- Sanctions against Russia have been 30 to 40 percent effective, a former tax official told Reuters.
- But the sanctions will disrupt Russia’s economic growth for several years, Oleg Vyugin said.
- Russia’s tech industry will also face sanctions as it relies on foreign imports.
Western sanctions against Russia over the invasion of Ukraine have been 30 to 40 percent effective, but there will be headwinds, Oleg Vyugin, a former senior finance minister and central bank official, told Reuters on Tuesday.
His comments come as Russia’s economy appears to remain resilient after nearly seven months of trade restrictions. Russia has taken measures to deal with the challenges caused by the sanctions, added Vyugin, who was deputy finance minister and deputy governor of the Bank of Russia. He retired from the Moscow Stock Exchange this year.
Although the sanctions were not entirely effective, Vyugin told Reuters that “the main result of the sanctions is that the process of economic growth in Russia was interrupted for several years.”
The country’s economy got off to a strong start in January and February and would have been on track for 6% growth in 2022 had it not been sanctioned, Vyugin said. But there is now a “negative effect”, he told Reuters, adding “so sanctions are working”.
Currently, the Russian economy shrank by 4% year-on-year in the second quarter of 2022 – the first full quarter since the war began. Russia’s Economy Ministry expects GDP to contract by 2.9% in 2022, a government official told Reuters in early September. That’s significantly less than the World Bank forecast, which is expecting a decline of 11%.
Russia could face more problems as the European Union – Russia’s biggest customer – ends its heavy reliance on Russian energy, with most crude oil imports set to be banned by the end of 2022.
Vjugin said there will be “serious damage” to the economy if Russian exports are curtailed.
The situation is not looking good on the import front either, as the shortage of some products will hit Russian industry hard. This applies to the tech sector, where Russia relies on imports, Vyugin told the news agency.
“The world will evolve, but Russia will only use some second-rate technology and spend huge resources to replicate what already exists in the world but cannot be imported,” Vyugin said. “If the situation does not change, Russia will see a gradual decline in the level of technological development.”
Russian state airline Aeroflot has already started removing spare parts from working planes due to supply shortages amid the sanctions, Reuters reported in August.