How Russia Evades Western Sanctions

Shady trade routes and oil tankers keep the Russian economy ticking over, writes Sonny Loughran.

Russia currently exists in a state of economic purgatory. Since Vladimir Putin’s invasion of Ukraine in February 2022, Western powers seeking to limit his nation’s warmaking capacity have instituted one of the harshest sanction regimes the world has ever seen. Imports of Russian oil, above a certain price, have been outlawed, as have exports of sensitive materials, such as semiconductors, engine parts, and communications equipment,that might find their way into Russian weaponry. The country’s banks have been cut off from SWIFT—the main system banks use to coordinate international payments. And some $280 billion worth of Russian assets remain frozen in European banks.

Despite this, Russia’s war continues. The Russian economy grew at a rate of around 4 percent in the second quarter of 2024, down from a first quarter high of 5.4 percent. And despite predictions that the Russian military would suffer crippling shortages, Putin’s war machine has proved surprisingly efficient at rearming itself. In fact, the Russian arms industry is booming. The Royal United Services Institute (RUSI), a UK defence think tank, estimates that Russia’s domestic production of Kh-101 cruise missiles has increased eightfold over the last year. And Russian military spokespeople have boasted of supply lines that deliver tanks, drones, and artillery shells in their thousands.

Though the Russian boasts are surely hyperbole, Russia’s military resilience continues to embarrass the world’s economists. Shortly after Russian troops crossed the border into Ukraine, the International Monetary Fund predicted that the sanctions would cause Russian GDP to shrink by more than a tenth by the end of 2023. The Economist speculated about the possibility of a coup. Analysts at Reuters opined that Russia would probably collapse under such financial pressures. How then, has the Russian war machine kept on rolling?

The answer is that trade flows of restricted goods have shifted in response to the global sanctions. Those European technology companies, for example, that were previously Russia’s biggest suppliers, are now banned from supplying Russian customers. They have not, however, been banned from selling their wares to countries like Kazakhstan—where a once tiny tech industry is enjoying an unprecedented boom. The value of Kazakh tech exports has skyrocketed from $50m in 2020 to more than $500m in 2023. Much of this increase can be attributed to a rise in Russian business: tech exports to Russia have increased sevenfold since 2021—and this boost in trade has resulted from an increase in imports from exactly the same countries that have vowed not to do business with Russian clients.

00:00 Russia economic purgatory
00:12 Sanctions on oil
00:27 Banks cut off
00:40 Economy still growing
00:56 Arms industry boom
01:22 Surprising military resilience
01:35 Shifted trade flows
02:02 Tech exports skyrocket
02:30 Kazakhstan middleman role
02:44 Europe goods funneling
03:12 Increasing Armenian imports
03:39 Alternative trade routes
03:53 Secondary sanctions strategy
04:20 Civilian goods risk
05:00 Global trade challenge
05:28 Western support alternative
05:55 Oil industry resilience
06:37 Shadow oil industry
06:48 Avoiding monitoring agencies
07:15 Difficult effective sanctions
07:42 Military support necessary
08:21 Complex supply chains
09:02 Western financial ties
09:30 Historical financial flow
10:25 Western dependency created
11:34 Military aid crucial
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[jsg]

Economic sanctions are always ineffective

[biztosdotcom]

Can we please have more Zoë on all topics?

[JonathanRossRogers]

1:06 I didn't expect to see Putin with an AR.

[alexdugin]

The Russian economy survives, but the average Russian suffers. The Tsar cares not if the serf has enough money to live, classic Russian economic tactics.

I've heard a lot of young Russians complain that they can not afford rent after graduating from college, but who cares? We can make more rockets!
It actually works well for the government since, in this case, the only way to survive financially is to join the military, but it's not a great long-term plan.

Russia also (shockingly) suffers from a shortage in manpower and is considering importing workers from the Far East, which is amusing, given how much they laughed at the West importing migrants just a few years back.

Honestly, at this point, it doesn't matter if Russia wins or loses in Ukraine. After the war, and probably after Putin's death, the country will probably implode since the average Russian is in such deep shit. We're looking at 1917 all over again, and we don't know if this time it will turn out better.

[DaboooogA]

Putin's actions show he is inept in long-term strategy

[cakeofthepan]

This is one massive cope….but it looks like the good guys are going to win at last.