Russia’s economy has been buffered by attempts to evade West’s economic sanctions, according to researchers from a US-based think tank.
Russia’s economy is crumbling – but the West needs to put more pressure on Moscow, researchers say.
That’s because Russia is getting better at evading Western sanctions, like selling its oil above the $60 price cap.
There are five things the West could do to up the ante on Moscow’s economy, according to one think tank.
Western nations need to do more to further weaken Russia’s economy, according to researchers from the Atlantic Council.
But Russia has also gotten better at evading sanctions, researchers said, giving the economy an unexpected buffer. That includes things like selling oil outside of the $60-per-barrel price cap, a key effort imposed last year to crimp Moscow’s war revenue.
“As harsher sanctions have been imposed, Russian evasion efforts have stepped up. To increase pressure on Russian President Vladimir Putin’s regime further, or even to maintain that pressure as Moscow refines its evasion measures, the West would need to intensify sanctions and other tools of economic statecraft,” the think think said in a note last week.
Researchers outlined five things Western countries could do to up the ante:
1. Strengthen controls on Russian exports.
The US has already created a task force to target those who are helping foreign nations evade sanctions, the Justice Department announced in February, and has urged other countries to abide by those rules.
“More effective enforcement would require more ambition with and significant investment in the existing export control coordination and enforcement infrastructure across the G7 countries,” the think tank said.
2. Tighten the $60 price cap on Russian oil.
Some experts say that Russia has likely been selling oil above the $60 price cap, partly due to a loophole where oil suppliers inflate shipping costs but are technically selling crude below the $60 threshold. That alone could have brought in more than $1 billion to Russia over the second quarter, according to a Financial Times analysis.
That suggests stronger price controls are needed for Russian oil, considering that crude is one of Moscow’s main revenue sources. Better enforcement includes investigating firms who are facilitating the trade of Russian oil, and imposing sanctions on those who are found to violate the price cap rules.
3. Use Russia’s foreign reserves to rebuild Ukraine.
Russia was locked out of around $360 billion it had in foreign reserves last year when it first began its invasion of Ukraine.
Those reserves will be untouched until Russia pays for the damage it caused in Ukraine, the G7 said at a recent summit. Using that money now to help rebuild Ukraine would have an “enormous” symbolic impact, researchers said, especially since Russia has likely written off those funds as permanently lost.
4. Get rid of Russia’s hidden stashes of money.
Russian oligarchs and even Putin himself have reportedly hidden the extent of their personal wealth for years. Those funds need to be uncovered and placed under sanctions, the note said.
5. Put Russia under a full financial embargo
Western nations have already imposed sanctions on large Russian banks last year, but those lenders could be hiding financial transactions by facilitating them through smaller unsanctioned banks. That means the West could enforce a full embargo on Russia’s financial sector, researchers said, isolating Russia even further from the rest of the global economy.
Experts say that Russia’s economy is struggling more than officials have suggested, and the Kremlin has avoided publishing key statistics while under-the-radar data show a far grimmer future for Russia than Putin has let on.