WASHINGTON – Four months after the war in Ukraine, countries aligned with Russia are facing mounting economic pain, even as sanctions and energy embargoes have had little impact on the military campaign of Russian President Vladimir V. Putin or his political status in their own country.
US officials have vowed that the Russian financial system would be battered if it attacked Ukraine, and President Biden boasted in March that sanctions “crushed the Russian economy” and that “the ruble has been reduced to rubble”. But Russian oil revenues have set records as crude prices rise. And after a dip in February, the ruble hit its seven-year high against the dollar this week.
Biden officials say the Russian economy is nonetheless experiencing damage that will increase over time, especially as restrictions on technology exports to Russia gradually hinder the growth of its industries, from aerospace to computing. And on Thursday, a White House spokesman said leaders of the Group of 7 Industrial Countries, which will begin meetings in Madrid on Sunday, will discuss new plans to further “tighten” Russia’s economy.
But it’s unclear which side has more time left. The Ukrainian government says as many as 200 of its soldiers are killed every day, and thousands of civilians have died as Russia takes over territory in eastern Ukraine. Mr Putin still has almost dictatorial power, and he is unlikely to conduct serious peace talks with Ukraine as long as his army is making a profit.
“The Russian financial system is back to normal after a few weeks of severe bank runs,” said Elina Ribakova, deputy chief economist at the Institute of International Finance. wrote on Twitter last week, adding that those who thought “that Russia would be without funding for a few weeks at the beginning of the war, would end the war, have proved naive”.
Few, if any, Biden officials expected sanctions to end the war immediately. But the government and its European counterparts also did not expect the economic pressure they are now experiencing. Despite initial assurances that sanctions would not hit Russian energy exports, America has since banned imported Russian oil and the European Union has announced plans to cut imports by 90 percent this year. Partly as a result of these actions, energy prices have soared in the US and Europe, with regular gasoline averaging well above $5 a gallon in some states.
Now, Mr. Biden is bracing for midterm elections this fall, in which Republicans are likely to benefit from the rising cost of living. The end of summer will also lead to cooler temperatures in Europe, amid mounting alarms that Moscow is throttling natural gas supplies.
And in a bit of a twist, the sanctions and related embargoes allow America’s main strategic competitor, China, to buy massive amounts of oil at deeply discounted prices, while Russia seeks willing customers to replace lost revenues.