6th Dec 2022

US and EU sanctions 'crippling' Russia, Yale study finds

  • Moscow: 30 years of growth wiped out in months (Photo: Alex F)
Listen to article

Western sanctions were driving Russia toward "economic oblivion" despite reports to the contrary, a leading US university has said.

The mere fact over 1,000 foreign firms — who had invested more than $600bn [€590bn] in Russia and had employed over one million Russian people — were winding down operations was a huge blow, according to research by Yale University.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"The value of these companies' investment in Russia [worth 40 percent of Russian GDP] represents the lion's share of all accumulated, active foreign investment in Russia since the fall of the Soviet Union," the study said.

"There is no doubt that significant gaps remain in sanctions policy across the US and EU, which need to be closed urgently to further choke the inflow of revenue from commodity exports into the Kremlin's coffers," the Yale report said.

But the capital flight alone meant six months of war had undone three decades of growth, it added.

The corporate retreat was compounded by rich Russian individuals, who had moved at least $70bn out of the country.

At the same time, Russia had lost EU export markets and Russian industry was struggling to maintain production due to lack of Western parts and technology, the Yale survey added.

"Despite [Russian president Vladimir] Putin's delusions of self-sufficiency and import substitution, Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products, and talent," it said.

"The hollowing out of Russia's domestic innovation and production base has led to soaring prices and consumer angst," it noted.

Russia was selling more oil to China as the EU phased out oil purchases, but the Chinese were buying some qualities of Russian oil at a $35/barrel discount due to oversupply, it noted.

Meanwhile, if Russian gas cut-offs were causing alarm in Europe, they were also painful for the Kremlin, whose budget needed EU gas money more than European economies needed Russian gas in the long term, the study said.

And Putin was already burning through his foreign currency reserves via "unsustainable fiscal and monetary stimulus" to keep things going, the study noted.

"The picture that emerges of the structure of the modern Russian economy is that of an internally corrupt, Western technology-dependent resource behemoth", it said.

"There is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia," it added.

The Yale study goes against the grain of recent expertise, with other analysts saying high oil and gas prices as well as rouble exchange rates were making Putin rich.

It also comes after some Russia-friendly EU leaders, such as Hungarian prime minister Viktor Orbán, began saying EU sanctions weren't working.

But the Yale researchers warned that many "excessively sanguine" Russia-analyses had an important flaw — they were based on "periodic economic releases by the Russian government itself, without cross-checking or verification of data integrity".

Russia cuts Nord Stream 1 gas to 20% capacity

It comes a day after EU governments approved a watered-down plan to curb gas demand by 15 percent, aimed at lowering consumption, building storage, and sharing supplies if Russia in future cuts all exports.

Brazil pitches itself as answer to Ukraine war food shortages

Brazilian president Jair Bolsonaro is pitching his Latin American country as the answer to the world food crisis following the war in Ukraine. The traditional wheat importer has now exported three million tonnes of the grain so far in 2022.


Autocrats make us all less secure

How should democratic states co-operate with authoritarian governments in the future? My organisation, Democracy Reporting International, has studied the security strategies of 13 democratic governments to understand how they see this relationship.


Serbia now has no choice but to join EU sanctions on Russia

Vladimir Putin himself is somewhat suspicious of Serbia's leader, as are most who deal with the opaque Aleksandar Vucic. The Russian president has preferred to keep his Serbian counterpart compliant, via a tight rein of annually-reviewed gas pricing.

Stakeholders' Highlights

  1. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  2. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  3. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  4. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  5. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  6. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe

Latest News

  1. EU delays Hungary funds decision, as Budapest vetoes Ukraine aid
  2. Borrell gets pension from MEP fund set for taxpayer bailout
  3. Autocrats make us all less secure
  4. Big Agri's lies: green EU farming not to blame for food insecurity
  5. German top court declares €800bn EU recovery fund 'legal'
  6. EU countries struggle to crack Hungary's vetos
  7. Frontex expanding migrant route-busting mission in Balkans
  8. EU ministers in fresh battle on joint debt, after Biden subsidies

Stakeholders' Highlights

  1. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  2. European Committee of the RegionsRe-Watch EURegions Week 2022
  3. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  4. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  5. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  6. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online

Join EUobserver

Support quality EU news

Join us