The Military-Industrial Pivot
When Western nations imposed sanctions on Russia following its 2022 invasion of Ukraine, many policymakers predicted economic collapse would cripple Moscow’s war effort. Yet as we enter 2025, Russia’s ability to maintain military operations remains largely intact despite over a dozen sanctions packages. Understanding why sanctions Russia efforts failed to achieve their primary strategic goals requires examining how Moscow restructured its entire economy around military production.
According to Monde Diplomatique, Russia has adopted a form of military Keynesianism, dramatically increasing government expenditure to stimulate economic activity through the war effort. The rise in orders received by the military-industrial complex has stimulated numerous other sectors of the Russian economy. Massive recruitment and rising pay in the arms industry have particularly benefited factory workers and engineers who were among the biggest losers when the economy shifted toward services in the 1990s.
The results are visible in economic data. According to The Arctic Institute, Russia’s Arctic LNG 2 liquefied natural gas project offers a perfect example of Russia’s adaptation and resilience. Despite sanctions causing Western and Chinese partners like TotalEnergies, JOGMEC, CNOOC, CNPC, and Mitsui to declare force majeure, Novatek (Russia’s second-largest natural gas company) found ways to keep the project moving forward.
Sanctions Loopholes and Implementation Failures
Several structural weaknesses have undermined the international sanctions regime against Russia. According to The Guardian, Western sanctions have contained numerous loopholes and carve-outs that provided financial lifelines to Moscow. Humanitarian goods exemptions and inconsistent enforcement across countries have created pathways for continued trade.
The oil price cap mechanism exemplifies these shortcomings. According to Al Jazeera, the G7 and EU placed a $60-per-barrel price cap on Russian oil sold to third parties, an unprecedented bid by the EU to enforce its will beyond its borders. However, Russian entities have since purchased aging tankers from Western companies at prices higher than scrap value, creating a shadow fleet outside Western control estimated at 187 vessels.
Limited enforcement resources have further weakened sanctions impact. As Politico reports, EU nations have struggled with implementing sanctions, with Latvia and Lithuania challenging the reauthorization of a “no-Russia clause” that allows EU companies to continue operating in Russia while receiving authorization to import and export goods that would otherwise be banned.
Global Realignments and Alternative Markets
Russia has successfully reoriented its economy toward non-Western trade partners. According to Business Insider, China’s trade with Russia hit record levels in recent years, with Chinese exports to Russia surging by 50%. India has increased Russian oil imports by 134%, accounting for almost half of Russia’s seaborne crude trade.
This pivot east has been accompanied by significant de-dollarization efforts. According to BRICS studies, Iran, Russia, and China have made substantial progress conducting trade in local currencies. In early 2022, 20% of incoming trade to Russia was paid for in Chinese yuan, up from 3% a year earlier.
The EU sanctions Russia program has also suffered from inconsistent implementation and enforcement. According to Noerr, “EU sanctions aim to have an asymmetrical effect, i.e., to hurt the Russian economy more than the EU’s. It is doubtful whether this aim has always been achieved.” Special interests within the EU have protected certain sectors—such as nuclear energy, real estate, and for a long time, diamond imports—limiting the impact of sanctions on Russia’s most profitable industries.
Military Spending as Economic Stimulus
Far from collapsing under sanctions pressure, Russia’s defense-oriented economy has shown surprising vitality. According to Monde Diplomatique, with military expenditure officially 7% of GDP, Russia is making a huge war effort, yet this is far from a wartime economy. This is clear from its small budget deficit—only around 2% of GDP, despite a public debt ratio among the world’s smallest at 17%.
The success of this strategy is reflected in Russia’s broader economic indicators. According to The Center for Strategic and International Studies, capital investment (expenditure on new construction, higher-tech equipment for enterprises, purchase of new kit, etc.) stood at 9.8% year-on-year in 2023, which exceeded inflation, and 7.4% in 2024. A rise in incomes and lending has fueled consumer spending, contributing to economic growth despite sanctions.
Why Sanctions Are Not Working as Intended
The evidence from multiple sources indicates sanctions are not working as expected against Russia. According to The New Yorker, sanctions generate meaningful change only about 40% of the time, and their effectiveness depends on factors including the target country’s economic structure, alternative trading partners, and ability to adapt—all areas where Russia has demonstrated considerable strength.
Moscow’s ability to withstand sanctions also stems from fundamental characteristics of the Russian economy itself. According to economist James Galbraith cited in Responsible Statecraft, “Russia has an excellent education system, plenty of technical knowhow, and industrial plants that have been built by western multinationals since the end of the cold war. Sanctions provide an incentive for the Russians to substitute home-grown products for western imports.”
The Need for Strategic Reassessment
The experience with Russia sanctions demands a fundamental reassessment of how economic warfare tools are designed and implemented. The failure of current approaches suggests a need for more targeted measures that account for the adaptability of modern economies and the multipolarity of the current international system.
More effective strategies might involve fewer exemptions and carve-outs, greater coordination among implementing countries, and focusing on highly specific technologies rather than broad economic sectors. Any future sanctions regime must also acknowledge the reality that determined states with sufficient resources and partners can develop effective workarounds, especially in a world where alternatives to Western financial systems have proliferated.
The Russian sanctions experience offers valuable lessons about the limits of economic coercion in an increasingly multipolar world. While sanctions remain important policy tools, they must be designed with greater realism about their potential impacts and limitations, particularly when targeting resource-rich, technologically capable states with alternative trading partners.