Four years of Western sanctions have not collapsed the Russian economy. They have bent it. Analysts at the Center for Strategic and International Studies wrote in February 2023 that the economy had “generally defied apocalyptic forecasts” in 2022, even after more than 11,000 new restrictions on Russian people, companies, products and technologies. GDP contracted approximately 2.2 percent that year.
The first shock, 2022
Some of the damage was blunt. Russia’s airlines carried 95 percent of passenger volume on foreign-made planes, and aircraft production fell by 25 percent in 2022, CSIS said. Car output dropped by about 50 percent in the third quarter. Pharmaceuticals, which rely on imports for nearly 80 percent of domestic production, ran short of medicines throughout the year.
The money side held up better. The ruble became the “world’s best-performing currency” by spring. Rosstat put 2022 inflation at 11.9 percent, though analysts suspected underreporting. The oil embargo and price cap hurt, costing Moscow approximately €160 million daily in December 2022, a 17 percent drop in fossil fuel export earnings. January 2023 brought the biggest budget deficit since 1998, and only $87.2 billion in liquid assets remained in the sovereign wealth fund, roughly a quarter less than before the war.
War spending carries the economy, then runs out of road
Then growth returned, bought with military money. Meduza reported on December 30, 2025 that GDP expanded over 4 percent in 2023-2024. By the third quarter of 2025 the pace had slowed to 0.6 percent, down from 1.4 percent in the first quarter. The Central Bank forecast 0.5-1.5 percent for 2026.
The split inside the economy was stark. Civilian manufacturing sat nearly 5 percent below its December 2024 level, and auto production fell 61.6 percent year-over-year in October. High interest rates choked credit to non-defense firms. The 2025 federal deficit reached 5.7 trillion rubles, 2.6 percent of GDP. Taxes went up: VAT to 22 percent from January 2026, corporate profit tax from 20 to 25 percent. Sanctions-related discounts on Russian oil averaged around $27 per barrel at source ports.
The Kyiv School of Economics picked up the story in its mid-2026 assessment, published August 4, 2026. An oil price spike lifted export earnings from $10.4 billion a month in early 2026 to $21.5 billion in April, roughly $35.7 billion extra over March through June. The state spent about 620 billion rubles holding down domestic fuel prices, so the budget saw less of it. Ukrainian strikes at one point left “around 40% of Russia’s refining capacity” disrupted or constrained.
First-quarter GDP shrank 0.6% from the prior quarter and 0.2% year-on-year. The first-half deficit hit 5.7 trillion rubles, 2.7% of GDP, 19% above the revised target. KSE warned that “financing the deficit is becoming increasingly challenging,” pointing to failed government bond auctions.
Sources
- Russia Sanctions at One Year: Learning from the Cases of South Africa and Iran
- Stalling growth, falling oil prices, and the civilian sector sacrificed: Meduza's top five takeaways on the Russian economy heading into 2026
- Sanctions and the Russian Economy: 2026 Mid-Year Assessment
