Sanctions imposed on Moscow over Ukraine invasion are erasing 15 years of Russian economic progress and three decades of integration with the West, report says Institute of International Finance (IFF) released Wednesday.
• Read also: [EN DIRECT] 105th day of war in Ukraine: here are all the latest developments
However, the impact of these measures remains difficult to predict as they are constantly changing, with potential new sanctions on the one hand and a possible response from Russia on the other, particularly in the energy sector.
The war is likely to be more costly for Russian President Vladimir Putin, but sanctions don’t work like “flicking a switch”, IIF economist Elina Ribakova told a press briefing.
In its latest analysis, the IIF predicts that the Russian economy will contract by 15% this year and another 3% in 2023.
Financial sanctions — including the reduction in Moscow’s ability to repay its foreign debt — rising prices and the exit of foreign companies from the country are slowing domestic demand, “thus clouding the economic outlook in the short, medium and long term” .
The report’s authors note that “some of the most significant consequences have yet to be felt.”
Elina Ribakova noted that sanctions disrupt global value chains. She sees it as a “disintegration of 30 years of investments and connections with Europe”.
According to IIR Executive Vice President Clay Lowery, assessing the effectiveness of sanctions imposed on Russia depends on what governments are trying to accomplish.
“If by success you mean hurting the economy … then these sanctions are definitely having an impact,” and that should increase, he told reporters.
However, in the past, sanctions have not proven effective in changing policies, he said.