The Impact of Western Sanctions on Russia’s Economy: The Experience of Adaptation and Perspectives

RUS-EUOn July 14, 2016 online conference “Russian Economy under sanctions: adaptation and perspectives of the experience” was held at Finam. The conference brought together representatives of business, academia and financial institutions. Participants discussed the extension of the anti-Russian sanctions by the European Union, imposed in July and the results reached by the Russian economy in the two years in conditions of economic sanctions.

The discussion began with assessment of the total economic impact of sanctions on the Russian economy. In particular, participants compared the effects of sanctions and the oil prices. So, in a short period the effect of sanctions on the Russian economy is not less than the the decline in oil prices. Moreover, in late 2014 western sanctions had more infuencial effect than devaluation of the ruble. The proportion of lower oil prices in the collapse of the ruble was 25% and the impact of sanctions was assessed at 40%. In the long run, of course, the trend has changed as a result of the reorientation of the Russian economy, which has become more sensitive to the international price of fuel. However, for long-term economic development, diversification is a prerequisite for the lifting of sanctions. According to the discussants, it is very difficult to carry out structural reforms to improve the investment climate in the framework of sanctions.

A special focus was placed on the question of the success of import substitution policies. In particular, participants emphasized that the particular success can be noted in public procurement and agriculture sector. For example, after the imposition of sanctions demand for apples in the Russian Federation increased by 40%.

The EDSG attented the conference on behalf of the business community.