International sanctions are hurting Russia very badly.
Imposed on Moscow following the invasion of Ukraine, they are wiping out about 15 years of the country's economic progress and three decades of integration with the West, according to a report by the Institute of International Finance (IIF) published on Wednesday.
However, the impact of these measures remains difficult to predict as they are constantly changing, with potential new sanctions on the one hand and a possible response from Russia on the other, particularly in the energy sector.
In its latest analysis, the IIF predicts that the Russian economy will contract by 15% this year and another 3% in 2023.
Sanctions are not like “flicking a switch”
The war is likely to be more costly for Russian President Vladimir Putin, but sanctions don't work like "flicking a switch", said IIF economist Elina Ribakova.
Financial sanctions, such as reducing Moscow's ability to repay its foreign debt, rising prices and the exit of foreign companies from the country are slowing domestic demand, "thus clouding the economic outlook in the short, medium and long term".
The authors of the report thus note that “some of the most significant consequences have yet to be felt”.
Elina Ribakova further noted that sanctions upset global value chains.
She sees in it a “disintegration of 30 years of investments and connections with Europe”.
According to IIR Executive Vice President Clay Lowery, assessing the effectiveness of sanctions imposed on Russia depends on what governments are trying to accomplish.
“If by success, we mean harming the economy (…) then these sanctions certainly have an impact”, and this should increase.
However, in the past, sanctions have not proven their effectiveness in changing course policies, he recalled.
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Vladimir Poutine