Short overview of sanctions and their impact

Since the start of its full-scale invasion of Ukraine, Russia has faced a sweeping array of Western sanctions aimed at crippling its financial, military, and economic capacity. These sanctions have been unprecedented in scale, targeting nearly every sector of the Russian economy. Roughly $350 billion of its foreign reserves have been frozen, while over 23 Russian banks have been cut off from the SWIFT system by 2025, effectively isolating them from global financial flows. Measures also target wealthy Russian nationals, limiting large deposits in Western banks and curbing access to crypto services. In the energy sector, the G7 and EU introduced price caps on Russian oil to reduce Kremlin revenues without disrupting global supply. At the same time, outright bans were placed on the import of Russian coal, oil, gas, gold, diamonds, aluminium, and other key commodities. At the same time, exports of sensitive, dual-use technologies—such as software for CNC machines, chemical precursors, and components used in drones—have been severely restricted. The technological and defence sectors have been further constrained by bans on exporting semiconductors, aviation parts, and industrial machinery essential to Russia’s military industry. Sanctions have also extended to foreign entities in countries like China, Turkey, and Kazakhstan that are suspected of aiding Russia’s war effort. On the transport front, Russian ships have been denied access to Western ports and EU waters, while Russian road hauliers are blocked from entering the EU. The sanctions regime has also aimed at individuals and the media, with over 16,000 people and entities subjected to asset freezes and travel bans by early 2024—including oligarchs, government officials, and propagandists—while Russian state broadcasters have been barred from operating in the EU. Finally, the scope of sanctions has widened to include Belarus, for its complicity in the war, and Iran, for supplying drones, alongside bans on investment in Russian energy ventures such as LNG and crude oil development.

The impact of sanctions on Russia has been profound, leaving lasting scars on its economy and warfighting capacity. By 2025, the country’s GDP lags 10–12% behind pre-war projections, with real disposable incomes falling by as much as 25%, eroding the standard of living for millions. Inflation has surged as sanctions disrupted vital supply chains, prompting the central bank to hike interest rates to 21% in a desperate attempt to stabilise the rouble. On the military front, export controls have choked off access to key components needed for weapons manufacturing, compelling Russia to turn to costly and unreliable black-market alternatives. Perhaps most damaging of all, the G7-led oil price cap has stripped the Kremlin of over $500 billion in revenue since the outset of the war, striking at the heart of its ability to finance both domestic stability and continued aggression.

Even though these international sanctions were unprecedented in scale, Russia used a varied approach to mitigate the impact imposed in response to its actions in Ukraine and other geopolitical conflicts. These strategies encompass economic, technological, political, and legal dimensions, reflecting a comprehensive effort to maintain economic stability, safeguard political influence, and adapt to the evolving global landscape. Russia uses the following strategies to circumvent sanctions.

Economic Strategies (e.g. trade partners, currency swaps)

In response to Western sanctions, Russia has adopted a strategy of import substitution, aiming to reduce its dependence on foreign goods and technologies. This approach has been particularly evident in sectors like agriculture, manufacturing, and defence, where the state has promoted domestic production to maintain economic resilience. Through government-backed initiatives, critical industries such as food production and pharmaceuticals have been targeted for self-sufficiency, lessening the impact of disrupted imports.

At the same time, Russia has reoriented its trade towards non-sanctioning countries, with a marked pivot to Asia and the Global South. Strengthening ties with China, India, and Turkey has allowed Moscow to offset lost revenues from Western markets, especially through increased energy exports. These new trade partnerships are increasingly conducted in national currencies, helping Russia sidestep the dominance of the U.S. dollar and reduce exposure to Western financial sanctions.

Complementing these efforts, the Russian state has tightened its control over strategic sectors, particularly energy and finance. State-owned enterprises have played a central role in sustaining critical operations under pressure, while alternative financial mechanisms—most notably the SPFS system, a domestic alternative to SWIFT like SPFS (System for Transfer of Financial Messages) and NSPK (National Payment Card System) have been developed to facilitate international transactions and maintain economic continuity despite Western restrictions.

Technological Adaptations (e.g. cyber tactics, tech imports)

Western sanctions have acted as a catalyst for Russia’s push toward domestic technological innovation, especially in critical sectors like energy, defence, and information technology. In the energy industry, efforts have focused on developing homegrown technologies for hydrocarbon extraction and processing, aiming to replace reliance on Western systems. Meanwhile, the information and communications technology (ICT) sector has channelled increased investment into domestic software and hardware, seeking to build sovereign alternatives to foreign products.

To support these ambitions, the Russian government reformed several key industries, aiming to bolster long-term resilience. In the energy sector, state-owned enterprises have led the charge by modernising infrastructure and advancing new production technologies. These initiatives have been backed by targeted subsidies and tax incentives, creating a policy environment encouraging innovation, efficiency, and self-reliance.

Crucially, Russia has also deepened technological cooperation with non-Western partners—most notably China and India—to gain access to advanced technologies and industrial know-how. Joint ventures and technology transfer agreements, particularly in the energy and defence sectors, have helped Russia circumvent sanctions and fill gaps left by the departure of Western firms.

Political Alliances (e.g. diplomatic ties, international support)

The new relationships that Russia formed with the aforementioned non-Western partners have offered Moscow crucial lifelines—opening access to new markets, technologies, and financial resources. The Comprehensive Strategic Partnership with China, in particular, has been central to this strategy, ensuring continued energy exports and securing Chinese technological and financial support.

Beyond bilateral partnerships, Russia has also intensified its engagement with regional and alternative multilateral organisations, such as BRICS and the Eurasian Economic Union. These platforms have enabled Russia to foster economic cooperation with like-minded states, while providing a forum to challenge Western dominance in global governance. Through such initiatives, Moscow has sought to build a parallel international order favourable to its interests, especially in areas like energy security and trade.

At the core of this geopolitical strategy lies Russia’s energy diplomacy. As the world’s largest energy exporter, Russia has wielded its vast oil and gas resources as foreign policy instruments, leveraging them to secure political goodwill and deepen economic ties with non-sanctioning countries. By maintaining robust energy exports to Asia and other Global South partners, Russia has simultaneously sustained vital budget revenues and reinforced its influence across emerging power centres.

Legal Loopholes (e.g. offshore accounts, shell companies)

To mitigate the impact of Western sanctions, Russia has crafted a legal framework designed to shield its economy and citizens from punitive measures. This includes laws designed to protect domestic businesses and individuals and retaliatory sanctions targeting Western companies and figures. These countermeasures have reinforced the Kremlin’s narrative of sovereignty under siege while providing tools to manage internal economic fallout.

In parallel, Russia has increasingly relied on third countries with looser enforcement of sanctions to circumvent trade and financial restrictions. Corrupt schemes involving foreign subsidiaries have facilitated the importation of sanctioned goods into Russia. Companies set up entities across various jurisdictions to disguise the end beneficiary as legitimate enterprises in third-party countries. Nations like Georgia, Armenia, and Kazakhstan have become key intermediaries. This informal rerouting network has significantly weakened the effectiveness of sanctions, allowing Moscow to access otherwise blocked technologies and resources, such as the use of Special Purpose Vehicles (SPVs) to sustain trade with sanctioned partners while avoiding Western financial systems.

Adaption techniques

As Russia continues to adapt to sanctions, the Western-led liberal order is likewise adjusting its sanctions policy to stay one step ahead. The enhanced enforcement mechanisms mark a significant tightening of sanctions implementation. A central upgrade is the EU’s criminalization directive, which compels member states to impose prison sentences for sanctions violations and strengthens cross-border prosecution efforts. To combat circumvention, the measures ban EU companies from engaging in Russian trade deflection schemes and prohibit the storage of Russian oil in EU ports, alongside banning support for liquefied natural gas (LNG) infrastructure. Additionally, authorities are intensifying surveillance of high-risk shipping routes, particularly through Türkiye, the UAE, and Central Asia. On the financial front, the U.S. Treasury has revealed payment channels between the People’s Republic of China and Russia, and has sanctioned entities using cryptocurrency exchanges to bypass restrictions—highlighting a growing focus on financial networks used to evade sanctions.

Conclusion

Despite the unprecedented breadth and severity of Western sanctions imposed on Russia since its full-scale invasion of Ukraine, Moscow has demonstrated a notable degree of sanctions resilience. While sanctions have unquestionably inflicted significant damage—diminishing GDP, slashing state revenues, and degrading military production—Russia has not been brought to its knees. Instead, it has adapted with a blend of economic self-reliance, geopolitical realignment, legal ingenuity, and technological improvisation.

The Kremlin’s pivot towards non-Western partners, particularly China and India, has allowed for new trade routes and alternative financial systems to flourish, partly blunting the intended isolation. State control over key sectors, the exploitation of legal grey zones, and the construction of parallel institutional frameworks have enabled Russia to survive—if not thrive—under pressure. However, these adaptations come at a cost: economic stagnation, increased dependence on authoritarian allies, and a long-term erosion of technological competitiveness.

Sanctions, while far from being a silver bullet, remain a vital tool of strategic containment. Yet they are not static instruments. Just as Russia innovates to dodge them, the West is compelled to constantly refine enforcement, close loopholes, and recalibrate its approach. This dynamic contest—sanction and circumvention—has become a defining feature of the geopolitical struggle between Russia and the Western-led liberal order, with profound implications for the future of global power alignment and the efficacy of economic statecraft.