BRUSSELS, July 11 — When Western allies began freezing Russian central bank assets in early 2022, the figure was eye-watering. Roughly $300 billion in reserves were immobilised, a move without modern precedent. The claim was that this would cripple Moscow’s ability to finance its war.
The catch, years on, is that the Kremlin has found workarounds that blunt the intended force of those measures. The mechanics here are worth dissecting.
Since February 2022, the United States, the European Union, the UK and allied nations have imposed over 16,000 sanctions on Russia. The targets are layered: the financial system, energy exports, technology imports, and a long list of individuals. The EU’s ban on Russian oil imports took effect in December 2022; the US ban came earlier, in March 2022.
Then came the G7 price cap mechanism, launched in December 2022, which set a $60 per barrel ceiling on Russian oil. The idea was to keep Russian crude flowing to global markets while starving the Kremlin of its wartime revenue.
The numbers on the ground
Follow the money, and the picture gets complicated. Russia’s GDP contracted by 2.1% in 2022 — a shallower drop than many forecasters had predicted. By 2023, according to the IMF, the economy had reversed course, posting 3.6% growth.
That rebound was driven by two forces: a massive surge in military spending, and sustained energy sales to China and India, both of which continued buying Russian crude. The price cap mechanism was supposed to prevent exactly that.
On closer reading, the policy relies on Western insurance and shipping services to enforce compliance. When buyers in India or China arrange their own tankers and insurance, the cap becomes harder to police. The result: Russia has maintained export volumes, albeit at a discount, and has redirected trade flows eastward.
Inflation, however, tells a different story. By 2024, Russian inflation had climbed to 7.4%.
That is a real pressure point for ordinary households, and it reflects the cumulative effect of sanctions on imports and production costs. The Kremlin has responded by boosting domestic manufacturing and deepening trade ties with non-Western nations. But self-sufficiency takes time, and inflation remains stubborn.
Diamonds and diplomatic signals
The EU’s 12th sanctions package, adopted in December 2023, included a ban on Russian diamonds — a move aimed at a sector that had largely escaped earlier measures. The diamond trade is opaque, and enforcement will depend on traceability systems that are still being built. The EU is betting that closing this loophole will add to the pressure.
Then there is the political dimension. Ukrainian President Volodymyr Zelenskyy has claimed that growing peace support is emerging within Russian President Vladimir Putin’s inner circle.
If true, that may reflect the cumulative economic strain — the slow grind of sanctions, the inflation, the difficulty of sustaining a war economy indefinitely. But claims of Kremlin internal divisions are notoriously hard to verify, and Moscow has shown a consistent ability to adapt. What to watch next.
The frozen $300 billion in central bank reserves remains a live issue. Discussions in the EU and G7 about using those assets to fund Ukraine’s reconstruction have gained traction, but they raise legal questions about sovereign immunity and precedent.
The price cap mechanism is also under review, with some policymakers arguing the $60 level should be lowered to tighten the squeeze. Russia, meanwhile, continues to invest in its own production capacity and in alternative payment systems to reduce dependence on the dollar. The sanctions regime is not failing, but it is not delivering the swift economic collapse some predicted.
It is a grinding, cumulative campaign — one that has reshaped global energy flows, pushed Russia toward China and India, and left the Kremlin with a growth story that masks deep structural problems. The question now is whether the pressure can be sustained long enough to shift the calculus in Moscow.
