Western Sanctions on Russia and Strategic Stability

The decision to launch a full-scale invasion of Ukraine in February 2022 and the subsequent imposition of strict sanctions by the United States and its allies shook the Russian economy. Output fell sharply in the months after the invasion. Half of Russia’s war chest of international reserves was frozen, and the financial sector wobbled after large swaths of the economy were cut off from the Western financial system. As the year progressed, sanctions on Russia’s vital hydrocarbon exports were ratcheted up, but Russia gradually adapted to the new wartime environment. Trade was quickly reoriented to non-Western countries. Most importantly, oil continued to flow to export markets, generating much-needed revenues. In the end, the economy defied the apocalyptic predictions made after the war began and shrank by a mere 2 percent over the course of 2022, a remarkable feat given the scale of the economic disruption caused by sanctions and the war effort. Most observers forecast that output will rise in 2023, prompting some to suggest that the worst is over for Moscow.

This report provides an assessment of the impact of the sanctions imposed by the United States and its allies on Russia—sanctions that were unprecedented in their intensity and scope—18 months into Russia’s expanded campaign in Ukraine. In particular, it examines how sanctions have affected strategic stability both in the context of the Russo-Ukrainian War and in general. In the first section, the broad contours of the sanctions regime are outlined. The second section summarizes how the Russians have responded, and the third section highlights where the sanctions have clearly succeeded and failed and where their impact remains uncertain. A final section considers how the sanctions regime has affected strategic stability and the risks that have, or could, emerge if, as is likely, the regime is maintained.