“This is less about business ambitions and more about a humanitarian necessity, as ordinary citizens suffer the most,” he added.

Russia’s civil aviation sector has been among the hardest hit by Western sanctions, which have cut off the supply of planes and parts to Russia, forcing airlines to operate fewer flights and cannibalize planes for spare parts.

Agee said AmCham Russia is also advocating for the removal of an investment ban on U.S. companies in Russia, lifting sanctions on Russian banks to restore cross-border payments and resuming the supply of luxury goods.

“We’re currently drafting a so-called white paper for the U.S. government, analyzing the challenges American companies have faced over the past three years and which sanctions have impacted them the most,” he said.

AmCham Russia’s appeal comes as U.S. President Donald Trump pursues talks with President Vladimir Putin about ending the war in Ukraine, which the Kremlin has described as a potential step toward restoring bilateral relations.

Reuters, citing anonymous sources, reported this week that the White House had instructed the U.S. State and Treasury departments to compile a list of entities and individuals eligible for potential sanctions relief. U.S. officials would use the list in discussions with their Russian counterparts as part of broader diplomatic and economic negotiations, the report said.

The Kremlin later said that sanctions relief was a prerequisite for normalizing U.S.-Russia relations.

Last month’s first direct U.S.-Russia talks since the full-scale invasion of Ukraine were accompanied by a wave of Russian media reports claiming that Western companies were eager to return to the country amid hopes of easing geopolitical tensions.

Putin has called for a regulatory framework to facilitate the return of Western companies while ensuring an “advantage” for domestic manufacturers.

Agee estimates that around 150 U.S. companies have left Russia, while an equal number continue to operate there. Another 50 are officially registered in Russia.

The sanctions offices are now drawing up a proposal for lifting sanctions on select entities and individuals, including some Russian oligarchs, according to the sources.

So-called options papers are often drafted by officials working on sanctions, but the White House’s specific request for one in recent days underscores Trump and his advisers’ willingness to ease Russian sanctions as part of a potential deal with Moscow.

It was not immediately clear what Washington could specifically seek in return for any sanctions relief.

Russia is one of the world’s biggest oil producers and if U.S. sanctions on its energy system were eased, it could help prevent fuel prices from rising if Trump cracks down on oil exports from OPEC-member Iran.

The White House, the State Department, the Treasury Department and the Russian embassy in Washington did not immediately respond to a request for comment.

The Kremlin last year described relations as “below zero” under the administration of Joe Biden, a Democrat who backed Ukraine with aid and weapons and imposed tough sanctions on Russia to punish it for its invasion in 2022.

But Trump, who has promised a quick end to the war, has upended U.S. policy swiftly to open talks with Moscow, beginning with a phone call to Russian President Vladimir Putin on Feb. 12 that was followed by meetings between U.S. and Russian officials in Saudi Arabia and Turkey.

U.S. sanctions on Russia since the 2022 invasion of Ukraine have included measures aimed at limiting revenues from the country’s huge oil and gas industry and weakening its ability to fund the war.

Western governments led by Washington imposed a $60-per-barrel price cap on Russia’s oil exports. Biden also hit Moscow with designations on Russian energy companies and vessels that shipped its oil, including Washington’s toughest-yet measures on Jan. 10 shortly before leaving office.

Trump in January threatened to ramp up sanctions on Russia if Putin was unwilling to negotiate an end to the war in Ukraine. But more recently, Trump administration officials have openly acknowledged the possibility of easing sanctions on Moscow.

Treasury Secretary Scott Bessent said during a Feb. 20 interview with Bloomberg Television that Russia could win economic relief, depending on how it approached negotiations in the coming weeks. Trump told reporters on Feb. 26 that Russian sanctions could be eased “at some point.”

Economic Cooperation

The White House asked State and Treasury officials to devise a possible sanctions relief plan before Trump last week extended a state of emergency over the situation in Ukraine, the U.S. sources said.

The state of emergency sanctions certain assets and people involved in Russia’s war. Those measures, imposed by then-President Barack Obama’s administration, have been in place since March 2014, when Russia annexed Ukraine’s Crimea.

It is unclear which Russian sanctions the Trump administration would consider lifting first.

Trump could issue an executive order that would allow the administration to begin the process of easing some Russian sanctions, but he would also need to seek congressional approval to lift measures on certain entities, said John Smith, a partner at Morrison Foerster law firm and the former head of the Treasury Department’s Office of Foreign Assets Control.

Since 2022, Russia has been able to build a wartime economy with increased military spending and industrial production. But experts say the country’s economy is vulnerable and in desperate need of Western sanctions relief.

Russia says it is open for economic cooperation. The Kremlin said last week that Russia had lots of rare earth metal deposits and was open to doing deals to develop them after Putin held out the possibility of such collaboration with the U.S.

Any formal economic deal with Moscow would likely require the U.S. to ease sanctions.

Trump has been seeking a minerals deal with Ukraine – home to a trove of lithium deposits and rare earth minerals – as pay back for billions of dollars in U.S. aid. However, no deal was signed after an explosive Oval Office meeting between Trump and Ukraine’s President Volodymyr Zelenskiy on Friday.

Erin Banco is a national security correspondent focusing on the intelligence community. She covers everything from the wars in Ukraine and Gaza to U.S. covert operations overseas. She previously worked at POLITICO as a national security reporter. Banco has a long history covering the Middle East region, from Cairo to Baghdad to Aleppo where she’s reported on the Arab Spring and its aftermath, including the civil war in Syria and the rise of ISIS. Her 2017 book, Pipe Dreams, focuses on the development of the oil and gas industry in the northern Kurdistan region of Iraq. Banco attended The University of Wisconsin-Madison, where she majored in Arabic and journalism. She earned a master’s in public administration from Columbia University’s School of International and Public Affairs in 2014.

The sudden and unexpected thaw between official Moscow and Washington has Russians letting out a cautious sigh of relief that maybe, just maybe, a return to normalcy could suddenly be in the cards.

“We were expecting some changes,” said a senior Kremlin official, speaking on the condition of anonymity to discuss the subject more freely. “But of course, we didn’t expect such a tremendous change.”

Until recently, the ideological clash between Russia and the West seemed unbridgeable, with Moscow entrenched in its opposition to what it claimed was Washington’s hegemonic ambitions.

But the intensifying contacts between Russia and the United States and President Donald Trump’s stunning remarks that appeared to align with President Vladimir Putin’s narratives around the invasion have sparked a fledgling hope for change and an end to the war.

After Moscow described a call between the two leaders and talks in Saudi Arabia as “friendly,” Russian social media was flooded by jokes that the former rivals were now “brotherly nations” that will rule the world together — a boilerplate phrase officials normally use to refer to post-Soviet states or China.

There has been chatter that soon, Russians would be able to shop foreign brands again, take direct flights abroad and pay for them with Visa cards that work. The speculation that Western companies will return to Russia kicked into high gear after Putin’s business envoy Kirill Dmitriev said on the sidelines of the Riyadh talks that he expects some American business to return by midyear.

Another envoy, Boris Titov, spoke of “unfreezing accounts of unsanctioned companies, the return of Western brands, and the resumption of visa issuances.” For his part, Secretary of State Marco Rubio said an end to the war would unlock “potentially historic economic partnerships.”

“I feel like we took a breath three years ago and have been standing still, waiting to exhale. Now we can do it, cautiously,” said a 45-year-old dentist in Moscow. “I really want to believe that people will stop killing each other. A lot of people have died, and Trump has struck the right tone, constantly repeating about the senselessness of war.”

The dentist, like others interviewed for this article, spoke on the condition of anonymity to talk frankly about the war, fearing repercussions from the state.

“Brands, international flights, Western payment systems make you part of the world to some extent, and their presence in your country instills confidence that you still live in a more or less normal country,” the dentist said.

A Levada poll conducted six months after the invasion, after the first wave of sanctions had taken effect, showed that Russians missed the Swedish furniture retailer Ikea, foreign electronics makers and car brands the most.

Behind the consumerism runs a deeper emotion — to many, walking past Zara and H&M storefronts or taking their kids to eat meatballs at an Ikea cafeteria on the weekend served as a tangible sign that Russia is not a pariah state locked behind a new iron curtain.

“It’s not about brands, of course, but about the fact that they are elements of ‘normal’ life that everyone really wants to get back,” said a 52-year-old senior manager at a large Moscow-based company. “Everyone is terribly tired of living in isolation while your country is killing people in your neighboring country. There is a sense of hope, for the first time in all these years. I really want to believe that all this is not fake.”

Despite the invasion, daily life in most of the country away from the Ukrainian border remains largely peaceful, occasional drone strikes and suspicious fires aside.

Yet the sense of war seeps into the routine, amid billboards luring men to the front line with astronomical payments plastered across cities and a lingering sense of anxiety that things could take a turn for the worse — such as another “partial mobilization” effort, like the one in 2022, that would claim more people for the battlefield.

The Russian economy has showed resilience in weathering sanctions, and foreign brands have been replaced by Russian analogs or goods imported from China or Turkey. But economic pressures are getting more evident as the central bank struggles to tame inflation and the costs of the war mount.

State media pundits used rumors about a Western corporate return to praise Putin’s success in breaking Russia’s global isolation. But such talk also raises public hopes, forcing some officials to try to manage expectations, pointing out that no company has officially confirmed it is returning and that Trump has yet to lift any sanctions.

Economy policymakers have also cautioned that a potential thaw with the United States would not be a blanket invitation for foreign businesses to return. They have taken a tough stance, saying Moscow will pick and choose who can come back, with an eye toward supporting domestic producers.

“We are not waiting for anyone with open arms. They will have to pay for everything, for their behavior,” said Russian Trade Minister Anton Alikhanov, expressing a dim view of those who had “abandoned” the Russian market.

Foreign Minister Sergei Lavrov said Russia must prioritize self-sufficiency and only allow foreign companies “into areas that won’t create risks for our economy, just in case someone wakes up on the wrong side of the bed again.”

The turbulent exit of foreign companies — marked by state asset seizures of firms such as ExxonMobil and Danish brewer Carlsberg — is a reminder of how risky Russia’s investment climate remains.

While ordinary Russians cheer at Trump’s apparent policy shift and the upbeat remarks from Russian officials, the glee has had a disorienting effect on the hard-line pro-invasion voices that built much of their following on rallying cries to destroy the West.

“Trump’s impudence knows no bounds but at home we already hear voices saying, ‘Thank God, things are looking up’ — what kind of ‘up’? That the Americans will dig the earth under Russian Kyiv?’ lamented Zakhar Prilepin, a nationalist pro-war writer, referring to a mineral deal Trump is expected to sign with Ukraine. “We are all for peace and negotiations. But if the above-described prospects are presented as unprecedented success, then this is not so.”

Some Russians also remained skeptical of Trump’s bold claims, particularly after the much-anticipated reset during his first presidency ended with Russia getting slapped with new rounds of sanctions.

“The highest expectations, if they don’t materialize, come with the highest disappointment,” warned Igor, a 33-year-old IT specialist from St. Petersburg.

The Kremlin official, however, said that any anti-American sentiment in the country was not about the people but about the governments. “You know, when a Russian says that America is our enemy, he doesn’t mean Americans. He means the American administration in Washington.”

He admitted that while “we were enemies of [the] previous administration,” with the new administration “there is a change in position.”

Russia also still faces a host of economic and social challenges that the war distracted people from, said Ekaterina Schulmann, a Russian sociologist and scholar based in Berlin. She expects the “outburst of jubilation” at the end of hostilities to be short-lived.

“People are tired, and tired of being scared, and strive for any kind of end, for an event that they can interpret as a return to normalcy,” she said. “Spoiler: They will be disappointed.”

But for others, just the thought of a Russia no longer at war is a new and exciting sensation.

“There is not much optimism in general, but I can say that just until very recently there was none at all,” the Moscow dentist said.

Francesca Ebel in Moscow contributed to this report.

Mary Ilyushina, a reporter on the Foreign Desk of The Washington Post, covers Russia and the region. She began her career in independent Russian media before joining CNN’s Moscow bureau as a field producer in 2017. She has been with The Post since 2021. She speaks Russian, English, Ukrainian and Arabic.

Natalia Abbakumova is a researcher for The Washington Post’s Moscow Bureau.

Ukrainian sovereign bonds, shares in the Austrian bank Raiffeisen, the Ukrainian mining company Ferrexpo and global steelmaker Arcelor Mittal have all posted record gains over the past week. The markets are betting on a prompt ceasefire and for sanctions against Russia to be eased. However, Moscow has refused to confirm the phone call between Putin and Trump and has warned against optimistic expectations.

Russia is managing well, and its economic problems are primarily homegrown

Russia has officially restated its demands in ending the conflict in Ukraine: fully recognised sovereignty over the occupied regions of the country, including the parts still controlled by Kyiv; a neutral Ukraine banned from joining Nato; and a lifting of sanctions against Moscow. Russia is also demanding prompt elections in Ukraine, which would see Volodymyr Zelensky removed. Moscow has indicated that it’s willing to decide the future of Ukraine directly with the US over the heads of Ukraine itself and Europe.

Ukraine has, unsurprisingly, deemed these demands unacceptable, but Zelensky’s administration has nevertheless indicated that it is ready for talks. Given the country’s precarious military and economic position, it doesn’t have much leverage. Much, then, depends on the whims of Trump.

According to one top foreign affairs official from Trump’s previous administration, the President regards the end of the war as his priority. He is, apparently, much more engaged personally in the breakdown of relations between Russia and Ukraine than between 2016 and 2020. According to this official, Trump is not yet considering lifting the sanctions. Moscow, of course, would insist on it in any negotiations.

No country can boast the dubious honour of being sanctioned more than Russia. Since 2014, more than 15,000 sanctions have been imposed on Russia by Ukraine and its Western allies. However, the Kremlin is only concerned about the restrictions imposed by the EU, the UK and US. According to a person familiar with the thinking of the Russian presidential administration, those imposed by the latter worry Moscow the most.

Russia’s position has remained unchanged since 2014: that all sanctions are illegal and must be lifted altogether. This maximalist approach is hardly achievable, though. Not only because Trump doesn’t have the power to lift European sanctions but also because some US sanctions are embedded into legislation and would need congress to approve the changes.

There is a way around this – the 1974 Jackson-Vanik amendment, for example, which restricted trade with the USSR in response to the bloc’s anti-Semitic emigration policy, was lifted only in 2012. Still, years before that, US presidents granted Russia conditional normal trade relations subject to annual review. Russia doesn’t want to see a repetition of this conditional easing but might feel compelled agree to it.

Even a partial lifting of US restrictions would crack the united front of Western powers when it comes to sanctions. No binding mechanism exists to align national sanctions regimes – every country does so voluntarily. If the US relaxes its sanctions in any way, those who remain will find themselves in an unenviable position: needing to shoulder the costs of the sanctions regime alone while leaving possible profits to the US.

If Trump keeps sanctions in place, there is also the chance he could indulge Moscow by not enforcing them too strictly. One option would, for example, be to not impose secondary sanctions against Russia’s leading oil buyers, India and China, and the third-party countries facilitating cross-border trade. 

So far, Russia has demonstrated impressive resilience in adapting its economy to and circumventing the restrictions imposed on it by the West. Without further enforcement, it will, in all likelihood, find a way of working around even the most recent sanctions against its oil exports and tanker fleet. There are conflicting opinions in Moscow on which sanctions are the most damaging. Industrialists and ministers responsible for the economy mainly complain about the restrictions on vital imports, notably machinery and parts, and financial sanctions, which thwart trade. The bankers and managers of the country’s macroeconomy are more concerned about the sanctions against oil exports and the banking system.

However, Russia is managing well, and its economic problems, amplified by sanctions, are primarily homegrown. High inflation, a shortage of workers, the prohibitively high cost of credit, a slowdown in the production of everything unrelated to the war effort – the easing of sanctions alone can’t resolve these issues. On the other hand, while it is deteriorating, the Russian economic stance is far from that of the late Soviet Union and is not forcing Putin to compromise for social stability. He may find confidence in the 4.1 per cent of annual GDP growth that the country experienced in 2024.

Markets usually know better, and a ceasefire might not be far away. However, sanctions will probably remain, and, for the rest of the world, Russia will still be pretty uninvestable – even when the guns fall silent.

She had been toiling in the shadows of the big labels for a decade, and the West’s implementation of economic punishments upon Russia didn’t make things any easier. But Ms. Knyazeva, who designs her own line of women’s wear, has scrambled through the international maze created by sanctions in order to source materials; made deals with garment factories in Russia, China, and Turkey; and found innovative ways to promote her name to customers.

The past three years have seen unprecedented success for Ms. Knyazeva’s business, as Russian women turn to entrepreneurs like her to dress them in the style they’d become accustomed to. She’s opened up four retail outlets in that time and will soon be moving her company headquarters into an upscale Moscow office space.

It may seem counterintuitive. But the still-escalating blizzard of sanctions leveled against Russia in the wake of its invasion of Ukraine and the mostly effective responses of Russian policymakers and private entrepreneurs have not only failed to punish Russia but actually stimulated some sectors of its economy in ways that will probably endure long after the Ukraine war has ended.

The first thing Ms. Knyazeva tells a journalist visiting one of her Moscow shops is that she’s grateful to those Western companies, which moved into the Russian market in the 1990s, for bringing ideas and expertise that transformed the old Soviet culture of fashion indifference, inculcated modern business methods, set standards of quality, and educated Russian consumers.

“I didn’t wish for this situation, but I’m a Russian who feels patriotic,” she says. “When all those foreign firms departed, it opened up niches that previously seemed unreachable to us. Russian customers were looking for equivalent goods to the ones no longer available, and our task was to provide them.”

Western sanctions vs. Russian creativity

Ms. Knayzeva is a small player among the many Russian companies that rushed into the vacuum left behind by retailers like H&M, Adidas, and Chanel. But her success is emblematic of a wider process that, through shock and adaptation, transformed Russia’s already developed consumer economy from one dominated by international brands to a largely Russified one.

Wealthy Russians are still able to obtain high-fashion clothes, jewelry, and other luxury goods, albeit at much higher prices. But for customers on a budget, the disappearance of most Western brands they’d grown accustomed to seemed to threaten a return to the era of shortages and mediocre products that still lives in the memories of Russians over 40 years old. Russian government policies stabilized the economy, and entrepreneurs like Ms. Knyazeva stepped into the breach.

For most types of relatively low-tech consumer goods, Russian businesses have proved surprisingly adept at developing alternatives, rerouting their supply chains, and providing copycat products of similar quality, though often at higher prices. Over three years of war, that has occurred in most sectors, including cosmetics and toiletries, foodstuffs, furniture, home appliances, and software. Even Russian laptop computers have reportedly captured 4% of the market, though imports from China still dominate.

Other economic sectors are struggling to replace Western imports on forbidden lists. The Russian government promotes import substitution in a variety of ways, including by subsidizing innovation centers that focus on developing replacements for critical technologies and components. One study found that Russian industry has succeeded in meeting only a quarter of its needs in this way, leaving it reliant on expensive and circuitous methods of “parallel import” to obtain needed tools and parts.

But the architects of Western sanctions appear to have greatly underestimated the power and creativity of Russian market forces to withstand and even benefit from the sudden withdrawal of foreign corporations, says Oleg Buklemishev, an economist with Moscow State University.

Russia has long since thrown off the shackles of Soviet central planning, its consumer economy has been developing on market principles for decades, and the Kremlin has been working, with some success, to sanctions-proof the macroeconomy since 2014, when conflict with the West began to look irreversible.

It’s hard to guess how deeply sanctions have impacted Russia’s military industry, which is their main intended target. That’s mainly due to wartime secrecy and disinformation. But Mr. Buklemishev says war production lies outside any normal economic rules. “If they need something for the military, they will find a way to obtain or produce it,” he says. “Cost is no object.”

But in sophisticated civilian industries such as the energy sector, automobiles, and aircraft – where commercial viability is a must – substituting vital Western imports and expertise has proved slow, and bottlenecks have formed that may last for years. Russia’s domestic car industry has struggled to produce components such as airbags and power brakes, leaving it stuck serving the low end of the lucrative Russian auto market. Chinese companies have taken over assembly plants vacated by Western automakers, and those more upscale cars are increasingly visible on Russian roads.

In many cases, Russian businesses have been temporarily boosted by the opportunity to acquire the assets of departing Western firms at fire-sale prices. That windfall may have been worth as much as $40 billion, leading some commentators to liken it to the mass sell-off of former Soviet state assets following the collapse of the USSR that created a class of instant billionaires.

“Look at me”

But no such bonanza befell Ms. Knyazeva or most of the new Russian fashion entrepreneurs.

“I studied Western haute couture and dreamed of making clothing on that level, available to the average Russian woman at affordable prices,” she says. “That’s what I’m still working to do.”

Ms. Knyazeva says the departure of Western firms has been accompanied by mood change on the part of Russian consumers, who formerly preferred foreign products, which they assumed to be superior.

“I have a half-million followers on my YouTube channel, and I’ve received many comments from people who say they are offended that all those companies just left us. Even if they returned tomorrow, people might not want their products,” she says.

The attitude shift, at least in the realm of fashion, is potentially seismic, agrees Aliona Doletskaya, former editor of Vogue Russia and a major fashion influencer in the country.

“Look at me,” she says. “I love wearing and mixing Russian designers with overseas fashion, especially those who provide excellent quality and style.”

A late breaking story on Friday, the US’ OFAC imposed the most extreme sanctions on Russian oil exports yet.

There are three main features of note in these sanctions: around 183 tankers were sanctioned; Russia’s major oil companies were included for the first time (although not Rosneft, the biggest); and the top Russian maritime insurance companies were hit as well.

The goal is to “reduce Russia’s revenue from oil exports.” That is not going to happen. What is going on is that as each of these sanctions come out a game of whack-a-mole starts, and Russia finds workarounds. Each time it takes a couple of months to organise, but so far a solution is always found.

For example, the sanctions on the major oil companies is very easy to avoid – and not Rosneft was excluded as the US still worries about actually reducing the flow of oil and spiking prices – as someone like Surgutneftegas (that was named) can simply sell oil on the domestic market to NoNameNeftegas which then exports it without sanctions.

Russian insurance has been hit for the first time too, and this is a bit more serious. When the crude oil price cap sanctions were brought in on December 5, 2022 the West rather naïvely thought that because it controlled 95% of the maritime insurance business (largely Lloyds of London) that it could use this as the enforcement mechanism. As bne IntelliNews reported not a single barrel of Russian crude oil has been sold below the oil price cap of $60 since. The market share of the western insurance has fallen to 65% since; basically Russia recapitalised its insurance companies and insured the shadow fleet ships itself. Chinese and Indian partners accepted this insurance as valid.

Now these Russian insurance companies have been hit, it will create a problem as ports in India will likely refuse entry to any ship insured by the state-owned Rosgosstrakh et al. But again if you think about it you can think of workarounds pretty easily. Russia’s Sovcomflot can just buy Indian insurance. Again the point is not to stop the oil flow, just make it harder.

The most effective of all, will be the sanctions on tankers. 183 (or thereabouts) is a lot of ships. It’s about a third of the circa 400 tankers in the shadow fleet and OFACs sanctions on these ships mean Asian ports will definitely refuse to admit them.

As we have reported, the European sectoral sanctions have been almost entirely useless as in addition to being easy to dodge they are riddled with carve-outs in order to protect EU businesses that remain heavily dependent on Russian raw materials. It was reported today that Europe’s piped gas imports to Europe were actually up 14% to 32bcm in 2024, despite all the talk of weaning the EU off Russian gas.

However, the US can afford to be tougher as it is almost entirely self-sufficient in everything (enriched uranium being a notable exception).

The Biden administration has avoided imposing really tough sanctions on Russian oil as it worries about the market impact. However, these so-called strangulation sanctions that were launched last December are amongst the most effective yet as they go down a level from targeting sectors to targeting individual companies and ships, threatening their owners with secondary sanctions, which Chinese, Turkish and Indian companies must avoid.

The work around in the shadow fleet’s case is to rename and reflag the tankers, which has been going on, but again that takes time.

And China and India are willing partners in this process. A key point, that is underreported, is that they are buying energy with a big circa 20% discount, while, Europe at least, is paying a premium. With something as fundamental as energy costs, that is a very big competitive advantage indeed – especially when you unit production costs in the Global South are already a third of those in the Developed World. This comes at a time when the report from former Italian Prime Minister and ex-European Central Bank boss Mario Draghi has already highlighted Europe’s fading competitiveness, which has already led to the deindustrialisation of economies like Germany.

The new sanctions won’t reduce Russia’s oil revenue – they are a headache, rather than an unsolvable problem – they will cause supply disruptions and drive up transaction costs that will in turn fuel more inflation in Russia, so they have some merit. But they wont stop the war or bring Russia’s economy to its knees.

The final irony is that they come only 10 days before US President Joe Biden is due to leave office. Ukraine’s supporters have been calling for exactly these sanctions for years, but the Biden administration has studiously avoided enacting them as it is more scared of spiking oil prices than it is of Russia. Biden is desperate to rescue his reputation given his failure to provide Ukraine with enough support to win the war, by going out with a bang and providing Ukrainian President Volodymyr Zelenskiy with some sort of leverage in the inevitable ceasefire talks.

And his job was made easier as there is an oversupply of oil in the market of about 2mn barrels so disrupting Russia’s oil exports (of just under 5mn barrels in 2024) will actually help balance the market. Nevertheless, oil prices jumped on the news from $70 average in 4Q24 to around $80 today – but that is a price level everyone can live with and actually makes the US, now the world’s largest exporter of oil, a lot of extra money.

The wild card here is inbound President-elect Donald Trump, who could take these sanctions off again on January 21. It’s not clear what he will do of course, but one of his traits is to simply undo or reverse anything that Biden did, like sign on to the Paris Agreement. We shall see.

Running the gamut from individual limits against Russian leaders and businesses, to comprehensive restrictions on key sectors like Russian oil and natural gas, these sanctions are intended to impose unacceptable economic costs that directly hinder Russia’s war effort and indirectly incentivize Russia to end its campaign.

However, experts have been debating whether and how well they have worked. Some argue that the comprehensive sanctions, and in particular the widespread restrictions against its oil and gas revenue, are bringing Russia’s economy — and therefore its military campaign — to its knees. Others concede that sanctions may not successfully end the war outright, but contend they at least offer an inexpensive and low-risk way to slow Russian advances and take a public stand against the invasion. And yet, after nearly three years, the war still rages, Russia’s economy has rebounded, and Russian domestic support for Putin and the Kremlin are at an all-time high.

The problem with this solely economic debate is that it overlooks the risk for more serious counterproductive consequences. Sanctions are not just failing to end the war in Ukraine or weaken the Kremlin’s warfighting currency, they’ve also backfired, inadvertently strengthening Moscow’s hardline position, undermining the utility of alternative strategies, and shoring up the Kremlin against future international coercion. As a result, the fallback position that sanctions are at least better than nothing ignores their long-term perverse consequences for regional peace and international stability.

Sanctions against Russia after its invasion of Ukraine have included everything from economic restrictions to information controls. They have grown to include bans on industrial and technology export, bank freezes, restrictions against state-owned media outlets, and targeted sanctions against “high profile individuals and entities” including President Putin. The crown jewel is international bans on Russian oil and gas which account for 60% of Russia’s exports and nearly 40% of its federal budget.

The sanctions arguments

From the outset, Russia in 2022 appeared ready to cave to Western sanctions. Economic size and market diversity are usually good predictors of sanction-sensitivity, and Russia’s GDP is less than a quarter that of the U.S., its GDP-per-capita ranks only 70th globally, and perhaps most importantly, it is a rentier state, highly reliant on oil and gas export revenues for many of its state functions. Russia’s sanctioners, on the other hand, all possess formidable economies and the diversified stable markets necessary for wielding significant clout.

On the surface, these sanctions therefore looked like a good bet. And by naïve criteria they even enjoyed some success. Proponents argue sanctions are working because foreign businesses closed, domestic production nearly halted, and domestic talent fled so that now the Russian economy is a ticking time bomb ready to collapse. But sanctions are a long game that take time to accrue pressure, so proponents argue for waiting it out until Moscow cries “uncle.”

Russia’s economic resistance

But patiently waiting for Russia to run down its reserves and public patience has not panned out as proponents hoped. Targets of persistent sanctions, like Moscow, are not passive recipients. It has shielded critical supporters, built new trade networks, and ultimately earned more from its oil exports in 2023 than 2021. Some critics argue that the sanctions have failed because the U.S. and its allies are not able and willing to impose sufficiently thorough sanctions. Others blame Moscow’s clever domestic fiscal policies. Still others blame BRICS nations for systematically undermining the allies’ sanction efforts.

But whether by external sabotage or Moscow’s growing domestic immunity to sanctions, Russia is now economically less susceptible to sanction pressure than it was in 2022. Its trade flows with China doubled from 2021 to 2023 and exports to India increased ten-fold. Rather than curtailing the war effort, sanctions have catalyzed an economic and political partnership with China, India, Iran, and North Korea, suggesting a worrying geopolitical restructuring. The implication is that this growing network of partners will be more economically sanction-resistant and politically anti-Western.

Public approval

Pro-sanctions hold-outs argue, however, that even if Moscow manages to shield its elites from economic costs, the Russian public is still left holding the bill and will eventually turn on its leaders. But this pathway to policy change is looking increasingly unlikely. While sanctions are meant to undermine public support for the government’s sanctioned behavior, the Russian public has instead reacted to sanctions by rallying behind the government, strengthening Putin and his supporters’ domestic political position. Even before indicators of economic health began to boomerang, public approval ratings of both Putin and his government more generally had already surpassed pre-war levels.

Like many autocracies, Moscow holds tight reins on the spread of information domestically, and has a history of co-opting the information that does come out to its own political advantage. Leaders have used sanctions to rally public support, repurposing them to foment patriotism and resist foreign pressure by controlling the domestic narrative around sanctions and the war. This rally effect is not new. Putin and the Duma enjoyed a slight bump in favorability following the invasion of Georgia in 2008 and a larger increase following Crimea in 2014. What is notable, however, is how long all branches of government have managed to ride the post-Ukraine high. Putin’s approval hovered around 65% for two years, but jumped to over 80% following the invasion and has risen from there.

Attempts to combat misinformation and propaganda have also backfired. Private companies like Twitter/X and Meta attempted to crack down in 2022, blocking official accounts and removing false or misleading social media posts. Moscow responded by passing a series of censorship laws and banning Facebook and Twitter/X altogether in Russia. International and independent media was pushed out, social media accounts monitored, and reporters silenced, all effectively cutting off the Russian public’s access to any independent reporting on the conflict.

Without independent fact-checking to muddy the domestic information environment, calls to resist sanctions and rally behind leaders in Moscow can fall on more fertile ground. They see only claims of Russia’s “Responsibility to Protect” citizens in Ukraine, exhibits on NATO and the U.S.’s “chronicle of cruelty,” and claims that “regardless of the situation in Ukraine…[the West has] only one goal – to restrain the development of Russia.” As such, sanctions and unofficial restrictions have inadvertently strengthened Putin and his supporters’ domestic political position.

Counterproductive consequences

The sanctions debate should look beyond simple economic measures to consider the long-term risks. Sanctions are not just a cheap, non-violent way of signaling — however futile — public disapproval. Economic costs are not their only downside. The result of sanctions has been a Moscow with greater incentive and ability to pursue future military incursions, enjoying the unquestioned approval of an isolated domestic public, and the economic resistance to weather future restrictions. As a result, while sanctions may scratch Washington’s itch to resist the invasion, they actually create perverse incentives that undermine future engagement with Moscow on Ukraine and international security more broadly.

Ariel Petrovics is an Assistant Research Professor at University of Maryland’s School of Public Policy, a Research Fellow with Managing the Atom at Harvard Kennedy School’s Belfer Center for Science and International Affairs, and Non-Resident Fellow at the Quincy Institute. She earned her PhD in Political Science from the University of California, Davis.

The meeting, organized by Tufts professors Christopher Miller and Daniel Drezner, did not come up with a decisive answer to the key question: are the sanctions working — and the related question, should they be wound up, continued, or intensified?

In part, this is because Western leaders have been vague when it comes to defining the goals of the sanctions, which have shifted over time. Initially, the goal was to deter Russia from launching the invasion. That did not work. So then the goal was to crash the Russian economy, force a bank run and collapse of the ruble, which would hopefully cause Russian elites, and/or the Russian people, to rise up against Putin and force him to abandon the war. For a week or two, that seemed to be working. But the Russian Central Bank imposed strict controls to stop the outflow of capital and ended the convertibility of the ruble. The Russian economy did not collapse.

After that, the goal shifted to one of attrition, increasing the cost to Putin in the hope that it will make him more willing to come to the negotiating table and end the war. By ratcheting down the declared goals, leaders can keep insisting that the sanctions are working.

Edward Fishman, a former U.S. Treasury official, said the “Goal was to shock the system, create chaos, and force Russian policy makers to redirect attention to developments inside Russia.” But we underestimated the skill of Russian financial managers and the extent to which they had been preparing for sanctions in the wake of the annexation of Crimea in 2014.

Maximilian Hess, author of the new book, “Economic War: Ukraine and the Global Conflict Between Russia and the West,” argued that Putin has been preparing Russia for economic war with the West since the passage of the Magnitsky Act in 2012, which sanctioned individuals involved in the death of Russian banker Sergei Magnitsky.

Historically, sanctions have only worked in about one third of the cases. Success only comes if they are multilateral, involving a majority of key economic players. In the case of Russia, there was unexpected solidarity amongst the Europeans and between the Europeans and the U.S., which hit Russia hard given its dependence on oil and gas exports to Europe. However, only a few nations outside the West joined the sanctions (Japan, South Korea, Singapore, Australia). China, India, Turkey and others increased their trade with Russia, buying the oil which was no longer flowing to Europe.

Despite the relative lack of success, sanctions are a popular tool, in large part because they are better than the alternatives — doing nothing, or going to war. They may be more important as a way of signaling political commitment amongst allies, rather than for their economic impact. Peter Harrell, a former National Security Council official, noted that “sanctions have been a growth industry over the past 20 years,” starting with Bill Clinton’s use of sanctions to target drug cartels and expanding as part of the post-9/11 War on Terror.

The U.S. was later encouraged by the success of the sanctions on Iran, which forced it to negotiate the Joint Comprehensive Plan of Action (JCPOA) in 2015 limiting its nuclear program. However, the Russian economy is much larger, more diverse, and globally integrated than that of Iran, so the impact of the sanctions has been more modest. Harrell concluded that we “need to be realistic about what sanctions can achieve, and not expect that they are a magic bullet.”

While the sanctions were extensive, they mainly focused on the financial sector — cutting Russia out of the SWIFT financial transaction network, barring transactions with most Russian banks. Interestingly, Fishman revealed that the decision to freeze the Central Bank’s assets was only taken after the full-scale invasion. However, the West feared that an abrupt interruption of Russian energy exports would cause inflation to spike, so oil and gas continued to flow into Europe through 2022. And the banks handling payments for oil and gas exports were exempt from the sanctions.

The U.S. controls critical nodes in the finance sector, and the dollar remains the main currency for international trade and investment. But Elina Rybakova of the Peterson Institute pointed out that Washington has no such critical leverage over energy markets, and is still struggling to come up with ways to monitor and regulate the export of critical dual-use technologies.

Meanwhile, Harvard’s Craig Kennedy alluded to the fact that sanctions can be a negative-sum game, harming the country that is imposing them just as much as the target. This has certainly been true for Germany, hit by a 400% rise in the price of natural gas in 2022.

Organizer Daniel Drezner pointed out there has been a number of unintended consequences for which ramifications have yet to be unpacked. They include the rise of a “shadow fleet” of uninsured tankers shipping Russian oil to India and China, and the expansion of a shadow network of financial transactions facilitating Russia’s evasion of the sanctions.

By making it harder for Russians to export capital, the sanctions have boosted investment in the Russian economy, and has tied the business elite — the main advocates of Westernization — even more closely to the Kremlin. The war has further institutionalized the militarization of Russian economy, polity and society and it might be very hard to get the country off that path in a post-Putin future.

Finally, Drezner noted one important unintended consequence for Russia — that the war united the West, led Sweden and Finland to join NATO, and Germany to rearm. This nullifies a decades-long strategic goal of Russia to separate Europe and the U.S.

Analysts agreed to the assertions that the sanctions, for all their limitations, are squeezing the Russian economy’s prospects for long-term economic growth, particularly with regard to access to the investment and technology to develop new oil fields. Sergei Vakulenko, a fellow at Carnegie’s Russia Eurasia Center, argued that Russia is “facing graceful decline [in oil output] but not a sudden drop.” That seems to be a price Putin is willing to pay to continue his war in Ukraine.It is hard to say how (and when) this conflict will end or what the end state will be. Will a future Russia rejoin the West at some point? Or is Russia destined to become a resource base for China and other nations now unaligned with the West or willing to “multi-vector” on the geopolitical landscape?

Peter Rutland is a Professor of Government at Wesleyan University and associate of the Davis Center for Russian and Eurasian Studies at Harvard University. Before that he taught at the University of Texas at Austin, and at the University of York and London University in the UK.

The man in question is Björn Seibert, formerly a German defense ministry official and currently head of cabinet to European Commission President Ursula von der Leyen. Daleep Singh, Wally Adeyemo—these are not household names, but together they have totally reshaped the use of global finance as a weapon of war. 

The first thing to know about Western sanctions on Russia since February 2022 is that they are unprecedented. The second thing to know is that they haven’t worked.

To start with the first: The sanctions imposed by President Joe Biden’s administration on Russia after its invasion of Ukraine were a massive escalation from the comparatively mild sanctions imposed by Barack Obama in 2014 after the invasion of Crimea. For example, cutting off Russia from the global payment system SWIFT, which Baker calls “the Gmail of the global banking system,” was without parallel. Singh, deputy national security advisor for international economics, and Adeyemo, deputy secretary of the Treasury, among others, had to work overtime to get the Europeans to agree to it.

Even more extreme was the decision to freeze assets held in Western financial institutions by Russia’s central bank. “To do this to a fellow central bank involves breaking the assumption of sovereign equality and the common interest in upholding the rights to property,” wrote economic historian Adam Tooze at the time. The figures involved are staggering: more than $300 billion, compared to the $7 billion in Taliban assets that Biden froze after our withdrawal from Afghanistan.

Treasury Secretary Janet Yellen was a holdout against the asset freeze. She refused to agree to the plan when it was first proposed because she worried about its effects on currency markets. Mario Draghi, the Italian prime minister and former European Central Bank president, was dispatched to convince her, which he successfully did. “They spoke the same language, and I’m not talking about English,” an anonymous source tells Baker.

The world turns on such conversations. Another took place in July 2023 at the Aspen Security Forum, where National Security Adviser Jake Sullivan listened to former Treasury Secretary Larry Summers’s pitch for confiscating Russia’s frozen assets and giving the money to Ukraine for reconstruction. 

Summers’s wingmen in his pitch were Robert Zoellick and Philip Zelikow, two Republicans. The three tell Baker that they teamed up in order to make their idea “transcend party politics.” In fact, it just drives home that our Russia policy is currently being set by the uniparty. Zoellick and Zelikow are both Bush-era neoconservatives. As for Summers, he was pushing for harsher sanctions on Russia back in the Yeltsin years, when he was serving under Robert Rubin in Bill Clinton’s Treasury Department. 

Sanctioning Russia is not something these people had to be reluctantly brought around to. Many were raring to impose sanctions from the get go. Note that the first package of sanctions Biden imposed on Russia were in April 2021, before the invasion. According to Baker, that package was in response to “Moscow’s meddling in the U.S. elections, the poisoning of the late Russian opposition activist Alexei Navalny, and the Russian-backed cyber hack on the U.S. tech company SolarWinds Corp.”

Furthermore, “The Biden administration viewed the sanctions as an act of housekeeping, making up for Trump’s unwillingness to respond to Russia’s malign actions.” They imposed new sanctions because the last guy didn’t—a logic that only hardened attitudes in the Kremlin.

Two and a half years after the invasion, it is clear that sanctions have not had the devastating effect on Russia’s economy that the Biden administration expected. The ruble has not crashed. Russia’s economic growth is strong, projected to be higher than France’s or Germany’s this year. 

The disappearance of McDonald’s from the Russian market is a symbolic blow, a reversal of the hopeful symbolism of 1990 when the Cold War ended, but the domestic replacement, Vkusno i Tochka, has picked up the slack serving Russia’s fast-food diners. That is the story for most sectors of domestic production that have been affected by sanctions, in part because Putin made it his goal after 2014 to make his country sanction-proof.

When de-SWIFTing was first floated in 2014, Russia moved to create its own alternative payment systems. The Mir card was launched domestically in 2016, which allowed Russian consumers to survive the withdrawal of Visa and Mastercard from the Russian market in 2022. Without that alternative in place, the Russian economy might indeed have crashed. 

“Many Western leaders hoped that the sanctions would quickly kneecap Putin’s war machine,” Baker writes. She concedes, “That proved overly optimistic.” But that does not go far enough. These unprecedented sanctions have actually hurt America more than they have helped us, in at least three ways.

First, they have pushed Russia’s oligarchs closer to Putin. “Putin always told us the West hates us,” one tells Baker. “Now it’s a fact.” Second, they have sacrificed the neutrality that previously upheld America’s position as the global financial powerhouse. If other countries doubt our commitment to property rights and fiduciary neutrality, they will be reluctant to entrust us with financial power over them. The downsides of this loss of trust will not be apparent right away. They may take years to manifest, but they may well be the most important consequence of the war. 

Third, it has shown China our whole hand. By going after Russia so aggressively, we have essentially shown China exactly what we would do if they invaded Taiwan and we decided to retaliate. This information has no doubt been priceless to Chinese war planners—as has been the example Russia is setting in how to circumvent us.

Helen Andrews is a senior editor at The American Conservative, and the author of BOOMERS: The Men and Women Who Promised Freedom and Delivered Disaster (Sentinel, January 2021). She has worked at the Washington Examiner and National Review, and as a think tank researcher at the Centre for Independent Studies in Sydney, Australia. Her work has appeared in The New York Times, The Wall Street Journal, First Things, The Claremont Review of Books, Hedgehog Review, and many others. You can follow her on Twitter at @herandrews.

More than two years after US President Joe Biden declared ‘the rouble would be turned to rubble’ by sanctions, the Russian economy looks if anything more resilient with GDP growth hitting 3.6% in 2023 – outstripping every G7 country. 

Instead, Western efforts to cripple the Kremlin’s war effort by freezing funds, booting Russian banks from international payment systems and ceasing trade have only prompted Moscow to build better relations with other international partners, including China and Iran.

Now, experts are sounding the alarm, warning that Britain and her European partners will only become weaker in the face of their foes – and more subservient to the US – if sanctions continue apace. 

Speaking exclusively to MailOnline, Dr. Ksenia Kirkham, a specialist in economic warfare at King’s College London, said Europe is ‘shooting itself in the foot’ with its sanctions strategy and has pushed Russia to ‘escape Western mechanisms of control’ and become more self-reliant.

And Alan W. Cafruny, professor of international affairs at the US’ Hamilton College, argued Europe’s decision to cut off Russian oil and gas imports has done nothing but damage their own economies and line the pockets of US corporations – all while Russia continues to export its hydrocarbons out east unperturbed. 

The West’s ruthless commitment to punishing Russia with economic warfare has already endured for a decade.

America and the EU slapped Russian entities with sanctions as early as 2014 after the annexation of Crimea, a tactic which the UK Foreign Office said aimed to ‘deter, disrupt and demonstrate’ – that is, to deter further Russian aggression, disrupt its nefarious activities and demonstrate the West’s resolve. 

But the all-out invasion of Ukraine by Russian forces in February 2022 crystallised the failure of sanctions as a form of deterrence, with the measures evidently failing to stop the Kremlin from pressing ahead with its violent goals. 

‘Sanctions influenced Russia’s behaviour enormously, but not in the direction of stated objectives by the sender states,’ Dr. Kirkham said. 

‘If the objective was to deter Russia, then sanctions were distinctly counterproductive – they have simply made Russia more aggressive towards the West, especially towards the US.’

Then, following the outbreak of war, Ukraine’s Western partners refused to come to Kyiv’s defence with boots on the ground or planes in the sky.

Instead, they dramatically increased the scope of their already failing sanctions, seeking to weaken Putin’s war machine and compel a change in behaviour by crippling the economy and levying even harsher penalties on key state entities and individuals. 

But Dr. Kirkham believes these tactics have only expedited Russian efforts to undermine the West’s dominance in global political and economic forums.

‘Russia’s isolation is a myth,’ she said flatly. 

‘Moscow has been forming strong alliances with its BRICS partners and some other states in the Middle East, Africa and Latin America, with the aim of creating a new global balance of power. 

‘What we witness now is (Russia’s) development of alternative trade routes, payment systems, and duty-free zones that bypass sanctions and escape Western mechanisms of control.

‘The most alarming factor for the West is that, in the long run, its overreliance on sanctions compliance will undermine the very mechanisms through which sanctions effectively operate – i.e. the dollar hegemony and control over supply chains.’

Supporters of the West’s sanctions regime claim that Russia’s current economic strength will not last, arguing that the true impact will be felt in the coming months and years as the war rumbles on. 

But Dr. Kirkham doubts this, arguing that Russia has in recent months begun to shore up its deficiencies that sanctions would be expected to capitalise on. 

‘In 2022-2024, with a record high defence spending (7.5% of GDP), we have witnessed a boost in Russia’s military capacities – the country possesses all the necessary natural resources, workforce, and knowledge to respond to the needs of ”special military operation”,’ she said.

‘The gaps in some segments like electronics and machinery have been successfully covered by Russia’s partners that now not only replenish Russia’s shortages in some key components but also share their expertise and knowledge to secure Russia’s future self-sufficiency and domestic production. 

‘It would be wrong erroneous to suggest that the ”Kalashnikov” economy is dependent on the continuation of war.’

Cafruny went even further, suggesting the impact of the war and resulting sanctions may even be a net benefit to Moscow.

‘To be sure, the militarisation of the economy may lead to bottlenecks down the road, but if anything the overall impact of the war on the Russian economy has been generally positive,’ he declared.

He went on to explain how Europe scored an own goal with its decision to turn away from Russian energy imports, struggling with surging prices while the likes of China and India purchase Moscow’s crude at an enviable discount. 

And the porous nature of sanctions has allowed Russia to sidestep restrictions, with third countries simply able to buy up Moscow’s product and sell it on.

‘European countries have suffered greatly from a ”sanctions boomerang”,’ Cafruny said.

‘Throughout 2022-2023 natural gas prices soared, especially devastating the German economy based on relatively inexpensive natural gas. 

‘US LNG exporters, having pressed both the Trump and Biden administrations long before the war to cut off Western Europe from Russian energy, have profited massively from increased exports to Europe.’

As a result, the ‘hub and spoke’ relationship of European nations to the US will only solidify, with Britain and EU states becoming yet more reliant on America for military protection, oil and gas imports, and market access.  

With no end in sight for war in Ukraine and the Russian army making slow but steady progress in the Donbas, Western policymakers now face a troubling paradox. 

Unwilling to provide direct military support to Kyiv, the US, UK and Europe have little option but to continue awarding untold billions in aid packages to President Zelensky while shoring up loopholes and deficits in the sanctions regime.

But if the last decade has proved anything, it’s that the current approach to sanctions is not working as intended, and in the eyes of many has ceased to be effective altogether.  

Dr. Kirkham called on policymakers to review their approach to sanctions, warning that the current trajectory will not reduce Russia’s military effectiveness but could have unintended consequences for countries the world over. 

‘The overreliance on the mechanisms of deterrence, such as trade wars and economic sanctions… eventually leads to further disruption of vital supply chains, causes business inefficiencies, and resource exhaustion.’