Alexei Druzhinin/Reuters
- Sanctions on Russia have had a withering effect on Moscow's economy, the European Union said.
- That's one of the main reasons why Russia's economic future looks "bleak," according to one official.
- Despite Putin's show of defiance, scholars say Russia is in a far worse state than the Kremlin has let on.
Russia's economic future is looking grim amid signs that sanctions against the nation have had a lasting impact on its ability to function, according one European Union official.
The European Union imposed 11 rounds of sanctions against Russia starting shortly after it invaded Ukraine in February 2022. Measures included kicking Russia out of the SWIFT global financial communication system, greatly limiting energy imports from Russia, and establishing a $60-per-barrel price cap on Russian oil.
"Some people claim these sanctions have not worked. This is simply not true. Within a year, they already limited Moscow's options considerably causing financial strain, cutting the country from key markets and significantly degrading Russia's industrial and technological capacity," EU official and European Commission vice president Josep Borrell said in a recent statement. "To stop the war, we need to stay the course."
Despite its public posturing, Moscow is feeling the pain from being isolated from the global marketplace. Russia's GDP, for one, shrank 2% in 2022, the year sanctions first took effect, according to a Europe Commission estimate based on Rosstat data.
Much of that loss stems from western nations refusing to buy up Russian products, which has left Russia forced to sell to its remaining supplies to friendly countries at hefty discounts. Russia's energy revenue tumbled 45% over the first quarter of this year after the EU oil ban took effect.
Meanwhile, the EU's non-energy imports from Russia, which include goods like wood and various metals commodities, fell 60% through 2022, while EU exports to Russia for items that are used in weaponry and equipment fell 78%.
Private consumption has also been hit, with some industries in Russia suffering more than others. Car production plummeted 48% year-over-year, while manufacturing was down 6% overall. Retail trade was also down 10%, and wholesale trade was down 17%.
The outlook for Moscow's economy looks "bleak," Borrell added, pointing to a Organization for Economic Co-operation and Development report that estimated Russia's GDP would shrink up to 2.5% this year.