London Daily

Focus on the big picture.
Wednesday, Nov 26, 2025

Sanctions hit Russian economy, although Putin says otherwise

Sanctions hit Russian economy, although Putin says otherwise

Nearly two months into the Russian-Ukraine war, the Kremlin has taken extraordinary steps to blunt an economic counteroffensive from the West. While Russia can claim some symbolic victories, the full impact of Western sanctions is starting to be felt in very real ways.
As the West moved to cut off Russia’s access to its foreign reserves, limit imports of key technologies and take other restrictive actions, the Kremlin launched some drastic measures to protect the economy. Those included hiking interest rates to as high as 20%, instituting capital controls and forcing Russian business to convert their profits into rubles.

As a result, the value of the ruble has recovered after an initial plunge, and last week the central bank reversed part of its interest rate increase. Russian President Vladimir Putin felt emboldened and proclaimed — evoking World War II imagery — that the country had withstood the West’s “blitz” of sanctions.

“The government wants to paint a picture that things are not as bad as they actually are,” said Michael Alexeev, an economics professor at Indiana University who has studied Russia’s economy in its transition after the collapse of the Soviet Union.

A closer look, however, shows that the sanctions are taking a bite out of Russia’s economy:

— The country is enduring its worst bout of inflation in two decades. Rosstat, the state’s economic statistics agency, said inflation last month hit 17.3%, the highest level since 2002. By comparison, the International Monetary Fund expects consumer prices in developing countries to rise 8.7% this year, up from 5.9% last year.

— Some Russian companies have been forced to shut down. Several reports say a tank manufacturer had to stop production due to a lack of parts. U.S. officials point to the closing of Lada auto plants — a brand made by the Russian company Avtovaz and majority-owned by French automaker Renault — as a sign of sanctions having an effect.

— Moscow’s mayor says the city is looking at 200,000 job losses from foreign companies shutting down operations. More than 300 companies have pulled out, and international supply chains have largely shut down after container company Maersk, UPS, DHL and other transportation firms exited Russia.

— Russia is facing a historic default on its bonds, which will likely freeze the country out of the debt markets for years.

Meanwhile, Treasury officials and most economists urge patience, saying that sanctions take months to have their full effect. If Russia can’t get appropriate amounts of capital, parts or supplies over time, that will cause even more factories and businesses to shut down, leading to higher unemployment.

It took nearly an entire year after Russia was sanctioned for seizing Ukraine’s Crimea peninsula in 2014 for its economic data to show signs of distress, such as higher inflation, a decline in industrial production and a slowdown in economic growth.

“The things that we should be looking for to see if the sanctions are working are, frankly, not easy to see yet,” said David Feldman, a professor of economics at William & Mary in Virginia. “We’ll be looking for the price of goods, the quantity of goods they are producing and the quality of goods. The last being the hardest to see and probably the last to appear.”

Transparency into how sanctions are affecting the Russian economy is limited, largely because of the extraordinary lengths the Kremlin has taken to prop it up. In addition, its largest sector — oil and gas — is largely unencumbered due to European, Chinese and Indian reliance on Russian energy.

Benjamin Hilgenstock and Elina Ribakova, economists with the Institute of International Finance, estimated in a report released last month that if the European Union, Britain and the U.S. were to ban Russian oil and natural gas, the Russian economy could contract more than 20% this year. Current projections forecast a 15% contraction.

While the EU has agreed to ban Russian coal by August and is discussing sanctions on oil, there’s been no consensus among its 27 nations so far about halting oil and natural gas. The European Union is far more reliant on Russian supplies than Britain and the U.S., which have banned or are phasing out Russian oil. In the meantime, Russia gets $850 million a day from Europe for its oil and gas.

The U.S. and its allies have argued that they have tried to tailor sanctions to affect Russia’s ability to wage war and financially hit those in the highest echelons of government, while leaving everyday Russians largely unaffected.

But Russians have noticed a spike in prices. Residents of one Moscow suburb said 19-liter jugs of drinking water they regularly order have become nearly 35% more expensive than before. In supermarkets and stores in their area, the price for 1 kilogram (2.2 pounds) of sugar has risen 77%; some vegetables cost 30% to 50% more.

Local news sites in different Russian regions in recent weeks have reported that multiple stores are shuttered in malls after Western companies and brands halted operations or pulled out of Russia, including Starbucks, McDonald’s and Apple.

The Kremlin and its allies on social media have repeatedly pointed to the recovery of Russia’s ruble as a sign that Western sanctions aren’t working. The ruble crashed to around 150 to the dollar in the early days of the war but recovered to around 80 to the dollar, about where it was before the invasion. A gauge of weekly inflation by Rosstat has shown inflation slowing, but that is not surprising after the central bank raised interest rates as quickly as it did.

Russia’s central bank had doubled its benchmark interest rate to support the ruble’s plunging value and stop bank runs. It dropped the rate to 17% from 20% this month and signaled it might lower it further.

This isn’t the first time Russia has thrown its full force behind defending the ruble’s value as a symbol of resistance against the West. Throughout the 1970s and ’80s, the Soviet Union had an official exchange rate of one ruble equaling about $1.35, whereas the black-market exchange rate was closer to four rubles to the dollar. The Russian debt crisis of the late 1990s also was caused partially by the Kremlin’s active defense of the currency’s value.

U.S. Treasury officials have dismissed the significance of the ruble’s recovery.

“The Russian economy is really reeling from the sanctions that we put in place,” Treasury Secretary Janet Yellen said, adding that the ruble’s value has been artificially inflated by central bank intervention.

If and how Russia wins the economic war will come down to whether the Kremlin can drive division in the West, causing the sanctions to become patchy and less effective. At the same time, Russia will have time to develop alternatives for goods it can no longer access, a concept known as import substitution.

Looking back at the 2014 sanctions, the Congressional Research Service said in January that the impact on Russia was modest only because the U.S. effectively acted alone. This time, there are multiple international actors.

But Alexeev, the Indiana University professor, sees one glaring gap.

“As long as Russia can continue to sell oil and gas, they will muddle through this,” he said.
Comments

Oh ya 4 year ago
Well let's just wait and see who has bread to eat and fertilizer to put on the crops. Go to your grocery store in America if you want to see empty shelves, photos all over the net and news. US Government says inflation is 8.5% but go to shadowstatsdotcom and see when you figure it out like they did in 1980 it is close to 20%. Just another hit piece by the bought and paid for MSM

Newsletter

Related Articles

0:00
0:00
Close
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
Domino’s UK CEO Andrew Rennie Steps Down Amid Strategic Reset
UK Economy Stalls as Reeves Faces First Budget Test
UK Economy’s Weak Start Adds Pressure on Prime Minister Starmer
UK Government Acknowledges Billionaire Exodus Amid Tax Rise Concerns
UK Budget 2025: Markets Brace as Chancellor Faces Fiscal Tightrope
UK Unveils Strategic Plan to Secure Critical Mineral Supply Chains
UK Taskforce Calls for Radical Reset of Nuclear Regulation to Cut Costs and Accelerate Build
UK Government Launches Consultation on Major Overhaul of Settlement Rules
Google Struggles to Meet AI Demand as Infrastructure, Energy and Supply-Chain Gaps Deepen
Car Parts Leader Warns Europe Faces Heavy Job Losses in ‘Darwinian’ Auto Shake-Out
Arsenal Move Six Points Clear After Eze’s Historic Hat-Trick in Derby Rout
Wealthy New Yorkers Weigh Second Homes as the ‘Mamdani Effect’ Ripples Through Luxury Markets
Families Accuse OpenAI of Enabling ‘AI-Driven Delusions’ After Multiple Suicides
UK Unveils Critical-Minerals Strategy to Break China Supply-Chain Grip
Taylor Swift’s “The Fate of Ophelia” Extends U.K. No. 1 Run to Five Weeks
UK VPN Sign-Ups Surge by Over 1,400 % as Age-Verification Law Takes Effect
Former MEP Nathan Gill Jailed for Over Ten Years After Taking Pro-Russia Bribes
Majority of UK Entrepreneurs Regard Government as ‘Anti-Business’, Survey Shows
UK’s Starmer and US President Trump Align as Geneva Talks Probe Ukraine Peace Plan
UK Prime Minister Signals Former Prince Andrew Should Testify to US Epstein Inquiry
Royal Navy Deploys HMS Severn to Shadow Russian Corvette and Tanker Off UK Coast
China’s Wedding Boom: Nightclubs, Mountains and a Demographic Reset
Fugees Founding Member Pras Michel Sentenced to 14 Years in High-Profile US Foreign Influence Case
WhatsApp’s Unexpected Rise Reshapes American Messaging Habits
United States: Judge Dressed Up as Elvis During Hearings – and Was Forced to Resign
Johnson Blasts ‘Incoherent’ Covid Inquiry Findings Amid Report’s Harsh Critique of His Government
Lord Rothermere Secures £500 Million Deal to Acquire Telegraph Titles
Maduro Tightens Security Measures as U.S. Strike Threat Intensifies
U.S. Envoys Deliver Ultimatum to Ukraine: Sign Peace Deal by Thursday or Risk Losing American Support
Zelenskyy Signals Progress Toward Ending the War: ‘One of the Hardest Moments in History’ (end of his business model?)
U.S. Issues Alert Declaring Venezuelan Airspace a Hazard Due to Escalating Security Conditions
The U.S. State Department Announces That Mass Migration Constitutes an Existential Threat to Western Civilization and Undermines the Stability of Key American Allies
Students Challenge AI-Driven Teaching at University of Staffordshire
Pikeville Medical Center Partners with UK’s Golisano Children’s Network to Expand Pediatric Care
Germany, France and UK Confirm Full Support for Ukraine in US-Backed Security Plan
UK Low-Traffic Neighbourhoods Face Rising Backlash as Pandemic Schemes Unravel
UK Records Coldest Night of Autumn as Sub-Zero Conditions Sweep the Country
UK at Risk of Losing International Doctors as Workforce Exodus Grows, Regulator Warns
ASU Launches ASU London, Extending Its Innovation Brand to the UK Education Market
UK Prime Minister Keir Starmer to Visit China in January as Diplomatic Reset Accelerates
Google Launches Voluntary Buyouts for UK Staff Amid AI-Driven Company Realignment
UK braces for freezing snap as snow and ice warnings escalate
Majority of UK Novelists Fear AI Could Displace Their Work, Cambridge Study Finds
UK's Carrier Strike Group Achieves Full Operational Capability During NATO Drill in Mediterranean
Trump and Mamdani to Meet at the White House: “The Communist Asked”
Nvidia Again Beats Forecasts, Shares Jump in After-Hours Trading
Wintry Conditions Persist Along UK Coasts After Up to Seven Centimetres of Snow
×