russia-based Leningrad Laser Systems (LLS) is involved in the supply, integration, and development of innovative solutions in the fields of lasers and fiber optics in Russia. LLS and U.S.-designated Russia-based laser product manufacturer  Lassard are contractors for the U.S.-designated  All-Russian Scientific Research Institute Of Experimental Physics ’ (VNIIEF’s) Institute of Laser Physics Research. VNIIEF performs experimental testing of Russia’s nuclear weapons. Lassard is an industrial enterprise offering full-cycle manufacturing of laser technology and optical equipment with potential for military and weapons applications. Russia-based Cryotrade Engineering is a supplier of cryogenic equipment, cryogenic instruments, and analytical equipment from leading manufacturers. LLS and Cryotrade Engineering have previously been contracted by U.S.-designated  L.D. Landau Institute for Theoretical Physics of Russian Academy of Sciences , a quantum computing research center. China-based Gker Laser Technology Co Ltd (Gker Laser) has sent hundreds of thousands of dollars’ worth of goods, including laser diodes, optical fiber, and lasers, to Lassard. China-based Jinan Kewei Optics Co Ltd (Jinan Kewei) has sent hundreds of high priority HS code goods to LLS and U.S.-designated electronics company  Staut Company Limited , including electronic integrated circuits, tantalum capacitors, and multilayer ceramic capacitors.

LLS, Gker Laser, and Jinan Kewei were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy. Cryotrade Engineering was designated pursuant to E.O. 14024 for operating or having operated in themanufacturing sector of the Russian Federation economy. 

PRC-based Suppliers to Russian Military-Industrial Base

Analog Technology Limited  (Analog Technology) is a Hong Kong-based electronic component distributor with locations in the PRC and India that has shipped high-priority items, including electronic integrated circuits, to Russian companies including U.S.-designated  LLC Spetselservis and  Limited Liability Company Spetsvoltazh . Analog Technology was designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

Shandong Oree Laser Technology Co., Ltd.  (Shandong Oree) and Zhejiang Zhenhuan CNC Machine Tool Co., Ltd. (Zhejiang Zhenhuan CNC) are PRC-based machine tool companies that have shipped metalworking machines and other related equipment to Russia. Shandong Oree and Zhejiang Zhenhuan CNC were designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy.

PRC-based Chongqing Xianuofugeluode International Trade Co Ltd  (CXI Trade) has made dozens of shipments of technology, including integrated circuits, to Russia since February 2022. CXI Trade has also acquired technology for Russian military-industrial base entities. CXI Trade was designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

Enka Trading Limited is a Hong Kong-based wholesaler with expertise in electronic devices and components that has facilitated the procurement of electronic components, including integrated circuits, for Russian end-use. Enka Trading Limited was designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

PRC-based Shandong Ki Forest New Advanced Co Ltd  (Shandong Ki Forest) has made thousands of shipments of high-priority technology to Russia, including semiconductor devices, electronic integrated circuits, tantalum capacitors, transformers, converters, and inductors. Shandong Ki Forest’s primary customers in Russia are Reomaks Limited Liability Company  (Reomaks), a supplier of industrial and specialized electronic components, and Solard , an importer of electronic components. Shandong Ki Forest, Reomaks, and Solard were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

Hong Kong-based HK Nicest Electric Technology Co Limited (HK Nicest) has sent over 100 shipments of  high-priority items to Russia-based end-users, including electronic integrated circuits, tantalum capacitors, and multilayer ceramic capacitors. HK Nicest has supplied equipment to Russia-based end-users supplying the Russian defense industry with electronics to produce aviation equipment. One of HK Nicest’s Russian buyers has been U.S.-designated Russian electronics company  Streloi Ekommerts . HK Nicest was designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

PRC-based Daytek Chongqing International Trade Co Ltd  (Daytek) has acquired advanced technological equipment for Russian military-industrial base end-users. PRC national Yi Xuan Wu (Wu) is the director of Daytek. Wu has helped Russian counterparts evade sanctions and acquire technology for the Russian military-industrial base. Daytek and Wu were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

Türkiye-Based Suppliers to Russian Military-Industrial Base  

Türkiye-based SSGCTM CNC Takim Tezgahlari Makine Sanayi Ve Ticaret Limited Sirketi (SSGCTM CNC) has provided over $6 million worth of goods to U.S.-designated Russian manufacturing company  Limited Liability Company I Machine Technology (I Machine), including computer numerical controlled (CNC) machine tools. Türkiye-based Minyon Kesici Takimlar Makine Sanayi Ve Ticaret Limited Sirketi (Minyon Kesici) has sent over 600 shipments to Russia-based end-users, with shipments including tools used for metal processing and CNC machine tools, including over $800,000 worth of CNC machine tools to I Machine. 

Türkiye-based Gepa Uluslararasi Ticaret Limited Sirketi (Gepa) has provided over $4 million worth of goods to U.S.-designated Russian manufacturing company  Alfa Machinery Group , including various machine tools and related equipment.

Türkiye-based Kamilhan Lojistik Dis Ticaret Limited Sirketi (Kamilhan Lojistik) has sent over $3 million worth of high priority HS code goods, including electronic integrated circuits and machines for the reception, conversion, and transmission of data, to U.S.-designated Russian electronics company  Limited Liability Company Trade House Kyutek .

Türkiye-based CPS Proses Kontrol Urunleri Sanayi Ve Ticaret Anonim Sirketi (CPS Proses) has shipped German and U.S.-manufactured machine and welding equipment to U.S.-designated Russian technology company and defense contractor  Ostec EC Ltd . 

Türkiye-based RMB Yapi Insaat Taahhut Sana Yi Ve Ti Caret Limited Sirketi (RMB Yapi) has sent hundreds of thousands of dollars’ worth of remote-controlled unmanned aerial vehicles (UAVs) as well as programmable controllers for UAVs and lithium-ion batteries to Russian end-users.

Türkiye-based Taksan Makina Sanayi Ve Ticaret Anonim Sirketi (Taksan Makina) has sent over $700,000 worth of goods, including metal-working centers and machine tools, to U.S.-designated Russian manufacturing company  Limited Liability Company Pumori Northwest

(Pumori Northwest), a major provider of metalworking equipment and machine tools to the

Russian defense industry. Türkiye-based Dener Ithalat Ihracat Ve Dis Ticaret Anonim Sirketi (Dener Ithalat) has sent over $300,000 worth of goods to Pumori Northwest, including metalworking centers and a metalworking machine tool.  

SSGCTM CNC, Minyon Kesici, Gepa, Taksan Makina, and Dener Ithalat were designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy. Kamilhan Lojistik, CPS Proses, and RMB Yapi were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy.

ANNEX 2: RUSSIA’S DOMESTIC WAR ECONOMY

The following Russia-based persons were designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy:

• Aktsionernoe Obshchestvo Kazanskoe Opytnoe Konstruktorskoe Byuro Soyuz  manufactures weapons and ammunition. 
• Aktsionernoe Obshchestvo Nauchno Proizvodstvennoe Obyedinenie Poisk  manufactures fuses for projectiles, artillery, and missiles. 
• Birtrans  transports Russian military equipment, including armed personnel carriers and tanks. 
• East West Conversion  develops and sells armaments and military equipment. 
• Federal Research and Production Center Nizhny Novgorod Research Institute of Radio Engineering Joint Stock Company produces radar equipment used by the Russian Army.
• Joint Stock Company Federal Scientific and Production Center Scientific Research Institute of Applied Chemistry  develops and manufactures pyrotechnic systems used for the protection of armored vehicles, aviation, and marine objects.
• Joint Stock Company KB Luch (KB Luch) designed the Korsar, also known as the Corsair UAV system, which is used by the Russian Ministry of Defense for surveillance, aerial reconnaissance, patrol and observation, and target acquisition. The KB Luch-designed Korsar has been used by Russian forces in Ukraine.
• Joint Stock Company Murom Machine Building Plant Production Association manufactures weapons and ammunition. 
• Joint Stock Company Scientific and Production Association Impuls produces automated controls systems used by the Russian Armed Forces and Strategic Missile Forces.
• Joint Stock Company Solikamsk Plant Ural  manufactures gunpowder and explosives.
• Joint Stock Company Voronezh Central Design Bureau Polus develops and produces radio monitoring equipment used by the Russian Army and Navy.
• Limited Liability Company Geoscan  manufactures UAVs used in Russia’s war against Ukraine.  
• Limited Liability Company Kingisepsky Machine Building Plant  develops unmanned explosive-carrying boats.
• Limited Liability Company Military Transportation  transports Russian military equipment, military vehicles, and air defense systems. 
• Limited Liability Company Roboavia Unmanned Systems  manufactures an attack UAV used by the Russian military. 
• Limited Liability Company Russian Eagle  manufactures and sells weapons, ammunition, and ordnance.
• Moran Security Group Ltd ( Moran ) offers armed security services and has operated under contract to Russian state-owned enterprises.   Russian national Alexey Badikov is Moran’s Chief Executive Officer.
• OOO Sepo Zem  produces electronic control systems for military aircraft engines. 
• PAO Radiofizika  develops, tests, produces, installs, maintains, repairs, and sells armaments and military equipment. 
• Research and Production Association Named After AS Popov manufactures and develops advanced military communication equipment used by the Russian Ministry of Defense.
• Research and Production Enterprise Kaluga Based Instrument Making Plant Typhoon Joint Stock Company  manufactures radio systems and weapons systems used by the Russian Armed Forces.
• Samarskii Zavod Kommunar  manufactures weapons, ammunition, small arms, ordnance, and explosives.
• Scientific Production Center of Anti-Terrorist and Forensic Equipment Spektr AT LLC  develops, produces, and supplies thermal imaging systems and surveillance and inspection equipment used by the Russian Ministry of Internal Affairs (MVD) and U.S.-designated  Federal Security Service (FSB).
• Ship Repair Yard of the Black Sea Fleet of the Ministry of Defense of the Russian Federation services minesweepers, corvettes, frigates, and other warships.
• Special Materials Corporation develops and produces personal armor protection products used by the Russian Ministry of Defense and the FSB.
• VM Trans Group of Companies LLC  transports Russian military equipment. 
• Taiber OOO  developed drone technology for “kamikaze” drones.

Additionally, Joint Stock Company Shipbuilding Plant Named after B Ye Butoma  (Butoma), located in illegally Russian-occupied Crimea, Ukraine, builds warships for Russia’s Black Sea Fleet. Butoma was designated pursuant to E.O. 14024 for operating or having operated in the defense and related materiel sector of the Russian Federation economy.

The following Russia-based entities were designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy:

• Aktsionernoe Obshchestvo Malmyzhskii Zavod Po Remontu Dizelnykh Dvigatelei  overhauls engines for U.S.-designated  Kamaz , a supplier of armored vehicles to Russia’s military, and is involved in machining and the repair of machinery and equipment. 
• Aktsionernoe Obshchestvo Moven NN  manufactures and supplies ventilation, climate, and refrigeration equipment for shipbuilding facilities and markets its goods to Russian military customers.
• Scientific and Production Association of Automatics Named after Academician Na Semikhatov  develops and manufactures control systems and radio-electronic equipment and markets its goods to Russian military customers.
• Aktsionernoe Obshchestvo NPTS Spetselektronsistemy  manufactures 3D structures and micromodules, including semiconductors, and is located at Technopolis Moscow, a special economic zone managed by U.S.-designated  Joint Stock Company Special Economic Zone Technopolis Moscow .
• Aktsionernoe Obshchestvo Sinara Transportnye Mashiny  sells machinery, repairs and maintains vehicles, including tracked machines, and works with the Government of the Russian Federation.
• JSC The Special Boiler Design Bureau  designs, manufactures, and repairs boiler equipment for naval use. 
• Aktsionernoe Obshchestvo Strela  manufactures electrical equipment and holds a license from the Russian Ministry of Defense.
• Alyans Riteil  manufactures metal structures, metal barrels, fabricated metal, and fasteners. Alyans Riteil markets fittings used in special military equipment.  
• AOProton Impuls  manufactures semiconductors, diodes, transistors, and special purpose machinery. AO Proton Impuls also manufactures circuit boards, a critical component in Russian UAVs.
• AO Proton PM  manufactures jet engines and liquid missile engines.
• Armorgrupp manufactures armored vehicles.  
• Astrosib repairs electronic, precision, and optical equipment and produces optical instruments. 
• Avtonomnoe Uchrezdenie Tekhnopark Mordoviya  facilitates the production and assembly of UAVs and operates an industrial park that hosts producers of electronic warfare equipment. 
• Belogorodskaya Shipyard Limited Liability Company  manufactures berthing complexes and crane vessels and markets its goods to Russian military customers.
• DD Imeks builds, repairs, and maintains ships and conducts machining activities.
• Elektroradioavtomatika JSC  manufactures fastening products for cable runs and electrical equipment, electrical connectors and electrical distribution devices, and markets its goods to Russian military customers.
• Gruppa Kompanii Astrokupol  develops automated shelters for special-purpose optical equipment. 
• Gruppa Promavto manufactures special-purpose vehicles, including vehicles for Russia’s Ministry of Internal Affairs.
• Joint Stock Company Alekseev Central Hidrofoil Design Bureau  manufactures high-speed vessels, hydrofoils, hovercrafts, and amphibious platforms, and markets its goods to Russian military customers.
• Joint Stock Company Factory Crizo  manufactures electrical equipment for the Russian Navy, including products installed on surface vessels and submarines.
• Joint Stock Company Novaya Era  manufactures electric power systems for ships and vessels of the Russian Navy.   
• Joint Stock Company NPO Stekloplastic  manufactures multifunctional fiber-based materials and state-of-the-art composites with military applications.  
• Joint Stock Company OboronAuto manufactures armored vehicles marketed to Russian military customers.
• Joint Stock Company Omskiy Nauchno Issledovatelskiy Institut Priborostroeniya  produces electronic warfare systems and specialized communication systems. 
• Joint Stock Company Polema  manufactures crude iron, steel, tubes, pipes, and steel bars and holds a license for explosive and chemically hazardous production.
• Joint Stock Company Research and Implementation Enterprise Protek manufactures radar equipment.
• Joint Stock Company Research and Production Center Vigstar  manufactures electronic components and markets its products to Russian military customers.
• Joint Stock Company Soedinitel manufactures hermetic and corrosion-resistant connectors and cable fittings, and markets its goods to Russian military customers.
• Joint Stock Company SR Space  manufactures engines and develops UAVs and UAV detection and suppression systems. 
• Joint Stock Company the Central Research Institute Kurs  designs shipboard electronic weaponry and onboard equipment for ship-based aircraft and missile weapons.  
• Joint Stock Company Tizol  manufactures non-combustible insulation materials and structural fire protection systems for shipbuilding, including for military projects.
• Joint Stock Corporation Shipbuilding and Ship Repair Technology Center  is a shipbuilding company that provides support for combat ship design and construction and manufactures valves and fittings for all types of ships and vessels.
• JSC Research and Production Company Magneton manufactures magnets and industrial magnetic systems used by the Russian Ministry of Defense.
• JSC Resurs manufactures fixed resistors, resistor sets, microwave resistors, and absorbers, which it markets to Russian military customers.
• Lifors   designs and manufactures electric accumulators and batteries and sells voltage regulators, which are critical components in Russian UAVs. 
• Limited Liability Company Carbontex manufactures composites from 3D weaved volumetrically reinforced all-woven preforms, which it markets to Russian military customers.
• Limited Liability Company Merkator Holding manufactures machinery and equipment, including snow removal machines used by the Russian Ministry of Defense.
• Limited Liability Company Neva Tool Factory manufactures nodes, parts, rotary-plunger hydraulic motors, and tools, which it markets to Russian military customers.
• Limited Liability Company Plastik Stroymarket manufactures anticorrosive materials, integrated waterproof mixtures, adhesives, and sealants, which it markets to Russian military customers.
• Limited Liability Company Production Plant Named After Shaumyan manufactures lubrication oils and greases approved for use in weapons and military equipment by the Russian Ministry of Defense.
• Limited Liability Company Rosizolit  produces components for UAVs and supplies composite materials to the Russian military-industrial base.
• Limited Liability Company Scientific and Production Association of Structural Materials Prometey  manufactures ship fittings, deck equipment, as well as various marine equipment, including pneumatic tankers, spires, hatch closures, and steering machines, and markets its goods to Russian military customers. 
• Limited Liability Company Scientific Production Company Advent produces rotary support devices and ship structures for clients including Russian government agencies.
• Limited Liability Company Volgograd Ship Engineering Plant  produces ship portholes, hatches, viaducts, fittings for ventilation, and air conditioning systems used for equipping Russian military surface vessels and ships.
• LKKA Company Limited produces springs and wires and markets its products to the Russian Armed Forces.
• Lyskovskii Elektrotekhnicheskii Zavod manufactures printed circuit boards and power tools and produces generators for Russia’s military industry.
• Limited Trade Development Chimtech-R  manufactures sealant materials supplied to the Russian military-industrial base.
• Marine Equipment Engineering Corporation JSC manufactures integrated combat information and control systems, radar and sonar equipment, and navigation and communication systems.
• Microem   manufactures connectors and cable assemblies for all types of applications and components for computer and server equipment. Microem imports components used in Russian UAV navigation modules.
• Nauchno Proizvodstvennaya Firma Trekol  manufactures all-terrain vehicles and markets its vehicles to Russian military customers.  
• Nauchno Proizvodstvennoe Obyedinenie Gorizont  develops and manufactures optical electronic modules, industrial computers, and anti-drone systems.
• OOO Gazprommash  manufactures machinery and holds licenses for the operation of explosive production facilities.  
• OOO Soyuz Podshipnik manufactures bearings, including for U.S.-designated Russian military armored vehicle supplier Kamaz. 
• OOOValcom develops and manufactures high-precision intelligent sensors and integrated automation systems for specialized vessels, including icebreakers and naval vessels.
• Otkrytoe Aktsionernoe Obshchestvo Vladimirskii Zavod Elektropribor  manufactures metal structures and electronic printed circuits and is a partner of U.S.-designated  JSC Aerospace Defense Concern Almaz-Antey , a Russian state-owned enterprise that designs, develops, and manufactures anti-aircraft, anti-missile, and non-strategic missile defense systems.
• PJSC Rostov Optical and Mechanical Plant manufactures night vision devices for fire control systems in armored military equipment. 
• PKP Segment Energo  produces cables meant to operate in extreme conditions that are marketed to Russian military customers.  
• Public Joint Stock Company Priboy  produces automated submarine radios.
• Regional Center of Laser Technologies CJSC is involved in 3D laser cutting, laser welding, and processing of titanium and markets its products to Russian military customers.  
• Research And Production Company Micran Joint Stock Company  manufactures electronic devices, radar systems, test and measurement equipment, and mobile and complex communication solutions.
• Rezonit manufactures printed circuit boards, which are critical components used in Russian UAVs.  
• Rotor   works with aircraft and electrical equipment and is involved in the production of electrotechnics and electronics.
• Shiprepairing And Shipbuilding Corporation JSC  manufactures, repairs, and maintains vessels and related equipment for the Russian Navy.
• Sitem manufactures metal structures, fabricated metal products, and machinery. Sitem supplies, designs, and installs surveillance systems, perimeter protection systems, and supplies thermal imaging equipment. 
• Technology Research Centre Ank LTD  develops and manufactures sealed accumulators and battery products, including lithium-ion storage batteries for unmanned and manned underwater vehicles.
• TPK Vostok Resurs  manufactures specialized materials and works with specialized machines. TPK Vostok Resurs has received items from U.S.-designated   Yantai Iray Technology Co Ltd , a supplier of telescopic and thermal sights to Russia.
• Troitsk Crane Plant Limited Liability Company  produces specialized equipment for shipbuilding and ship repair and markets its products to Russian military customers.
• Ural Metal Processing Company LTD manufactures packaging tapes, pipes, and steel profiles used to package military-industrial complex loads.

The following Russia-based persons were designated pursuant to E.O. 14024 for operating or having operated in the technology sector of the Russian Federation economy:

• Aktsionernoe Obshchestvo Kontsern Radiostroeniya Vega is a Russian government enterprise that develops, produces, and repairs radio electronic systems and equipment, as well as special-purpose systems and components.
• Federal State Autonomous Scientific Institution Central Research and Experimental and Design Institute of Robotics and Technical Cybernetics is a Russian government institution that conducts work in robotics, photonics, and optoelectronic systems.
• Institute of High Current Electronics Siberian Branch Russian Academy of Sciences develops devices and technologies for electronics, plasma physics, quantum electronics, and photonics, and has participated in a conference hosted by a U.S.-designated Russian weapons laboratory.
• Joint Institute for High Temperatures of the Russian Academy of Sciences researches energy efficient technologies and combustion, detonation, and explosions, and has participated in a conference hosted by a U.S.-designated Russian weapons laboratory.
• Joint Stock Company Institute for Networking Technology  develops software and markets its secure multiservice networks and communication infrastructure to the Russian Armed Forces.
• Joint Stock Company Sitronics KT  develops ship control systems and geographic information systems marketed to Russian military customers.
• Limited Liability Company Farad supplies electronic components, including transistors, which are a component in Russian UAVs.
• Limited Liability Company GK Triz Robotics  develops software for robotics and offers simulators to provide experience in the field of robotics and computer numerical control (CNC) for milling and tuning.
• Limited Liability Company Prime Radar Technology develops UAV detection and suppression technology and portable jammers.
• Limited Liability Company RevolEMC (RevolEMC) provides information security services for information systems and information facilities and produces and supplies anechoic chambers and shielded telecommunication cabinets.  
• Limited Liability Company Yuzhpolymetal Holding  produces mobile technology for chemical analysis used by the Russian Ministries of Internal Affairs and Defense and the FSB.
• LLC Applied Mechanics specializes in engineering and radio-electronics, and produces radio-electronics, high-precision mechanisms including hexapods, and motion simulators, which it markets to Russian military customers. 
• Ostec Smart Technologies Limited Liability Company specializes in the implementation of technological solutions for electronics assembly and installation, and imports semiconductor production machines.
• Paritet   sells electronics and computers and is involved in data processing and information technology.
• Research and Manufacturing Association Development of Innovative Technologies develops aircraft computing equipment and software that it markets to Russian military customers.
• Special Design Bureau of Electric Instrument Engineering LLC produces instruments used for electrotechnical equipment diagnostics and electric modules that it markets to Russian military customers.
• Timkom  imports field-programmable gate arrays from the PRC.
• Zakrytoe Aktsionernoe Obshchestvo Zolotoi Shar is one of the largest Russian suppliers of imported electronic components.

Russia-based Limited Liability Company Bank Tochka (Bank Tochka), founded in 2023, provides financial services to an organization that supports Russian combat troops and to an entity that provides ammunition to Russian military personnel. Bank Tochka was designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy.

Russia-based Ekodor is involved in transportation activities, including cargo handling, transport forwarding, and rail transport. Ekodor was designated pursuant to E.O. 14024 for operating or having operated in the transportation sector of the Russian Federation economy.

ANNEX 3: LIMITING RUSSIA’S FUTURE REVENUE FROM LIQUEFIED NATURAL GAS

The following Russia-based persons were designated pursuant to E.O. 14024 for operating or having operated in the construction sector of the Russian Federation economy:

• Aktsionernoe Obshchestvo RusGazDobycha is implementing the construction of a natural gas processing and liquefaction facility in Russia.
• Arktik SPG 1 manages and supervises construction projects and is developing a gas production site.
• Limited Liability Company Obsky Gas Chemical Complex is implementing the construction of a gas production and processing site in Russia.
• OOO Gazprom Invest  designs and constructs gas industry facilities.

Russia-based Arktik SPG 3  is involved in geological exploration, including prospecting and evaluation of mineral deposits. Arktik SPG 3 also mines clay, sand, kaolin, gravel, and other minerals. Artktik SPG 3 was designated pursuant to E.O. 14024 for operating or having operated in the metals and mining sector of the Russian Federation economy.

Russia-based Limited Liability Company International Innovation Center for Marine Structures and Ship Repair (International Innovation Center) manufactures enclosed sections of vessels for U.S.-designated shipbuilder  Limited Liability Company Shipbuilding Complex Zvezda (Zvezda), which is involved in the construction of specialized liquefied natural gas (LNG) tankers. International Innovation Center was designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy.

Russia-based Regent Baltica Company Limited (Regent Baltica) manufactures cryogenic isothermal panels for LNG storage. Regent Baltica was designated pursuant to E.O. 14024 for operating or having operated in the manufacturing sector of the Russian Federation economy.

U.S.-designated Joint Stock Company Sovcomflot (Sovcomflot) is the operator of four LNG tankers that are currently under construction. The following four vessels were identified pursuant to E.O. 14024 as property in which Sovcomflot, a person whose property and interest in property are blocked pursuant to E.O. 14024, has an interest:

• Sergei Witte (IMO: 9904687)
• Alexey Kosygin  (IMO: 9904546)
• Pyotr Stolypin  (IMO: 9904675)
• Zvezda 044  (IMO: 9904699)

U.S.-designated Zvezda is building an additional three LNG tankers at its shipyard. The following vessels were identified pursuant to E.O. 14024 as property in which Zvezda, a person whose property and interest in property are blocked pursuant to E.O. 14024, has an interest:

• Zvezda 047  (IMO: 9918781)
• Zvezda 046  (IMO: 9918779)
• Zvezda 045  (IMO: 9904704)

SANCTIONS IMPLICATIONS

As a result of today’s action, all property and interests in property of the persons above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person. 

In addition, foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base run the risk of being sanctioned by OFAC. For additional guidance, please see the  updated OFAC advisory , “Updated Guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia’s Military-Industrial Base,” as well as OFAC Frequently Asked Questions (FAQs)  1146-1157 .

The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to  OFAC’s FAQ 897 here.  For detailed information on the process to submit a request for  removal from an OFAC sanctions list, please click here.

Any persons included on the SDN List pursuant to E.O. 14024 may be subject to additional export restrictions administered by the Department of Commerce, Bureau of Industry and Security (BIS).

For identifying information on the individuals and entities sanctioned today, click here.  

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Russia's economy is failing, but that gives it a chance to reform

Dr Richard Connolly

This rapid deterioration of the Russian economy has taken place against a background of heightened tensions with the West. In particular, events in Ukraine, which resulted in economic sanctions imposed by the West. Indeed, it is likely that sanctions have only added to already high levels of uncertainty within Russia’s business community.

Read full opinion

What role should sanctions play in foreign policy? The case of Russia.

• Full Transcript

Subscribe to Brookings Podcast on Economic Activity

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Brookings Podcast on Economic Activity

Janice C. Eberly , Janice C. Eberly Nonresident Senior Fellow - Economic Studies Benjamin H. Harris , Benjamin H. Harris Vice President and Director - Economic Studies Oleg Itskhoki , Oleg Itskhoki Professor of Economics - Harvard University Elina Ribakova , and Elina Ribakova Peterson Institute for International Economics - Nonresident Senior Fellow Jón Steinsson Jón Steinsson Nonresident Senior Fellow - Economic Studies

October 23, 2024

• Sanctions against Russia have achieved some goals, but they have not significantly deterred Russian aggression against Ukraine.  
• The efficacy of sanctions is dependent on factors including the target nation’s interconnectivity in global trade and finance as well as impacts on the global economy.  
• A “doctrine of economic statecraft” should be developed to clarify the goals, capabilities, and scope of sanctions and other economic tools in foreign policy.   
• 31 min read

Since 2022, Western nations have emplaced a number of sanctions against Russia in response to the war in Ukraine. Policymakers and pundits have debated the efficacy of these measures, but this debate is belied by a deeper question: What does it mean for sanctions to “work”? In new BPEA research, Oleg Itskhoki of Harvard and Elina Ribakova of the Peterson Institute for International Economics explore fundamental questions of the theory and practice of sanctions in the Russia context. On this episode of the Brookings Podcast on Economic Activity, Ben Harris, director of Economic Studies at Brookings, joins the authors for a discussion on what’s next for Russia and developing a doctrine of economic statecraft.

• Listen to the Brookings Podcast on Economic Activity on Apple ,  Spotify , or wherever you like to get podcasts.
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EBERLY: I’m Jan Eberly, the James R. and Helen D. Russell Professor of Finance at Northwestern University.

STEINSSON: And I’m Jón Steinsson, Chancellor’s Professor of Economics at the University of California, Berkeley.

EBERLY: We’re the co-editors of the Brookings Papers on Economic Activity , a semi-annual academic conference and journal that pairs rigorous research with real-time policy analysis to address the most urgent economic challenges of the day.

STEINSSON: And this is the Brookings Podcast on Economic Activity , where we share conversations with leading economists on the research they do and how it will affect economic policy.

The topic of today’s episode is the sanctions the U.S. has put in place against Russia in response to its invasion of Ukraine. These have been in place for over two years now, and many policymakers and commentators have debated their efficacy.

In a new paper, Oleg Itskhoki of Harvard University and Elina Ribakova of the Peterson Institute for International Economics start by taking a step back and asking the lager question, what does it mean for sanctions to work? They join Ben Harris, Brookings vice president and director of the Economic Studies Program at Brookings, to discuss their paper titled, “The economics of sanctions: How do they work in theory and in practice?”

EBERLY: Economic policy has become a larger part of international relations and diplomacy, with sanctions of goods and services, financial services, and payments being deployed to try to resolve international disputes or to prevent them in the future. Oleg and Elina show what these tools are intended to do, what they do in practice, and when they can be a double-edge sword. Higher prices, for example, can affect the global economy, not just the sanctioned country, which may also be interconnected with other countries that have their own agendas.

STEINSSON: Yeah, sanctions on a large country like Russia clearly can’t be effective unless the countries imposing the sanctions are willing to bear the costs that the sanctions impose on them, such as higher oil prices in this case.

But let’s turn it over to Ben to hear his discussion with Oleg and Elina.

HARRIS: Thank you, Jan, thank you, Jón. Really appreciate it. Very much looking forward to today’s podcast. Let me start off by saying hello to our featured authors today. Elina, welcome.

RIBAKOVA: Thank you. It’s a pleasure to be here.

HARRIS: And, Oleg, welcome to you.

ITSKHOKI: Hi. Great to be here.

HARRIS: Great. So, let’s just jump right into it. One of the things that I really liked about your BPEA paper was that you take on both theory and practical application of sanctions. So, oftentimes when we hear about sanctions, there’s sort of this assumed theoretical underpinnings to the sanctions. We don’t really talk about why these sanctions are being levied in the first place or what the ultimate goals are or how we’ll evaluate the efficacy of the sanctions. So, your paper does a really good job, I think, of marrying the two.

But can we just sort of jump right into the fundamental question? The title of your paper is how do sanctions work in theory and in practice. So, before we dig into specific examples, let’s just start with that, maybe some background. What are sanctions and what effect are they designed to have and what do they do in practice?

RIBAKOVA: Thank you. We want to think about sanctions as something broadly defined, because when you look at the press, sanctions brings a lot of kind of associations to people. So, we want to say, look, this is economic statecraft. This is using tools of economic policy to exert pressure to achieve national security, foreign policy, or maybe even military security objectives. So, this is how we think about economic statecraft.

And economic statecraft encompasses a lot of measures. It includes sanctions—financial sector sanctions. Many people more recently will say, well, sanctions is just about finance. No, if you look at the historical literature, actually, sanctions were mostly about trade historically. Right? But then since the U.S. got so successful with financial sanctions, we identify now it with finance. So, it can be limits on the … on finance. It can be limits on access to foreign markets. It can be limits on trade. So, it’s all other measures of economic statecraft put together.

Why are sanctions used? I think you asked a fantastic question. When people think about sanctions, they think, oh my goodness, they’re going to achieve everything. No, it is not a magic bullet. Various dictators around the world are not going to die tomorrow or lose their power because we impose sanctions on them.

So, I think it’s important to be realistic about the use of sanctions. They might be more realistically to deter somebody from doing something. So, for example, if in 2014, Putin invaded partially Ukraine, we imposed sanctions and signaled certain sanctions to say, look, if you move further this is what’s going to happen. And potentially, and we also argue in our paper, that might have stopped Putin from moving further into the country.

Sanctions can be also about imposing costs. Once you have done something evil, well, we’re going to impose sanctions on you because we want to impose costs. Sanctions specifically in 2022 case on Russia–and, Ben, you know more than anybody else about it here–is about degrading Russia’s ability to continue the war. That’s another wonderful measure. So, realistic sort of targets, measurable targets are good targets. Sanctions that in theory should change the regime that gets a bit more complicated.

ITSKHOKI: And to add a little bit more background to this description. Right? You pointed out trade and financial sanctions. It’s actually important to keep the two separately. So, the two things that connects countries internationally, one is trade. And in principle, in the limit of full sanctions policy, you can cut down this trade to zero. You can put the country into autarky where the country needs to produce on its own everything that it needs. You know, in the modern world no country does that. There is a lot of trade linkages. And so, what sanctions do they really on the margin reduce the trade overall or trade in particular inputs that, for example, are used in military production or dual use goods. And so, those are sanctions on trade.

Sanctions on trade are costly because it means that both countries would trade less. Both the sanction coalition would trade less, and the country under sanctions would trade less. And so, this is the way the impact is generated. Right?

But the second type of sanctions are financial sanctions. And the idea, the premise, is that countries rely on Western financial systems. They use dollars in transactions or as a vehicle of savings for liquidity. They use payment systems such as Visa and Mastercard. They require clearance of international payments using SWIFT. And so, this is the Western infrastructure. It’s not trade in goods, but it’s the use of Western financial infrastructure. And this is a different type of sanctions, right? That you can impose directly on the financial system. And this is sort of, in a way, a less costly thing that Western countries can do to the extent the country that they’re trying to impact relies a lot on these financial services.

HARRIS: Great. Well, thank you for that helpful background. Let’s dig into the paper a bit more. So, in your paper, you note that sanctions policy is less likely to be effective against countries that can easily substitute away from foreign goods towards domestic ones. So, this suggests in general that countries with larger economies can weather sanctions better than those with smaller, more dependent economies. Do you guys mind elaborating on this? In terms of international trade, what are the characteristics of a particular economy that can make sanctions especially impactful? When are they less likely to work?

ITSKHOKI: Yes. And so, this is the basic insight from international trade, is that, of course, the more countries trade with each other the more impactful would be sanctions on limiting those trade flows. Right?

And so, here there are two factors that really matter. How much do you trade? And so, if you’re imposing sanctions on the small country, the small country tends to be small from the perspective of the rest of the world. So, the rest of the world does not rely so much on the goods produced on the small country. But for the small country, the rest of the world is very important. And so, when there is a big difference in size between the sanctioning coalition and the country on which you’re trying to exert influence, this is when the sanctions are most effective and least costly for the sanction coalition. Right? Because they can leverage their relative size. This is the first lesson.

And the second lesson, sanctions are costlier the harder it is to substitute away. Right? So, if you stop selling some crucial goods to a country and the country needs to produce those goods domestically, that’s one situation. The other situation is when that country can source those goods from other countries. Right? If the other countries don’t join the coalition and are willing to substitute the trade with the coalition, for example, of Western countries, the sanctions are much, much less costly because that substitution is much easier to do than to procure all the goods domestically.

And so, as a result, these are really the insights. It’s how much you trade and how easy the country would find it to substitute away from the goods that you trade.

RIBAKOVA: I think it’s about making a list of items which is the most costly for the sanctioning country going down. And that aside, what is the most painful for the country being sanctioned, going down. And you try to flip that and find this sweet spot of leverage where U.S., for example and its allies have the most leverage and it’s least costly, but at the same time is very impactful in Russia. And in 2014, that was found very wonderfully because that was the financial sector axis. Russia at the time borrowed more than $700 billion in outstanding gross debt. And for the U.S. markets, you know, Russia was pretty much negligible. So, cutting off Russia from the financial markets and its sectors of the economy was very impactful.

But then of course, now it is more challenging. This larger, more integrated into global trade economy might have the dominant power in a market. In Russia’s case, its energy markets, which makes it also costly for the sanctioning coalition. And on the other hand, as Oleg has explained, if there is a coalition of countries that is willing to help Russia, you know, that means our enforcement has to be so much more powerful. And I think here we need to bring the question of enforcement. It’s not just enough to announce something, but it’s also extremely important to enforce what you are announcing.

HARRIS: That’s great. So, you brought up a bunch of issues, which we’ll get to later on. You brought up Russia in general. You brought up Russia and energy markets and specifics, which we’ll get to in a second. And you also brought up enforcement. But before we jump to the Russia context, maybe we can just pause for a minute and talk about financial sanctions. And so, you made that distinction from the outset, the difference between sanctioning financial transactions and sanctioning trade. And so, can you explain to us circumstances when financial sanctions will and won’t work and also when financial sanctions might be counterproductive?

RIBAKOVA: Well, financial sanctions in the U.S. when the banker hears that, they ask how high? They don’t ask, do I jump? They ask, my goodness, how high? But it hasn’t been always like that. You Ben, of course, remember very well—and Oleg as well—in the early 2000s, post-9/11 with the PATRIOT Act and other measures and Treasury finding its secret power. It wasn’t immediately the case. You know, Treasury invested a lot of time. Once they understood that they’re controlling the critical nodes, they have the dominant power in the global provision of financial services. And it’s not just about the dollar alone, as Oleg explained very well, this is also about financial infrastructure. It’s holding the critical nodes and being able to control them, sometimes even physically. Right?

So, this is the power of the U.S. financial sanctions. Once they realized that, the U.S. authorities realized, they started building global infrastructure. For example, anti-money laundering rules, you know, reaching out to international institutions, saying this is extremely important. We want to clean up the financial system.

And I think it’s a very honorable, it’s a great thing to do. But at the same time, it enhances the leverage of the U.S. financial sanctions. So, I think that’s why 20 or more years on, we know that the financial sector sanctions are extremely impactful. So, on the way, we’ve had multibillion dollar fines applied to banks who didn’t quite get the memo the first time around; eventually they got the memo.

So, what are the risks, would you say? When can it be counterproductive? When there isn’t a global understanding, and we’ll get to it, about the doctrine. Some countries will say, no, you’re just trying to make my life difficult. It’s not about anti-money laundering and cleaning up the financial system. It’s about you trying to put me down for other orthogonal geopolitical reasons. So, therefore, what I’m going to do, I’m going to create fragmentation. I’ll try to drive some of my markets to other nodes. I will try to remove the centrality of the U.S. node and move somewhere else. And in practical terms, that means I will try to diversify. Maybe I will try to find alternative systems to SWIFT. I’ll try to find alternative systems to U.S. dollar settlement. I will try to fragment the market. And this is the key risk because as fragmentation takes hold, then, of course, the effectiveness of the U.S. sanctions will be also less impactful.

ITSKHOKI: And just to add to this beautiful description, it’s important to emphasize financial sanctions are cheap. It’s easy to impose them. It’s easy relatively to enforce them in comparison to trade sanctions. And so, if you have that instrument, you really want to use it. Unlike, for example, sanctions on trade, where you have to give up purchasing cheap Russian oil or gas—that’s costly for the countries. But imposing sanctions on the financial system comes almost at no cost.

The problem, exactly as Elina described, when countries anticipate that, especially if they were given the warning, they would wean themselves of the Western financial systems. They will use dollar less. They will use payment systems less. They will use clearance systems less. And that’s exactly what we observed, right? The financial sanctions that were imposed and announced in 2014, the Russians knew they were coming and prepared over the next eight years. And the strategy was to actually fragment itself from the Western financial system, rely more on the domestic financial system, more on their fragmented systems with China and other countries, which makes financial sanctions at the next stage so much less impactful and effective.

And so, while the West would love to use them more, there are limits which come from the fact that countries can substitute to alternative financial systems.

HARRIS: That’s really interesting. So, it’s your view that in 2022 through 2024 and perhaps longer, that the U.S.’s ability to levy financial sanctions on Russia is diminished because Russia responded to the 2014 sanctions by laying out a groundwork to avoid future sanctions by the U.S., which came 10 years later?

ITSKHOKI: Absolutely. And in fact, what you see is when would the sanctions work? Well, when the country relies a lot on the Western financial system. And Russia increasingly was reducing its reliance on the Western financial system, limited the amount of external debt. It started the full-scale invasion in ’22 when it was relying very little on Western financial markets. It did a lot to try to replace domestic payment systems.

It was not quite ready to the sanctions that were announced at first on the Russian assets. That came as a big surprise because it did change the existing rules at that moment, and that was an effective surprise. But at the next iterations, there would be much less surprise. And the countries that want to break international rules will know that this is coming, and we’ll prepare for this accordingly.

The question is how effective would be the international payment systems? And what we see so far is settling international transactions are still difficult without relying on Western banks and Western payment clearances. And this actually proved to be some of the effective secondary sanctions to enforce the trade sanctions that are in place.

HARRIS: So, we’ve been speaking about Russian sanctions. So, let’s dig in there a little bit more. Clearly, the sanctions levied against Russia were one of the major motivations for this paper, which makes it, I think, particularly timely. One of the components of that sanctions campaign is a price cap on Russian oil, which I worked on extensively when I was assistant secretary at the Treasury Department. So, as we on this podcast discuss Russian sanctions a bit more, do you guys mind first summarizing the sanctions regime levied against Russia and also discussing, which you alluded to earlier, whether or not you think it’s been effective?

RIBAKOVA: So, in terms of the sanctions on oil that you know so well about, I think it’s a wonderful example because it encompasses different policy difficulties and benefits. So, one is Russia is a dominant player in the oil markets. Right? We do have an issue, of course, at the center. So, just saying that Russia is not allowed to export 1 or 2 million barrels per day that it’s contributing to the market—well, contributing more—but to withdraw that much, it might have an impact on price, right? that might be costly to us in the sanctioning coalition. So, what do we do if we want to undermine Russia’s ability to which the war on Ukraine? We want to reduce their revenues.

So, eventually we have these oil sanctions or oil embargo from the EU and then global G7 oil price cap, which says, look, we want to have Russian oil flow to the market, but at the same time, we want to reduce Russian revenues. These are two objectives. Sometimes they come in conflict, right? And that’s when things get challenging. This is the reality of the policymaking. Nothing is straightforward and first best.

So, we ended up with the second-best solution: oil price cap together with the embargo. I think in the early days, and we have also a paper with Oleg and colleagues on it, is that we have seen the big wedge open from the price at which Russia was selling oil versus the price on the global markets. And that wedge opened because Russia had to find new markets.

As you know from Druzhba times, which is the pipeline that was completed in the ‘60s, Russian infrastructure is mostly in the European part, the oil infrastructure. And then the shipment mostly, or that the pipeline used to go to Europe. So, that worked wonderfully for many decades. Right? But now it had to find the ships and the way to go all around Europe and make its way to China and India. That’s much more expensive, right? That’s much longer travel times. So, we created the wedge of the cost, combination of the embargo, first and foremost, on the marginal oil price cap. And that had an impact.

However, over time we hit two constraints. One is the so-called attestation process. In the oil price cap, for Russia to be able to get the services for the shipment, it needed to show documentation that it’s selling oil under the oil price cap of $60. Well, if somebody were to ask me to pay my taxes with only a piece of paper that says, “Elina made no money this year and therefore shouldn’t pay any taxes,” well, that will be not always honorable. Maybe Elina will last, but at sometime Elina will break and will start cheating.

For Russia, the $10 difference on the oil price cap is more than $20 billion per year. This is a huge incentive to cheat. So, our attestation process was not good enough always to force Russia to comply with the oil price cap. That is one.

On the other hand, Russia moved towards so-called shadow fleet. The ships that do not get the service and are not registered in the G7 country coalition of sanctions. That means we basically have no leverage to impose this attestation process on Russia. And now the shadow fleet ships more than 70% of all the seaborne oil. And Russia maybe spent around $10 billion on that shadow fleet, which is again good because it’s imposed a cost. But it’s also difficult because it moves Russian oil away from the attestation process. So, it’s a fantastic story. We can have another podcast on it, but this is in brief our regime on the Russian oil.

ITSKHOKI: And to add a little bit more context to this discussion, it’s important to keep in mind that Russia exports about 5 million barrels a day, and that quantity has not declined in the last two-and-a-half years. So, it’s been 5 million barrels a day, very stably, despite all the sanctions and embargo. So, the destinations shifted from Europe to China and India, but the quantities stayed the same. And at the same time, it’s important to emphasize Russia exports at much higher world prices than before the invasion. The prices reached beyond $100, then they stabilized above $80. This is all very far from the $60 cap.

So, on one hand, you can say that, yes, a part of the price was shaved off by an embargo, by various sorts of restrictions imposed on Russian energy sector, by the price cap. But at the same time, Russia was receiving a higher price than before the invasion. And a lot of this money went towards financing the war in Ukraine, or most of this money went towards financing the war in Ukraine. And in that sense, the policy was ineffective. It did not curb the revenues.

So, in a way, a price cap is a useful tool. It should not be discarded. It should be kept. But it’s only effective when you can really bring down the world market prices. Right? If the market prices are much above the cap, it’s very hard to enforce it. If world prices come down, then the cap is also becoming increasingly more effective and easier to enforce. And so, what we have not really seen much until perhaps very recently is the world oil prices coming down. And when the world oil prices are lower, it’s much easier to enforce a lot of those policies.

HARRIS: So, is it safe to say that your assessment of the price cap on Russian oil is that it was a creative design in theory, but that in practice enforcement wasn’t sufficient to achieve its main objectives? Is that a fair characterization?

RIBAKOVA: Yes, I think it is a fair description. And I think what is not fair sometimes is comparing that to financial sector sanctions. Because financial sector sanctions, U.S. has the control of the critical node. In the oil markets, U.S. doesn’t. Financial sector sanction been used for more than 20 years. This is a new creative measure. Right? Financial sector sanctions are based on the industry, which is heavily regulated, prone to bank runs and wholesale bank runs. Right? So, it’s obvious that we have much more power there. Oil price, not so much.

But where the U.S. has been very effective is trying to bring back financial sector sanctions, leverage them, including sort of a hint of secondary sanctions to be able to enforce this new creative measures. So, for example, OPEC sanctioning tankers has helped to clean up a lot of the Russian shadow fleet. So, I think this is an example where these measures can work together.

ITSKHOKI: And it illustrates really well the common message that we’re trying to send throughout the paper is that sanctions are a tool. Price cap is one example of a tool that you want to use. It is creative, but it’s not the silver bullet or a magic wand— it doesn’t solve all your problems. So, you have to set the right expectations of what you can get from it. And the right expectation when the oil price is $100 a barrel is that the price cap will be difficult to enforce. And so, if you start approaching it with the right expectations, then I think it makes a lot more sense. And it’s clearly a tool that should be part of the toolkit for the for the Western policymakers.

HARRIS: Great. Let’s stay on this topic of evaluating the impact of sanctions. So, when I was at Treasury, one aspect of sanctions that we often discussed was the notion of frictions. So, these are essentially the costs or other impediments to trade and economic activity imposed on sanctioned countries. So, in the context of the price cap, for example, and Oleg, you noted this earlier, this included a widespread reshuffling of trade routes for exported Russian oil, which substantially elongated the time and costs of each shipment of oil. So, instead of just 2- or 3-day trip to the Netherlands, we’re talking about maybe 3-, 4-, or 5-week trips to ports in India. And you allude to similar costs associated with financial sanctions in your paper. So, you bring up, for example, bank runs within Russia in response to the financial sanctions levied in the wake of the invasion of Ukraine. So, how do you both think about frictions in the context of optimal sanctions policy?

RIBAKOVA: I think it is critical part of the sanctions policy to create this friction. You can think about sanctions, and you’ve seen it also in the literature and we’ll talk more about that in this paper, is that it’s a market intervention at the end of the day. It’s a government policy intervention to achieve a certain objective or sort of a greater public good, if I may. Right? So, therefore, it is based on the principle of creating friction in the market, and therefore we should explain why we’re creating this friction and what are the benefits and how we’re planning to achieve this friction.

So, in the case of Russian oil example, indeed, if I’m going to sell water cheaper in my office versus the next door, right? you know, I’ll have a stampede of people until I create friction to prevent them from coming in. Right? The same thing was the Russian oil price cap situation. So, the fact, for example, that we forced Russia to spend money on the shadow fleet—and we’re going to have another paper coming out soon about it—is that it’s about $10 billion, roughly, that Russia was forced to spend on the shadow fleet. That’s a very useful friction. It is something that they didn’t spend on the weapons.

At the same time about the attestation process, we didn’t create enough friction and a lot of less scrupulous traders continued to work with Russia. The same thing about the financial sector sanctions.

One could say that one of the frictions is that we need to be able to have compliance departments in the banks. They could say, well, why am I supposed to do that? But on the other hand, we’re all interested in the national security of the country, and sometimes we are, by extension, being tax departments when we submit our tax forms, right? Or sanction departments of the Treasury when we’re screened for unscrupulous investors for payments going through the system.

ITSKHOKI: So, there is absolutely no doubt that adding more frictions through international trade for Russia or to financing is useful. Exactly as Elina pointed out, that shaves off a part of the revenues or increases the costs. And if you can shave off $10 or $20 billion, it’s $10 or $20 billion less for the war financing. At the same time, to keep it in that perspective, Russia spends about $200 billion a year on the war and sells about that much of oil to the world market. And so, in that sense, if you shave off 10% or 20% of the revenues, it’s useful, but it’s only 10 or 20%.

And so, in that sense, you need to have reasonable expectations. Ten [percent] or 20% less revenues will not put an end to the war or to a substantial chunk of the financing. But still, it’s very useful. And so, the question is, how can you amplify it? How can you be more effective in imposing those costs and shaving off a bigger chunk of those revenues?

HARRIS: Great. Now, so Elina, you just brought up national security. So, let’s end with a big picture question in the spirit of the point you just made. So, at a Brookings event this summer, Daleep Singh, who is the deputy national security advisor for international economics, gave a speech and he talked about the need to develop a doctrine of economic statecraft to help govern tools like sanctions as well as economic tools that would be mutually beneficial. So, I think your paper would be a useful background for that effort, that is, the development of a doctrine of economic statecraft. Moving forward, how do you see sanctions policy evolving in the coming years? And what do you hope policymakers will take away from your research?

RIBAKOVA: We’re absolutely flattered to be called the background for this doctrine of economic statecraft, because I couldn’t agree more with Daleep. And if anything, we think that we also thought about it at exactly the same time.

I think it is critical indeed to think about the doctrine and also think about the positive and negative reinforcement. Right? We keep on thinking about sanctions, negative reinforcement. But also, it can be positive. For example, better trade regimes for countries that do work with us. And for example, Yellen has spoken about it with so-called “friendshoring.” Or it can be subsidized credits to countries in to bring them into our coalitions, the so-called fence sitting countries.

So, again, economic statecraft gives you all the tools. It gives you the government various tools. So, we don’t think that one tool can be a magic wand. None of them is. But in combination, they can be very impactful in terms of achieving certain measurable objectives. And I think that should also be part of economic statecraft.

Of course, if you don’t have a target, you cannot miss it. But it would be nice for the effectiveness of the sanctions to actually have specific measurable targets and then measure our results against those targets to the extent we can and do the cost-benefit analysis that should also be part of this economic statecraft doctrine.

And I think what is critical is a good doctrine should minimize fragmentation. For example, I was not long ago at a conference in China talking about the global financial system. And what many Chinese academics say, and policymakers, that, look, it’s all about geopolitical confrontation. The U.S. wants to put China down because we have, as a GDP numbers—they love to show this chart—we have caught up with them and they’re putting sanctions on us. And I’m saying, no, it can also be for other reasons, not just about you. Right?

And if we were to have this doctrine, which would explain that if a country refuses to abide by certain international rules, they shouldn’t enjoy the benefits of this global international financial infrastructure. So, therefore, if something were to happen to China and it would have to retaliate, not just military, but otherwise, they would also have an option of the financial sector sanctions or other sanctions within this global doctrine.

Of course, this is, one could say, wishful thinking example, but it does highlight the fact by having the doctrine, it’s much easier to bring countries on our side for the sanction coalition countries when we have these rules and regulations of using this. Of course, it also raises a good question, who is going to monitor that? WTO, Global Bretton Woods institutions? NATO? That of course is even more complex discussion that we’ll leave for the next podcast.

ITSKHOKI: Yeah. And in the absence of such a grand bargain about what the doctrine is, what mutually agreeable rules of international engagements are, and what are the punishments for violating them, we’re likely going to see more fragmentation exactly like we already discussed, that countries would need to prepare for the possible use of sanctions against them, and they would try to substitute the Western financial system for the alternatives and making sanctions less impactful. So, basically, the alternative to actually having a world coalition enforcing those rules is a world with a lot of fragmentation.

HARRIS: And so, can I just summarize? I had four major takeaways as far as what you hope that policymakers learn from your paper. One, provide positive reinforcement, not just negative reinforcement for actions. Two, provide measurable targets, perhaps not just obscure approaches to sanction. We want to identify the targets and then measure whether or not we’re hitting them. Three, perform a cost-benefit analysis. So, it’s not just about the benefits of sanctions, we also have to consider the costs on the country that’s imposing the sanctions. And fourth, and you both spoke about this to a fairly large extent, minimize fragmentation with the sanctions. Is that a fair summary of the four major takeaways?

RIBAKOVA: Absolutely.

HARRIS: Thank you so much. This was a fascinating paper and a wonderful podcast. You did a terrific job of explaining economic statecraft. I think this will be an aspect of policymaking which will be with us for years, if not decades, to come.

And I’m sure that your paper will provide useful context as those developments play out.

Oleg, Elina, thank you so much for joining us today.

ITSKHOKI: Thank you, Ben.

RIBAKOVA: Thank you.

STEINSSON: Once again, I’m Jón Steinsson.

EBERLY: And I’m Jan Eberly.

STEINSSON: And this has been the Brookings Podcast on Economic Activity . Thanks to our guests for this great conversation and be sure to subscribe to get notifications about new releases of this podcast.

EBERLY: The Brookings Podcast on Economic Activity is produced by the Brookings Podcast Network. Learn more about this and our other podcasts at Brookings dot edu slash podcasts. Send feedback to podcasts at Brookings dot edu, and find out more about the Brookings Papers on Economic Activity online at Brookings dot edu slash B P E A.

STEINSSON: Thanks to the team that makes this podcast possible, including Kuwilileni Hauwanga, supervising producer; co-producers Fred Dews and Chris Miller; audio engineer, Gastón Reboredo; show art was designed by Katie Merris at Brookings; and promotional support comes from our colleagues in Brookings Communications.

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US Finalizes $20 Billion Share of $50 Billion G7 Loan to Ukraine

Military aid, delivered as part of the United States of America's security assistance to Ukraine, is unloaded from a plane at the Boryspil International Airport outside Kyiv, Ukraine February 11, 2022. REUTERS/Serhiy Takhmazov/File Photo

By David Lawder and Susan Heavey

WASHINGTON (Reuters) -The U.S. on Wednesday finalized its $20 billion portion of a long-awaited $50 billion loan to Ukraine backed by frozen Russian assets, announcing plans to start making funds available by year-end for economic and military aid.

U.S. Treasury Secretary Janet Yellen and Ukrainian Finance Minister Serhiy Marchenko signed an agreement for a U.S. loan commitment of $20 billion, which would be placed alongside a separate $20 billion European Union commitment and $10 billion to be split by G7 allies Britain, Japan and Canada.

The loan will be repaid with the earnings from the over $300 billion in sovereign Russian assets that have been immobilized since Moscow's armies invaded Ukraine in February 2022. The funds are mostly held in Europe.

"In other words, Ukraine can receive the assistance it needs now, without burdening taxpayers," President Joe Biden said in a statement.

The Biden administration wants to make $10 billion of the loan funds available for military aid, a plan that would require the approval of the U.S. Congress, White House National Security Council officials told reporters.

It does not need Congress' approval to make available the remaining $10 billion by December, an NSC official said, adding: "Either way, the U.S. will provide $20 billion in support to Ukraine through this effort, whether it's split between economic and military support or provided entirely via economic assistance."

The official said the U.S. funds for non-military aid would be transferred to the World Bank Trust Fund, which has agreed to administer the loan.

A person familiar with that arrangement said the bank would manage sovereign loan contributions from the U.S., Japan and Canada in the same way that it manages a climate loss and damage fund.

Ukrainian President Volodymyr Zelenskiy, in an X social media post, thanked Biden and Yellen for making the U.S. loan happen, calling it a "significant step towards supporting Ukraine's fight for freedom and holding Russia accountable."

The Russian embassy in Washington denounced the agreement, saying it was tantamount to theft at a state level.

"It is clear, even to a layman, that the only thing 'significant' about this case is theft raised to the status of state policy," it said in a statement on Telegram.

BRITAIN, CANADA ANNOUNCE CONTRIBUTIONS

G7 finance ministers and central bank governors were due to meet this week on the sidelines of International Monetary Fund and World Bank annual meetings in Washington. The group includes the U.S., Japan, Germany, France, Britain, Italy and Canada.

Britain separately announced it would contribute $2.26 billion pounds ($2.94 billion) into the G7 loan, saying its funds would help Ukraine buy weapons and rebuild damaged infrastructure.

Defense minister John Healey said the money provided by Britain would be solely for Ukraine's military and could be used to help develop drones capable of traveling further than some long-range missiles.

Asked if Britain would allow Ukraine to use the money to buy British-made Storm Shadow missiles to hit targets deep inside Russia, Healey told reporters: "They are developing very heavily the use of even longer-range drones. They will work with us over how they use this money, and on the weapons they most need."

Canada's finance ministry said on Wednesday it would provide a C$5 billion ($3.7 billion) to the G7 loan package.

ELECTION TIMING

The loan plan was endorsed by G7 leaders in Italy in June, but was delayed by U.S. officials' insistence on assurances that the Russian assets would stay frozen long-term to provide a certain stream of repayment revenues.

Yellen was keen to avoid a situation where U.S. - or Ukrainian - taxpayers would be on the hook to pay back the loans if the frozen assets were turned back over to Russia as part of a truce agreement.

This would have required the EU to lengthen the interval for reaffirming its sanctions programs, including the asset freeze, from every six months to every three years. But Hungary refused to go along with this change, saying it wanted to wait until after the Nov. 5 U.S. presidential election.

Republican presidential candidate Donald Trump has vowed to "get out" of the Ukraine war. So rather than wait, Yellen chose to move ahead without additional EU assurances.

A source familiar with the matter said that the Treasury pivot to secure U.S. government agreement on the $20 billion for Ukraine recognized the need to push for as large a U.S. contribution as possible.

Yellen told reporters on Tuesday she felt confident that the assets would stay frozen and that it was a "secure loan."

Those sentiments were echoed by the NSC official, who said that because of the EU commitment to lend Ukraine at least $20 billion, the Europeans have "incentives to keep the assets immobilized until we get fully repaid." EU lawmakers on Tuesday approved the bloc's plan to use the frozen Russian assets for the loan.

(Reporting David Lawder, Susan Heavey and Andrea Shalal and Dan Burns in Washington and Andrew Mac, Writing by David Lawder; Editing by Alexandra Hudson, Andrea Ricci and Lincoln Feast.)

Copyright 2024 Thomson Reuters .

Photos You Should See - Sept. 2024

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