Since Russia’s invasion of Ukraine in February, countries committed to cutting their economic ties with Russia and crippling the nation’s economy via sanctions. There has been one problem with that plan: Russia is one of the world’s most important exporters of oil, gas, and raw materials. These are not products that much of the world can easily do without. In 2020, Russia imported over 220 billion USD worth of products from the rest of the world, mostly from China, Germany, and Korea. As sanctions have come into effect, the volume of Russian imports has taken a nosedive, but some countries like China and Turkey have drastically increased their economic ties with the warring nation.
The issue for the countries sanctioning Russia is that they are heavily reliant on Russian materials, whether they like it or not. This has led to a bizarre situation: the value of Russia’s exports has actually increased after its invasion of Ukraine, even in many countries that have opposed Russia quickly and publicly. Most frustratingly of all, attempts by the West to cripple Russia’s economy via sanctions have not had the effect that it had hoped, and Russia is still able to fuel its war effort through the sale of raw materials. That is due to just how intertwined Russia is with the global economy; simply put, it is almost impossible to live without Russian resources because there are no substitutes. While the US and the UK have stopped importing Russian oil, they were never big purchasers, so it was easy for them. Europe, on the other hand, heavily relies on Russian fossil fuels, and has hence been much slower to cut itself off. The continent only stopped importing Russian coal in August, it will ban sea-shipped oil in December, and it will eventually cut off all petroleum products in February.
Despite these actions, in the first half of 2022, Gazprom still saw record profits. That is because inflated global prices for oil and gas have raised margins substantially. With these prices, the Russian economy is weathering sanctions far better than most predicted. In April, the IMF predicted the Russian economy would shrink by 8.5%. In July, the organisation adjusted that number to 6%. Now, that number has been further revised to 3.4%. There will be more pain when the EU fully cuts Russian oil and gas in February, but those materials are expected to find new buyers. China and India, for example, have been more than willing to buy Russian crude oil. That said, those purchases have been at a discount. Countries like Saudi Arabia, Iraq, and Angola, which used to sell more to India and China, are now selling more to Europe. Western countries are now trying to introduce a price cap that will further limit how much revenue Moscow can earn from each barrel of oil sold.
In the long run, however, Russia will have more trouble selling its gas. Unlike oil, which is mostly carried by large ships, much of the nation’s gas has traditionally been shipped via pipelines, and those take many years to construct and are limited by geography. This makes shifting to a new market difficult. Russia currently only has one pipeline to China, and to move more via LNG terminals, it would first have to construct said terminals, which also takes significant time. Besides energy, the world is finding it difficult to live without other materials, such as fertiliser, asbestos, nuclear reactors, wheat, palladium, rhodium, uranium, and diamonds. It will not be smooth sailing for Russia going forward, but because of decades of international economic entanglement, the West’s sanctions are not creating waters that are quite rough enough to thwart Russia’s war efforts.