Vladimir Putin is attempting to at least partially lift sanctions on Russia by negotiating a de-escalation of tensions with the new U.S. presidential administration. However, European countries will not abandon restrictive measures, said the EU's special envoy for sanctions, David O’Sullivan. He considers them effective and points out that it is European sanctions that hurt the Russian economy the most.
Since February 2022, when Putin unleashed the war in Ukraine, Russia has lost more than $450 billion in revenue due to Western sanctions, O’Sullivan writes in an article for the Center for European Policy Analysis (CEPA). This corresponds to nearly three years of Russia’s military expenditures, he notes. In addition, Western economic measures have forced Russia to spend $10 billion to create a shadow fleet for exporting oil in circumvention of the price cap set by the G7.
Traditionally, U.S. sanctions are considered the most painful. Due to the global nature of the dollar-based financial system, banning banks and companies of a given country from accessing it deals a serious blow to its economy. The U.S. also has effective mechanisms for enforcing secondary sanctions—penalizing foreign banks that decide to work with sanctioned entities. However, Russia’s economic ties with the U.S. were insignificant even before the war, unlike its ties with Europe. This is why European measures—such as halting trade with Russia, stopping purchases of its gas, oil, and coal, banning the supply of dual-use goods and advanced technologies, the withdrawal of operating companies, sanctions against businesses and individuals, the freezing of foreign currency reserves worth €200 billion, and disconnecting banks from the SWIFT system—have inflicted the most severe blow on the Russian economy, O’Sullivan states. “We must continue to exert pressure,” he insists.
"Russia ranked fifth among the EU’s trade partners, accounting for 5.8% of total trade, which amounted to €253 billion before the war; since then, it has plummeted by 74% to €68 billion. Meanwhile, U.S. exports to Russia in 2021 made up just 0.4%—about the same as exports to Honduras; by 2024, this figure had dwindled to a mere $3.5 billion."
Russian oil imports to the EU have dropped by 90%, and although Russia has managed to redirect flows to Asia, becoming dependent on China and India, it has lost billions of dollars due to the discount at which its oil is now sold, expenses for purchasing and registering old tankers, rising freight rates, and regular declines in export volumes due to successive new restrictions, such as the “farewell” sanctions imposed by Joe Biden’s administration on January 10.
Perhaps nowhere have the negative consequences of Russian aggression been as evident as in the gas sector. Russia has lost the European market and is unable to find a replacement. Before the war, it supplied 45% of the EU’s gas imports; now, this figure is just 15%, O’Sullivan points out.
At the same time, Gazprom’s market share, according to the European Commission, has fallen to 7% (some losses have been offset by increased LNG supplies, although even in this sector, the “Arctic LNG 2” project has been unable to begin gas exports for more than a year due to sanctions). Gazprom’s gas business recorded a net loss of 1 trillion rubles in 2024, while its foreign currency reserves have collapsed more than fiftyfold to a paltry $13.5 million, according to its RAS financial report.
The growing economic difficulties resulting from sanctions are evident in numerous indicators, which explains why the Kremlin is eager to see them lifted, O’Sullivan writes. To finance the war economy, Putin has had to "plunder" the National Wealth Fund, "cannibalizing productive industries and the social welfare system," he notes.
Over three years of war, Russia has spent two-thirds of the fund, and as of March 1, its liquid portion had shrunk to 3.394 trillion rubles, or $38.7 billion—just 1.6% of the projected GDP for 2025, the lowest level since the fund's creation in 2008.
Due to restricted access to technology, Russian industry is deteriorating. Sanctions are driving up costs and reducing the quality of equipment, while "the price of components for Russia’s war machine has risen by 30%," O’Sullivan points out. Seeking to ease tensions with the U.S., Putin is aiming for a partial lifting of sanctions. The aviation sector, in particular, is facing severe difficulties due to a lack of aircraft components. This has resulted in a shortage of civilian aircraft, making it difficult to support tour operator programs, with 50–100 planes expected to go out of service annually, according to the Russian Union of the Travel Industry.
Moscow believes that restoring ties with Trump could bring not only geopolitical but also economic benefits, including the resumption of component supplies for Boeing aircraft operating in Russia, The New York Times reports.
Therefore, O’Sullivan insists:
"Although sanctions are not immune to evasion, they remain a vital mechanism, making it harder, slower, and more expensive for Russia to wage war. We must stay the course."
