Since Russian President Vladimir Putin launched the full-scale invasion of Ukraine in February 2022, the EU has imposed sweeping sanctions targeting Moscow’s energy, financial, and military-industrial sectors.

The sixteen rounds of restrictive measures – which include multiple export and import bans, service restrictions, and measures targeting specific individuals – have significantly harmed Russia’s economy, experts say, including by forcing the Kremlin to find longer, costlier supply routes to gain access to critical Western technologies.

The sanctions have also exacerbated many of the structural weaknesses plaguing Russia’s economy. War-induced labour shortages, in particular, have caused wages and prices to soar, leading Russia’s central bank to hike interest rates to record highs, dampening private investment.

Nevertheless, the measures have ultimately failed to deter Putin from continuing Moscow’s war effort. High oil prices and steep increases in military spending have also largely cushioned the impact of Western sanctions.

Indeed, by some metrics, Russia’s economy has rapidly outpaced the EU’s over the past couple of years. According to the International Monetary Fund, Russia’s GDP expanded by 3.6% in both 2023 and 2024, far above the EU’s growth rate of 0.6% and 1.1%, respectively.

Although such rapid expansion is not necessarily a sign of underlying economic resilience – many countries, after all, experience state-driven growth during wartime – experts warn that Russia’s economy is almost certainly strong enough to sustain its war for the foreseeable future.

They also note that Russia will, therefore, likely be able to resist financial pressure from the US and EU to agree to a 30-day ceasefire with Kyiv.

“The Russian economy can continue to support this war, and it won’t be a major issue for Putin in his thinking about negotiations or ceasefires,” said Janis Kluge, a senior associate at the German Institute for International and Security Affairs (SWP).

Kluge’s remarks were echoed by Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center, who noted in a recent article in Foreign Affairsthat Moscow “should be able to keep its overheating economy from exploding into a full-blown crisis for at least the next year”.

“Russia’s economic challenges are not yet so acute that they will make a meaningful difference in the war in the short term,” Prokopenko wrote.

Kluge, however, said that it is difficult to set a precise “deadline” for when the war might become unsustainable for Russia, as this largely depends on Putin’s willingness to shield the Russian public from the war’s wider impact.

Russia currently spends 8% of its annual GDP on defence: just over half the 12-14% of total output spent by the Soviet Union during the Cold War, and well below the 60% of GDP allocated by Moscow to the military during World War II.

“It depends on how far Putin is willing to go to militarise the economy,” Kluge said. “And if he’s willing to go further, let’s say to turn Russia into a real war economy, it can go on for longer.”

How critical is circumvention?

Analysts did, however, suggest that the EU could inflict additional damage on the Russian economy by clamping down on sanctions evasion through third countries, such as Armenia, Kyrgyzstan, and Kazakhstan, which have served as key conduits for Western exports to Russia since 2022.Alexander Kolyandr, a non-resident senior scholar at the Center for European Policy Analysis (CEPA), said that although cracking down on circumvention is often akin to the game of “whack-a-mole”, such efforts can still complicate Russia’s access to essential high-tech goods by forcing it to seek costlier supply routes.

“It’s definitely a whack-a-mole game,” he said. “But the next mole is getting more expensive than the previous one.”

Other analysts, however, argued that the scope for clamping down on circumvention is relatively limited.

“I think that actually cracking down as far as it is possible is already going on,” Kluge said, adding that the root cause of the problem is third countries’ reluctance to implement Western sanctions.

China, which has significantly expanded its trade links with Russia since the start of the war, is particularly unlikely to yield to Western pressure to limit its ties with Moscow, he noted.

“You will not be able to convince China to be tough on Russia, to hurt Russia economically,” Kluge said. “And China is really the most important piece to the circumvention puzzle.”

Is LNG the key?

Analysts also expressed reservations about a proposal, currently being floated by some EU leaders, to ban Russian liquefied natural gas (LNG) imports into the EU.Kolyandr noted that restricting imports of the super-chilled fluid could lead to a surge in gas prices, and would also increase Europe’s reliance on exports from the US – which has become increasingly unreliable since Donald Trump returned to the White House earlier this year.

“You can close European markets for the Russian LNG. That would be pretty damaging for the Russian economy, but I very much doubt the Europeans would do it,” he said.

“Firstly, they don’t want to see the prices to grow, and secondly, by doing that they create dependence on the American LNG – and America is not an epitome of a reliable partner right now.”

Kluge also noted that sanctions on LNG, although somewhat effective, would be far less impactful than additional sanctions on Russian oil, which accounts for the overwhelming majority of Russia’s export revenue.

However, he noted that such measures would likely require oil-rich nations like Saudi Arabia to boost production in order to stabilise global prices – which seems politically unfeasible.

“I don’t think that [the Saudis] are willing to backstab Russia,” Kluge said, noting that Riyadh “values its relationship” with Moscow and is also the location where peace negotiations between US, Ukrainian and Russian officials have taken place in recent weeks.

Ultimately, Europe’s best policy option may not necessarily be to impose additional export controls or import restrictions on Russia, but to continue providing economic and military support to Ukraine, some analysts noted.

The EU and the US should “sustain Ukraine through this critical period” and “bolster” the enforcement of current restrictive measures, according to Prokopenko.

Kolyandr, meanwhile, warned that Europe’s ability to impose further sanctions will ultimately depend on its capacity to withstand the economic blowback.

“Generally speaking, I don’t think that that there are sanctions that can harm your adversary without harming yourself,” he said, adding that the pertinent question for Europe is: “How much pain are you ready to suffer while causing pain to your enemy?”