Russia’s Economy Is Growing and Defying Western Sanctions

The story

Revised World Bank figures revealed that Russia’s economy has surpassed Germany’s and Japan’s to become the 4th largest in the world, after China, the U.S., and India.

As most European economies struggle for growth, Russia’s accelerated shift away from the West has not proved to be the burden many experts expected. To be sure, the standard of living in Russia does not compare to Western Europe’s, and is particularly distant from that of the United States. But its increasingly close partnerships with non-Western nations, especially China, have averted total economic collapse.

Russia’s economy continues to grow, even amidst massive Western sanctions levied in response to the country’s full-scale invasion of Ukraine. In fact, it’s growing faster than all advanced economies thanks to oil exports, bolstered by increased Chinese purchases and strong private consumption.

The politics

Near-universal agreement exists across the political spectrum in the West to continue sanctions, at least until the Russo-Ukrainian War ends. The Biden administration, which led the way in levying sanctions, pushed for more — urging European allies to expedite seizure of Russian assets currently frozen in their countries. Speaker Mike Johnson (R-LA), who oversaw passage of the law requiring seizure of Russian assets in the U.S., said they should be “used to fund the effort in Ukraine.”

European leaders across the political spectrum also support sanctions. Populist-right Italian Prime Minister Giorgia Meloni, who is chairing the G-7 summit this year, dedicated the opening meeting to discussing G-7’s unwavering support for Ukraine and signing a bilateral security deal.

Some on the populist right oppose further sanctions. Freedom Party of Austria leader Herbert Kickl called the sanctions “pointless.” Closer to home, Senator J.D. Vance (R-OH) wrote a memo warning that confiscating frozen Russian assets could pose “potentially dire consequences for the Western financial system.”

Beyond the headlines

Senator Vance’s position has gone relatively unmentioned in mainstream media, but politicians should pay attention. Seizing Russian assets to fund Ukraine aid could jeopardize the integrity of Western financial systems, especially the euro, by eroding confidence in foreign investments which could be subject to the same tactics. Fear and potential legal disputes could drastically decrease investment in Western nations.

Russia’s economy is able to tread water because of toothless responses by most nations outside the West. United Nations’ votes that demand Russia leave Ukraine often pass with large majorities, but the votes hold no sway. The list of countries that have actually sanctioned Russia, thus exposing domestic economies to lost revenue and the potential for reprisal, is much smaller: the West and its allies.

Even countries that sanctioned Russia left gaping holes large enough to send oil tankers through. The United Kingdom, for example, still imports Russian oil by first having it refined in India.

Russia’s increasing foothold in Africa is a profit center. As the United States prepares to withdraw troops from Niger in west Africa, Russia is now moving in and generating revenue through its private military company, the Wagner Group. The company secured profitable mining contracts, especially in gold, and provides military training and protection. These operations reap rubles for Russia, and they bolster Russian influence and control over valuable natural resources, including uranium.

Why it matters

Since the end of World War II, and even more so since the end of the Cold War, the Western financial system has dominated the world, providing inexpensive products for Americans and helping keep America on top. But if Russia continues to prove to non-aligned countries that the system can be resisted, the inclination to participate could diminish.

Although Russia has long been estranged from the family of Western nations, current efforts to obliterate the Russian economy have pushed the country into the hands of nefarious players like China, Iran, and North Korea. Russia's war of aggression brought severe consequences; but those consequences are also pushing the West, including the United States, into uncharted waters.