Russian economy: sanctions after the Ukraine war and the energy sector

Since the beginning of the Ukraine war, the US and its allies (primarily Western states) have steadily tightened sanctions against Russia in order to isolate Moscow economically. The strategy is to suppress revenues from gas and oil exports and reduce President Putin’s means of financing the war. In theory, this should force Russia to stop fighting once the money runs out. In practice, however, it is much more complicated, and assessing the effectiveness of these sanctions on the Russian economy is challenging.

An important distinction in assessing the sanctions is that oil and gas are two different categories, not products. The impact on oil is different from that on gas, and within the gas sector, sanctions affect pipeline natural gas differently than LNG. The overall economic impact is different from that on oil and gas exports, as sales and revenues are influenced by market factors and decisions made by the Kremlin, Washington, and Western parliaments. For example, even before the war, Europe had planned to reduce its oil and gas imports by 2030 to meet climate targets, which would have led to a billion-dollar annual decline in Russian oil and gas revenues regardless of the sanctions.