The Sanctions Against Russia Are Starting to Work
Economic penalties gain force over time, and for average Russians, the pain is finally setting in.
Now that Russian President Vladimir Putin finds himself in a war of attrition, his only chance at victory depends on outlasting both Ukraine and its military supporters. He isn’t merely counting on the demoralization of the Ukrainian people and on “Ukraine fatigue” in the West; he’s also assuming that his own country has the stamina for a long and brutal fight. Yet after nearly two years in which Putin has largely succeeded in insulating most of his subjects from the war, the effects of Western sanctions—coupled with the astronomical and growing human and monetary costs of the conflict—are finally beginning to cause pain for the Russian general public.
Immediately after the invasion of Ukraine early last year, when the United States, the European Union, and other democratic nations moved to disconnect Russia from global financial and trade networks, many Western commentators hoped that the country’s economy would quickly buckle, creating pressure on Putin to withdraw. That hasn’t happened. This year, the average Russian income is up, and the country’s GDP has grown by 2 percent. Unemployment is at a record low. Although widening, the budget deficit is still manageable at 2 percent of the GDP. Higher global oil prices have allowed Putin to avoid raising taxes on individuals while increasing levies on exporters and slapping a one-time windfall tax on corporate profits. Russia’s foreign-trade balance, while down from last year, is still net positive, despite the West’s sanctions.
Uninsured “gray fleet” tankers subvert the $60-dollar-a-barrel cap imposed by the West on the sale of Russian oil, which India and China continue to gobble up by the millions of barrels. Moscow spends some of this revenue in so-called parallel markets, such as Turkey and the former Soviet Central Asian republics, from where many sanctioned goods and technologies are shipped into Russia.
With time, though, Russia has begun to suffer from its isolation from the world’s wealthiest, most modern economies. The West’s sanctions are like a heavy boot on two hoses that sustained the Russian state and Russian society before 2022. One carries the oil and gas revenue, which constitutes close to half of the government’s budget, and the other brings imported goods that consumers, businesses, and military planners desperately need. The flows are impossible to choke off, but they are constricted.
Oil continues to bring in billions of dollars, but China and India buy Russian exports at significant discounts from what European buyers paid before the invasion. Russia has also lost income from the sale of natural gas. Virtually all of the state-owned energy company Gazprom’s pipes run west, and building new ones takes years and an enormous amount of money.
Before the war, Russia imported most of its key commodities, and the parallel markets cannot make up for the loss of supplies since early 2022. Many necessities are more expensive, a lot are adulterated, and the quantities available typically are far smaller than before the war—sufficient to keep day-to-day operations going but not enough to ward off a steady degradation of economy and society. Made-in-Russia “replacements” have been falling short, and shortages and breakdowns are multiplying across the economy, involving products as varied as tires, printing paper, airplane parts, and cellular towers. Among the more painful privations is the disappearance of up to 65 percent of crucially important medicines in some large cities. The Ministry of Health has advised of a coming deficit of almost 200 essential drugs.
Meanwhile, the direct consequences of Putin’s war and fiscal profligacy are becoming ever more evident. The military operation is squandering the Kremlin’s stores of money, supplies, and men. Already about 40 percent of the government budget, defense outlays are set to double next year. With an estimated $300 billion of Russian sovereign funds frozen in the West, the Kremlin has been forced to withdraw $38 billion from the rainy-day National Wealth Fund. That’s one-fifth of the fund and 2 percent of the country’s GDP. How long before Putin starts raising taxes and printing banknotes?
To combat the 7 percent inflation and shore up the ruble, which dipped to a record low of 100 per U.S. dollar at one point earlier this year, the central bank increased the interest rate to 15 percent, further depressing economic activity. In a sign of stagnation, if not yet recession, economic growth is projected to drop to 1 percent next year—or half this year’s rate, which itself was due mostly to the surge in weapons and ammunition production.
Making matters worse, Russian consumers may soon have trouble spending their money on their own needs. Along with claims that Russia is fighting Nazis in Ukraine, the Kremlin has resurrected another World War II trope: “All for the front, all for the victory!” (Vsyo dlya fronta, vsyo dlya pobedy!). The slogan is now being used to galvanize Russian society to donate “humanitarian” parcels to the soldiers in Ukraine, while private enterprises are pushed to switch to war production. The central bank’s governor, Elvira Nabiullina, has lamented the “inability” of domestic producers to satisfy consumer demand. For the first time since the 1990s, de facto price controls caused shortages of gasoline and diesel fuel in late summer and early fall, and greater scarcity and bottlenecks are certain to follow.
Nabiullina has also warned of a “sharp deficit” in the labor force. The trillions of rubles that the Kremlin is showering on the military-industrial complex cannot make up for the gaps in educated staff after hundreds of thousands of men ages 18 to 30 fled the country to escape the draft.
A still more troubling deficit is that of soldiers: The seemingly inexhaustible pool of potential conscripts is beginning to look rather shallow. Even as Putin sends an estimated 20,000 more men every month to fight in Ukraine, he is desperate to avoid a general mobilization—which is sure to be unpopular—before the presidential election next March. So he appears to be reaching for the bottom of the barrel. Conscripting prisoners into the Ukraine war started out as a bizarre campaign introduced by the Wagner Group, the ostensibly private military company led by the now-deceased former Putin crony turned mutineer Yevgeny Prigozhin, but has now become a standard practice. Incarcerated women, too, have been forced into military service. The prison population is down by an estimated 54,000 inmates. Rapists and murderers, some serving life sentences, are pardoned by Putin after six months in Ukraine.
Apparently still short of soldiers, the authorities have begun to press-gang many of the nation’s estimated 2.8 million migrant workers from predominantly Muslim countries in Central Asia. In the city of Moscow and the surrounding province of the same name—jurisdictions where at least 1 million Tajiks, Uzbeks, and Kirgiz now live—the police have raided mosques after services, forcing young men into buses that take them to military-induction centers.
Up to now, Putin has tamped down domestic opposition to his war through a combination of repression, shrewd politics, and monetary largesse. Criticizing the war—including by calling it a war, rather than a special military operation—is punishable by 15 years in jail. The Kremlin imposes high draft quotas on poor, rural Russians and on ethnic minorities in the north Caucasus and Siberia; it goes easy on large cities in central Russia, especially Moscow and St. Petersburg, to spare the sons of elites from military service. Soldiers who do end up in Ukraine are generously rewarded. This past July, a mobilized reservist’s starting monthly salary in Ukraine was 195,000 rubles ($2,200)—almost four times the national median income. The injury payout is 3 million rubles ($34,000), and the families of killed soldiers receive 5 million rubles ($54,600). These payments have buoyed veterans, their families, and even entire villages, but apparently they have not prompted a sufficient number of volunteers to replace the hundreds of thousands of soldiers who have been killed or wounded in Putin’s war.
Putin’s resort to conscripting prisoners and immigrants, many of them undocumented, is unlikely to reverberate politically. But protests among ethnic Russians are another matter altogether. Last month, the wives and mothers of mobilized reservists staged a rally demanding the return of their loved ones who have spent a year in the trenches. “People are tired [of the war], and [it is] important [for the authorities] to demonstrate that nothing is threatening people’s normal lives,” the women wrote in a post on Put’ domoy (“The Road Home”), a Telegram channel with 25,000 subscribers. “But we are telling you, our friends: [your lives] are being threatened—and how! We have been fucked over and you will be fucked too. Here and now we are creating a foundation of societal unity against a mobilization of unlimited duration.”
Small and inchoate though it is, the Road Home movement signals more trouble for the Kremlin than the plunging ruble or a budget deficit. Wars of attrition are decided at least as much by the morale on the home front as by the advances and retreats on the battlefield.
In promoting his invasion of Ukraine, Putin has repeatedly evoked memories of World War II, in which the Soviet people made unimaginable sacrifices, while also sparing most of his citizenry from ill effects. But that won’t hold true forever. “You may not be interested in war, but war is interested in you,” the Communist revolutionary Leon Trotsky, who led the Red Army to victory in the Russian civil war a century ago, supposedly said. Putin’s efforts notwithstanding, the war in Ukraine is unlikely to leave the people of Russia alone.