Russia’s economy shrank by 2.1 percent in 2022. That is the number Western governments quote when they want to show sanctions bite. The catch is the rest of the US Treasury’s own analysis: record energy exports kept the fall far shallower than it would have been.
A smaller economy, not a broken one
The mechanics matter here. Treasury’s sanctions economist argued that Russia’s economy sits over 5 percent below the path forecast before the invasion, and that it trails other energy exporters, the United States included. The ruble has swung up and down, ending roughly 20 percent weaker against the dollar between early February 2022 and December 2023. Labour is scarce. Inflation was 7.5 percent at the end of November, well above the central bank’s 4 percent target, and the benchmark interest rate has been pushed up to 15 percent.
Follow the money, though, and the war explains much of the growth that did arrive. Treasury said the 2023 expansion came largely from government spending on the war, infrastructure and social outlays. Moscow doubled its 2023 defence target to above $100 billion, which Treasury puts at a third of everything the state spends. Household consumption, by contrast, fell by about 2 percent in 2022.
Where the pressure shows
Oil and gas revenue took the visible hit. From January through October 2023 it was almost 40 percent lower than a year earlier, a drop Treasury partly credits to the EU embargo and the oil price cap, which pushed Russian exporters into sizeable discounts. A rise in global oil prices from summer 2023 then allowed some recovery.
The reserves tell another story. Western measures froze around $280 billion of Russian central bank and wealth-fund assets, roughly half the pre-war total. The National Wealth Fund holds about $146 billion, of which $72 billion is gold and liquid yuan. Treasury says continued drawdowns, together with sanctions, are wearing it down.
The trade map redrawn
Look at where the goods go and the sanctions picture changes again. In 2021 almost 50% of what Russia exported went to European buyers, DW reported, citing the Observatory of Economic Complexity. By 2023 Europe took barely 15%. China, at 32.7%, and India, at 16.8%, now buy half of everything Russia sells abroad.
Imports moved the same way. China supplied 53% of Russia’s imports in 2023, against 25.7% in 2021. Of the $110 billion worth of goods it sold to Moscow that year, 38% were machinery and components. The EU and UK together supplied more than a third of what Russia bought abroad in 2021. By the end of 2023 their share was under 20%.
Zsolt Darvas of the Bruegel think tank told DW that Russia is “surviving” but “not getting the same quality of products as before.” Elina Ribakova of the Peterson Institute for International Economics said things have not gone “as bad for Russia economically as many in Moscow had feared,” though she warned that China is effectively a gatekeeper for Russian trade. She called Russia a partner in crime for Beijing, “but not an indispensable one.”
Sources
- Sanctions and Russia’s War: Limiting Putin’s Capabilities | U.S. Department of the Treasury
- How has Russia's economy dodged Western sanctions?
