Despite the sanctions, the banking system in Russia has not yet collapsed. Expectations were high. Russia’s exclusion from the Swift system was called a “nuclear option” and “financial nuke” after Kremlin boss Vladimir Putin, 70, ordered his army to attack Ukraine.
No wonder: the Swift communication system handles international payments uncomplicatedly. The lockout should have cut Russians off from most global transactions through the Swift payment system. This would have made the import-export business incredibly complicated, combined with huge costs for Russia.
But despite isolation from the Swift system, the big bang didn’t materialize. The ruble rolls – sanctions or not. According to Russia, the country’s gross domestic product shrank by only 2.7 percent in 2022, according to the International Monetary Fund (IMF), there is a minus of 3.5 percent. “People hoped that the sanctions would have a stronger effect,” Gerhard Mangott (56), professor of international relations and Russia expert, told Blick.
The EU would cut itself in the flesh
The problem: not all Russian banks are excluded from the international payment system. “Payments for gas, for example, go through Gazprombank,” Mangott continues. Punishing it would also mean higher costs for the West. “Gazprombank was not excluded from Swift by this.” The EU, in particular, would be hurting itself with the Swift ban on all Russian banks as long as gas and oil are bought from Russia.
Strangely enough, precisely because of the sanctions, the value of the ruble is rising. Many companies are obliged to exchange their foreign currency for rubles, which increases the demand and therefore the value of the Russian currency. Such damage control avoided a run on Russia’s banks and a deep economic crisis could (so far) be avoided.
“Production must be financed by the state”
Moreover, Putin has been prepared for years. The Kremlin boss had already expected heavy sanctions when Crimea was annexed. That was in 2014. “Russia took forward-looking measures to become resilient to sanctions,” explains Mangott. Even then, people started promoting their own economy and isolating themselves from the global economy.
According to Mangott, the arms industry is also a growth factor. But: “The production must be financed by the state, which in turn puts pressure on the budget.” What is certain is that Russia is pouring all its resources into the war.
Europe is still too dependent on oil and gas
The fossil fuel economy remains Russia’s biggest asset – despite oil and gas price caps. As a result of the sanctions, Russia is no longer allowed to transport oil by sea. Mangott about Blick: “It hits Russia hard. Putin must accept price cuts that bring him less profit.”
But the sanctions clearly miss one goal: “Russia will not end the war because of the sanctions,” Mangott clarified. “Because for Russia, the economic losses are worth less than the geopolitical goals that are being pursued.”
The aim of the sanctions does not necessarily have to be for Russia to end the war. “There was hardly any public discussion about the purpose of the sanctions,” complains Stefanie Walter (45), professor of International Relations at the University of Zurich. Sanctions can also punish a state for its actions. “This effect is already noticeable, just not to the extent that was hoped for,” says Mangott. And above all, the medium to long-term war capability of the state must be limited.
Long-term effects have not yet been seen
“It may well be that the long-term effect of the sanctions against Russia is more negative than the short-term effect,” explains Walter. However, the West cannot afford sanctions forever because they harm both sides.
“The longer the war lasts, the higher the economic and social costs for the West,” Nicolas Hayoz (66), professor of political science with a focus on Eastern Europe, told Blick. So it depends on who can last longer. “Putin believes he is more patient than the West,” Hayoz said.
The Kremlin chief hopes that the EU and the US will urge Ukraine to end the war as soon as possible. Because time is against Russia. Even if the sanctions do not mean the great collapse. You harm the country. In 2021, Russia was still in the economic upswing. Those days are over.