Paradoxically, the more sanctions are employed, the stronger the incentives become for targeted states, and even neutral ones, to develop mechanisms for bypassing them, Lorenzo Maria Pacini
writes.
Between theory, promises and reality
Following the launch of Russia’s Special Military Operation in Ukraine in February 2022, the United States, the European Union, and their allies imposed the most extensive package of economic sanctions ever levied against a major power. The strategic objective was clear: to strike at the Russian economy in such a way as to drastically reduce the Kremlin’s ability to finance the war, isolate Moscow internationally, and ultimately bring about political change, or at least a revision of its military strategy.
The measures included partial exclusion from the SWIFT system, the freezing of approximately $300 billion in foreign reserves, sweeping technology export restrictions, and a progressive embargo on Russian energy supplies. At the time, many policymakers and analysts predicted a rapid and severe contraction of the Russian economy, accompanied by currency collapse, industrial paralysis, and growing domestic instability. Four years later, however, the picture looks markedly different. Russia has neither collapsed economically nor been decisively isolated. At the same time, Western economies, particularly European ones, have suffered significant collateral damage. This imbalance between expectations and results lies at the heart of what can be defined as the “sanctions paradox.”
In theory, economic sanctions are viewed as a non-military coercive instrument designed to alter a state’s behavior by imposing economic costs. Their effectiveness relies on several mechanisms: restricting access to international trade, limiting financial transactions, and freezing assets abroad. These tools are expected to generate internal pressure on political elites by weakening economic performance and, consequently, public support. In practice, however, their effectiveness is far from guaranteed, especially when applied to large, resource-rich, and politically stable economies.
Russia, as one of the world’s leading exporters of energy, minerals, and agricultural products, possesses structural characteristics that make it particularly resilient to external pressure. Its vast natural resources provide a steady source of revenue, while its relatively low public debt and accumulated reserves—despite partial freezing—have offered a buffer against shocks. Moreover, in an increasingly interconnected global system, sanctions rarely operate in a vacuum. They tend instead to reconfigure trade flows, creating opportunities for third countries to step in and replace sanctioned partners.
Indeed, Moscow has progressively redirected its economic relations toward new markets, particularly in Asia, the Middle East, and the broader Global South. China and India have emerged as crucial buyers of Russian oil and gas, often purchasing at discounted prices but in volumes sufficient to offset much of the loss of European demand. This shift has not only mitigated the impact of sanctions, it has also accelerated the reorientation of global trade patterns. The fundamental limitation of sanctions thus becomes evident: their effectiveness depends heavily on broad international participation, which in this case has been lacking. A significant portion of the world’s countries has chosen not to align with the Western sanctions regime, maintaining active economic and diplomatic ties with Russia.
Alongside formal economic relations, an extensive network of sanctions evasion mechanisms has developed. Intermediaries, shell companies, and transit countries have facilitated the continued flow of goods, capital, and technology. Particularly notable is the emergence of a so-called “shadow fleet” of oil tankers, often operating under opaque ownership structures and non-Western insurance systems, allowing Russian crude to reach global markets while circumventing price caps and logistical restrictions. Similarly, restricted technological components, particularly those with dual-use applications, continue to reach Russia through indirect trade routes, highlighting the difficulty of enforcing comprehensive controls in a globalized economy.
On the financial front, Russia has accelerated its efforts to reduce dependence on the dollar and the euro. The increased use of alternative currencies, such as the Chinese yuan, and the expansion of non-Western payment systems have gradually eroded the dominance of traditional financial infrastructures. This process of “de-dollarization,” while still partial, reflects a broader trend among emerging economies seeking to reduce their vulnerability to Western financial leverage. Domestically, the Russian government has pursued policies of import substitution and economic reorientation toward strategic sectors, particularly defense and heavy industry. While this model has entailed efficiency losses and reduced consumer choice, it has also reinforced a degree of systemic resilience.
The Backlash in Europe
The consequences of sanctions have been particularly acute in Europe. The rapid reduction of Russian gas imports has led to a sharp increase in energy prices, placing considerable strain on industrial competitiveness. Energy-intensive sectors such as chemicals, metallurgy, and manufacturing have faced rising production costs, in some cases leading to plant closures or relocation to regions with cheaper energy, notably the United States.
The surge in energy costs has also fueled broader inflationary pressures, affecting food prices, transportation, and services. As a result, household purchasing power has declined, contributing to growing social dissatisfaction and political polarization in several European countries. Importantly, Europe has not eliminated its dependence on external energy sources; rather, it has shifted it toward alternative suppliers such as the United States, Norway, and Qatar—often at higher costs and under different geopolitical conditions. This transition raises questions about long-term sustainability and strategic autonomy.
The United States, while less directly exposed, has not been immune to the broader economic and geopolitical repercussions. Rising global commodity prices have contributed to domestic inflationary pressures, while sustained financial and military support for Ukraine, combined with ongoing tensions in other regions, has increased the risk of strategic overextension. At the same time, the US economy has benefited in certain sectors, particularly energy exports and defense production, illustrating the uneven distribution of costs and benefits within the Western alliance.
Beyond immediate economic effects, sanctions have accelerated a deeper transformation of the global system. The increasing use of financial and economic instruments as tools of geopolitical competition has prompted many countries to reconsider their reliance on Western-dominated institutions. The freezing of Russian reserves, in particular, has been perceived by some states as a precedent that could, under certain circumstances, be applied to them as well. This perception has reinforced efforts to develop alternative financial architectures, including within frameworks such as BRICS.
Paradoxically, the more sanctions are employed, the stronger the incentives become for targeted states, and even neutral ones, to develop mechanisms for bypassing them. Over time, this dynamic risks eroding the very effectiveness of sanctions as a policy tool. What was once a powerful instrument of coercion may gradually lose its impact in a more fragmented and multipolar economic landscape.
Recent experience suggests that sanctions, especially when directed at major powers, do not produce linear or easily predictable outcomes. Instead, they generate complex chains of adaptation, resistance, and unintended consequences. In a world characterized by deep economic interdependence and a plurality of influential actors, their use entails significant risks: not only for the targeted country but also for those who impose them.
The Russian case therefore raises fundamental questions about the future of economic statecraft. Are sanctions still an effective instrument of geopolitical pressure, or are they increasingly counterproductive? Do they reinforce the existing international order, or do they contribute to its gradual transformation in ways that may ultimately disadvantage the West?
The answers to these questions will shape not only the evolution of the current conflict but also the broader trajectory of the international system in the decades to come.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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