Sanctions are depressing Russia's economy: new EU measures come into force

Sanctions are depressing Russia's economy: new EU measures come into force

Western sanctions are having a serious impact on the Russian economy, as a recent internal report from the Foreign Office shows. The measures, part of the EU's 17th sanctions package, have caused "significant" damage. In particular, Russia is having to cut key investments as oil and gas revenues have plummeted, reports Mercury.

The EU has imposed comprehensive sanctions on Russia over the past three years, including export and import bans, the exclusion of Russian banks from the Swift system and the suspension of broadcasting licenses. These measures are aimed at increasing pressure on President Vladimir Putin after Russia invades Ukraine in 2022, as Deutschlandfunk reported.

Sanctions and their evasion

The EU has made progress in tackling the so-called “shadow fleet” that is helping Russia evade Western oil sanctions. Some states have begun to withdraw flags from ships flying a false flag. Despite these efforts, China has become responsible for around 80 percent of sanctions evasion, while EU companies are also involved in this evasion.

To ensure the effectiveness of sanctions, close monitoring is essential. However, the EU faces difficulties with countries such as Kazakhstan, the United Arab Emirates and Turkey, where there are also attempts to circumvent sanctions. In a new measure, imports of oil into the EU via ailing foreign oil tankers are to be stopped.

Economic impact on Russia

Despite the embargo, Russia continues to sell oil, coal and gas, especially to China and India. Last year, Russia delivered record amounts of liquefied natural gas (LNG) to the EU, bringing the state treasury eight billion euros. The income from oil sales flows directly into the military budget, which leads to significant cuts in the areas of social services, education and health. Inflation in Russia was 9.9 percent in January 2025, further increasing the cost of living.

The current economic situation is tense, with forecasts predicting economic growth of just 1.35 percent this year, followed by stagnation until 2029. Companies are struggling to find workers, partly due to the war economy. There are also shortages of electronic components and software as China increasingly acts as the main trading point for Western semiconductors and high technology.

Political developments

With US President Donald Trump and Vladimir Putin potentially negotiating a ceasefire, there is growing concern that this could undermine sanctions policy. Trump has announced that he may lift existing sanctions. While the EU and G7 countries continue to put pressure on Russia, a return to previous relations between Russia and Europe is seen as unlikely.