The EU is wasting money on 'whack-a-mole', Russia's economy is not shaken by repeated sanctions, no one wants to 'stab Moscow in the back', this is the reason

The Russian economy has recovered and is resilient enough to withstand 16 rounds of strong sanctions from the European Union (EU) in the context of Moscow's military campaign in Ukraine that has lasted for more than 3 years. The question is how much damage can Europe withstand to maintain countermeasures against the country of birch?

Russian servicemen walk across Red Square after a snowfall in Moscow, March 17. (Source: EPA)

At the European Council meeting later this week, EU leaders – with the exception of Hungarian Prime Minister Viktor Orbán – are expected to repeat their promise to “intensify” financial pressure on Russia if it refuses to sign a peace deal with Ukraine.

But after three years of sanctions, it remains unclear whether Europe can inflict further damage on the Russian economy.

Punishment doesn't work

Since Moscow launched a special military operation in Ukraine in February 2022, the EU has imposed unprecedented comprehensive sanctions targeting Russia's energy, financial and military-industrial sectors.

Experts say the 16 rounds of sanctions — including various import and export bans, service restrictions and measures targeting specific individuals — have significantly damaged Russia’s economy. One effect is forcing the Kremlin to seek longer and more expensive supply routes to access key Western technologies.

The sanctions are also believed to have exacerbated many of the structural weaknesses plaguing the Russian economy. In particular, labor shortages have sent wages and prices soaring, forcing the country’s central bank to raise interest rates to record highs, dampening private investment.

However, these sanctions ultimately did not have the desired effect. High oil prices and increased military spending also reduced the impact of Western sanctions.

Statistics show that the Russian economy has rapidly surpassed the EU in the past few years. According to the International Monetary Fund (IMF), Russia's gross domestic product (GDP) has increased by 3.6% in both 2023 and 2024, much higher than the growth rates of the 27-member bloc of 0.6% and 1.1%.

While the statistics are not necessarily indicative of underlying resilience, as many countries experienced state-driven growth during wartime, experts warn that the Russian economy is almost certainly strong enough to sustain conflict for the foreseeable future, despite repeated Western sanctions.

“Economic power can continue to support conflict and it will not be a big problem for President Putin when he considers negotiations or a ceasefire,” said economist Janis Kluge, senior fellow at the German Institute for International and Security Affairs (SWP).

Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center, said that Moscow “can prevent its overheating economy from exploding into a full-blown crisis for at least the next year. In the short term, Russia’s economic challenges are not yet so severe that they could make a meaningful difference in the conflict.”

Russia now spends 8% of its annual GDP on defense: just over half the 12-14% the Soviet Union spent during the Cold War and far below the 60% of GDP it allocated to its military during World War II.

“It depends on how much Putin is willing to militarize the economy,” said an analyst at the Carnegie Russia Eurasia Center.

The importance of "circumventing the law"

However, analysts say the EU could further damage the Russian economy by tightening sanctions circumvention through third countries, such as Armenia, Kyrgyzstan and Kazakhstan, which have served as the main channel for Western exports to Russia since 2022.

While preventing circumvention often feels like a game of “whack-a-mole,” such efforts could still complicate Russia’s ability to access vital high-tech goods by forcing it to seek more expensive supply routes, said Alexander Kolyandr, a non-resident senior fellow at the Center for European Policy Analysis (CEPA).

“It’s definitely a game of whack-a-mole. But the next mole is going to cost more than the last one,” he said.

However, other analysts argue that the scope to tighten regulatory oversight is relatively limited.

“I think Europe has really tightened sanctions as much as it can,” said Kluge, who said the root cause of the problem was the reluctance of third countries to implement Western sanctions.

China, which has significantly expanded trade ties with Russia since the conflict in Ukraine broke out, has not succumbed to Western pressure to limit its ties with Moscow, he noted.

“You’re not going to convince Beijing to be tough on Moscow, to hurt Russia economically. China is really the most important piece of the circumvention puzzle,” he said.

Over the past three years, Russia has been subject to an unprecedented number of sanctions, becoming the most sanctioned country in the world, with 28,595 sanctions targeting individuals and legal entities. (Source: globsec)

EU may use LNG "trick"

Analysts also expressed reservations about a proposal currently being floated by some EU leaders to ban imports of Russian liquefied natural gas (LNG) into the EU.

Kolyandr noted that restricting imports of the super-chilled liquid could lead to a spike in gas prices and would also increase Europe's dependence on exports from the US - which have become increasingly unpredictable since President Donald Trump returned to the White House earlier this year.

“You could close the European market to Russian LNG. That would be quite damaging to the Russian economy, but I highly doubt the Europeans would do that. First, they don’t want to see prices rise, and second, by banning Russian goods, they would create a dependence on American LNG – and Washington is not the model of a reliable partner at the moment,” he said.

Analyst Kluge also noted that sanctions on LNG, while somewhat effective, would have much less impact than additional sanctions on Russian oil, which accounts for the bulk of the country's export revenue.

However, he said such measures would send a message to oil-rich countries like Saudi Arabia to increase production to stabilize global prices, but that would be politically unfeasible.

“I don’t think the Saudis are willing to stab Russia in the back,” Kluge said, noting that Riyadh “values ​​its relationship” with Moscow. Moreover, the Middle Eastern country has also been the site of peace talks between U.S., Ukrainian and Russian officials in recent weeks.

Ultimately, some analysts say, Europe's best policy option may not necessarily be to impose further export controls or import restrictions on Russia, but to continue providing economic and military support to Ukraine.

Europe's ability to impose further sanctions will ultimately depend on the continent's ability to withstand economic backlash, Kolyandr warned.

“In general, I don’t think there are sanctions that can harm the opponent without harming the imposer,” said Kolyandr, a non-resident senior fellow at CEPA, adding that the question is: “How much pain is Europe willing to endure while inflicting pain on its opponent?”

In summary, according to the Russian Ministry of Finance, over the past three years, the country has been subject to an unprecedented number of sanctions, becoming the most sanctioned country in the world, with 28,595 sanctions targeting individuals and legal entities.

However, in a speech at the Future Technology Forum in Moscow on February 21, Russian President Vladimir Putin said that despite all the difficulties and challenges, sanctions from the West have contributed to stimulating the economic and technological sectors of the birch country.

Russia's GDP growth hit a record high in 2024, as the country's economy successfully adapted to Western sanctions, growing strongly - in contrast to the economic stagnation in some of the EU's leading economies.

Source: https://baoquocte.vn/eu-ton-kem-voi-tro-dap-chuot-chui-kinh-te-nga-khong-nao-nung-boi-trung-diep-trung-phat-chang-ai-muon-dam-sau-lung-moscow-day-chinh-la-ly-do-308294.html