Written by Martin Russell,
In early 2014, Russia violated international law by annexing Crimea and allegedly fomenting separatist uprisings in the eastern Ukrainian region of Donbass. The European Union, the United States and several other Western countries responded with diplomatic measures in March 2014, followed by asset freezes and visa bans targeted at individuals and entities. In July 2014, sanctions targeting the Russian energy, defence and financial sectors were adopted.
These sanctions have not swayed Russian public opinion, which continues to staunchly back the Kremlin’s actions in Ukraine. The diplomatic impact has also been limited, particularly now that Russia’s military intervention in Syria has helped it to break out of diplomatic isolation. On the other hand, sectoral sanctions have proved painful, aggravating the economic downturn triggered by falling oil prices.
Sanctions have affected the Russian economy in various ways. The main short-term impact comes from restrictions on Western lending and investment in Russia. Oil and gas production remains unaffected for the time being, but in the long term energy exports are likely to suffer. Meanwhile, Russian counter-sanctions are benefiting the agricultural sector, but consumers are losing out in terms of choice and price. So far, the overall impact of sanctions has been to isolate Russia from the global economy and hold back economic modernisation.
Read the complete Briefing on ‘Sanctions over Ukraine Impact on Russia‘ in PDF.