Tag: Sanctions
Private and Public Sectors in the Belarusian Economy: Where Has the Pendulum Swung After 2019?
The Belarusian Private Sector experienced dynamic growth in the 2010s and, by the start of the current decade, matched the public sector in its contribution to GDP. However, since 2020, the institutional environment for entrepreneurship has significantly deteriorated. Combined with a reduction in the volume of publicly available official statistics, this has raised concerns about a significant decline in the private sector’s contribution to the Belarusian economy. This policy brief aims to systematize and analyze the dynamics of key development indicators of the private and public sectors in Belarus after 2019. It shows that private businesses have continued to play a crucial role in the Belarusian economy, generating about half of the gross value added in 2021–2024. However, the trend of increasing the share of private businesses in the economy, observed prior to 2020, came to a halt in 2021–2024. The share of state-owned enterprises also remained excessively high, despite being less efficient than private firms. If the status quo persists, sustainable long-term economic growth in Belarus is unlikely.
The Belarusian Private Sector and Public Sector Before 2020
After a period of high growth in the 2000s, the Belarusian economy entered a prolonged stagnation period. The annual GDP growth slowed from 7.1 percent in 2000–2011 to 0.7 percent in 2012–2021 and 1.1 percent in 2022–2024. The oversized state-owned enterprise (SOE) sector, extensively supported by the state via credit and other measures until 2015, is responsible for both the rapid growth in the 2000s and the subsequent stagnation (Hartwell et al., 2022).
The low efficiency of the public sector in the 2010s was partially offset by the expansion of more productive private firms. While this was not sufficient for Belarus to achieve high economic growth or close the wealth gap with Central and Eastern European countries, it did help maintain an upper-middle income per capita status – according to the World Bank classification, which Belarus has had since the mid-2000s.
The private sector developed dynamically in the 2010s, largely due to liberalized business conditions (Mironchik & Shcherba, 2022; BEROC, 2023). Labor resources flowed from SOEs to private firms (Chubrik, 2021).
By 2020, the Belarusian Private Sector’s contribution to GDP approached 50 percent (Mironchik & Shcherba, 2022) and, according to some estimates, even exceeded that level — rising by more than 10 percentage points since 2012 (Daneyko et al., 2022).
In 2020, the Belarusian economy, however, entered a period of turbulence. The Covid-19 pandemic, socio-political tensions and the government’s reactionary policies, a significant increase in sanctions pressure, and the forced restructuring of production chains significantly altered the business environment (Marozau, 2023). Support for SOEs from the government increased once again (Kalechits, 2024), while the regulatory environment deteriorated.
These changes, combined with a reduction in the volume of available statistics, have raised concerns about a decline in the private sector’s contribution to the economy after 2019. There are no known studies that have examined economic indicators of the public and private sectors since 2020. This policy brief aims to close this gap.
Economic Indicators of the Belarusian Private and Public Sectors in 2020–2024
Employment. The trend of gradual worker loss in SOEs persisted after 2019, while employment in the private sector expanded, even amidst an overall decline in the workforce.
The number of people employed declined by nearly 5 percent between 2020 and 2024 due to unfavorable demographic trends and intensified emigration. Employment dynamics varied significantly depending on the form of company ownership. The number of workers in SOEs and firms with state participation continued to decrease, whereas in the private sector, employment grew by just over 1 percent (see Figure 1).
Figure 1. Dynamics of employment in Belarus
Source: Author’s calculations based on Belstat data.
The share of the private sector in total employment increased from 42.9 percent in 2019 to 45.7 percent in 2024, while the share of the public sector declined from 57.1 percent to 54.3 percent (see Figure 2).
Industrial output and exports. The role of the private sector in manufacturing and exports of goods has remained nearly unchanged since 2019. However, the pre-2019 trend of its increasing role in the economy has stalled.
In 2024, private commercial organizations accounted for 30.5 percent of industrial production, an increase by 3.8 percentage points since 2019 (see Figure 2). Assessing the impact of individual industries on these changes is challenging, as Belarus Statistical Agency Belstat stopped publishing data on production in industrial sectors in 2022. The decline in the share of SOEs in production is, at least in part, linked to oil refining, whose output has not returned to 2019 levels due to the impact of sanctions.
Figure 2. Private Sector Share in Selected Economic Indicators of Belarus
Source: Author’s calculations based on Belstat data.
Note: Hereafter, mixed ownership enterprises (with any share of state participation) are considered part of state-owned enterprises (or the public sector).
The Belarusian industry is export-oriented, with around 70 percent of manufactured goods supplied to foreign markets. Detailed foreign trade data has also been restricted since 2022, but the volume of oil products and potash fertilizer exports can be estimated using mirror statistics, media leaks, and statements from Belarusian officials. According to this, the volume of export of oil products and potash fertilizers has significantly declined since 2019, and their share in total goods exports has decreased from 26 percent in 2019 to 15–20 percent in 2022–2024 (see Figure 3).
Other exports from SOEs have grown significantly since 2019, increasing their share of total goods exports by nearly 9 percentage points (see Figure 3). This has been driven by enhanced industrial cooperation between Belarus and Russia following the tightened sanctions in early 2022. It led to increased shipments of machinery and equipment to Russia, with the defense sector likely accounting for a significant portion.
Private firms also took advantage of vacant niches in the Russian market, increasing their exports after 2019. However, private sector exports grew at a slower pace than SOEs. With the decline in oil products and potash exports, the share of the private sector in total exports remained close to the 2019 level in 2022–2024 (see Figure 3).
Figure 3. Structure of goods exports
Source: Author’s calculations based on data from Belstat, National Bank of Belarus, World Bank, UN Comtrade and various news outlets.
Imports. The private sector has played a crucial role in rebuilding Belarus’s goods supply chains after sanctions were tightened in early 2022.
According to statistics from Belstat, the share of SOEs in goods imports decreased by 9.8 percentage points – from 28.2 percent in 2019 to 18.4 percent in 2024. However, it is reasonable to isolate the imports of oil and petroleum and gas products as the way Belstat classifies ownership may bias these figures. For example, natural gas from Russia is imported by Gazprom Transgaz Belarus – a 100 percent subsidiary of Russian state-owned Gazprom – yet classified in the data as private sector imports.
Adjusting for this, the private sector’s share of non-energy goods imports rose by almost 13 percentage points since 2019, reaching 73 percent in 2024 (see Figure 4). This signifies the private sector’s ability to adapt to the new economic reality, not only recovering but even growing its imports against the backdrop of the supply chain and financial disruptions of 2022–24.
Without the high adaptability of private businesses under drastically changing conditions, the economic downturn in Belarus in 2022 would have been much deeper, and the recovery in 2023 and growth in 2024 significantly slower.
Figure 4. Structure of goods imports
Source: Author’s calculations based on data from Belstat, National Bank of Belarus, World Bank, UN Comtrade, and various news outlets.
Investment and trade. The importance of state-owned enterprises in investments has increased slightly since 2019 but declined in sectors related to meeting consumer demand.
In 2019, 61.4 percent of all investments were generated by SOEs. During 2022–2024, this share fluctuated between 63.6–65.5 percent, while the private sector accounted for nearly 34.5–35.8 percent (see Figure 2). The slight increase in the role of SOEs in investment is linked to government efforts to intensify investment activity. This includes directives and recommendations for enterprises to initiate a new investment cycle.
In retail trade and catering, the private sector strengthened its position after 2019. Its share increased by 3 and 11.4 percentage points, respectively, reaching 86.8 percent and 78.9 percent in 2024 (see Figure 2).
Assessing the Contribution of the Belarusian Private Sector and Public Sector to Gross Value Added. There is no available data on the contribution of the public and private sectors to the gross value added (GVA) or GDP in Belarus. To estimate this contribution, an approach proposed by Daneyko et al. (2022) has been applied. This method assumes that labor productivity in the public and private sectors corresponds to overall productivity in the same proportion as wages in these sectors relate to the average wages in the economy.
According to these estimates, the private sector accounted for nearly 50 percent of Belarus’s GVA in 2019, while the public sector contributed slightly over 50 percent (see Figure 5). Between 2020 and 2024, the sectoral shares in GVA fluctuated around 50 percent.
Thus, despite the deterioration of the institutional environment for business after 2020, the significance of the private sector in Belarus’s economy has at least not declined. However, while the private sector’s importance in the economy increased before 2020, this trend did not continue between 2021 and 2024.
Figure 5. Contribution of the Belarusian private sector and public sector to Belarus’s gross value added.
Source: Author’s calculations based on Belstat data.
The public sector continued to generate less value added per employee than private businesses between 2020 and 2024. However, the gap narrowed from over 20 percent in 2019 to nearly 15 percent in 2024 (see Figure 6).
Figure 6. Efficiency of the public sector relative to the private sector
Source: Author’s calculations based on Belstat data.
Labor productivity growth in the public sector exceeded that of the private sector. However, given the influence of temporary production growth factors (vacated market niches in 2022–2023 and increased demand from Russia), this development is unlikely to be sustainable in the long term. Indirect evidence for this is the lack of a corresponding improvement in the relative efficiency of public sector investments. Between 2020 and 2024, each ruble invested by SOEs in fixed capital generated nearly 45 percent less value added than in the private sector — and this gap has widened since 2019.
Conclusion
The Belarusian private sector continued to generate around half of the country’s GVA after 2019 and remained the most productive part of the economy. Its significance did not diminish, even amid a deteriorating institutional environment and tightened sanctions against Belarus. Private businesses played a decisive role in restructuring supply chains during 2022–2024, following the disruptions in early 2022.
At the same time, the trend of increasing private sector participation in the economy, observed before 2020, has stalled, while the size of the public sector has remained substantial — particularly in industrial production. In turn, the efficiency of SOEs still lags significantly behind that of private firms, especially in terms of investment. If the current balance between the Belarusian private sector and public sectors persists, and the conditions that underpin it remain unchanged, Belarus’s long-term economic growth prospects will remain weak once the specific growth factors of 2023–2024 are exhausted.
References
- BEROC (2023). “Development of the private sector. Instead of reforms and for the economic sovereignty of Belarus”. (Ideas Bank). (in Russian)
- Daneyko, P., KEF experts (2022). “Reforming the SOE sector in Belarus: conceptual directions”. (Ideas Bank). (in Russian)
- Chubrik, A. (2021). “Back to the future or a short historical note on the Belarusian private sector”. (2021/03, IPM Research Center Discussion paper).
- Hartwell, C.A., Bornukova, K., Kruk, D., Zoller-Rydzek, B. (2022). “The economic reconstruction of Belarus: next steps after a democratic transition“. (European Parliament coordinator: Policy Department for External Relations. Directorate for External Policies of the Union).
- Kalechits, D. (2024). “Ensuring financial stability in 2023 and tasks for 2024”. (Bank Bulletin Journal, No 1/726).
- Marozau, R. (2023). “Belarusian business in turbulent times”. (FREE Network Policy Brief Series).
- Mironchik, N. & Shcherba, E. (2022). “What indicators may be useful for monitoring economic security of the Republic of Belarus?” (Bank Bulletin Journal, No 6/707)
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Russia’s Counter Sanctions: Forward to the Past!
Since February 2022, Russia has introduced a series of counter sanctions in response to the international sanctions introduced following the country’s full-scale invasion of Ukraine. These measures aimed to counteract external economic pressure while shielding the domestic economy from further destabilization. However, their broad implementation has led to mixed effects across various sectors while simultaneously increasing the administrative burden. This policy brief argues that Russia’s countersanctions reinforced state control over key industries, worsened market competition and fiscal sustainability, which contributed to a systematic move towards a planned economy.
Russia’s Counter Sanctions and the Expansion of State Control
Since February 2022, Russia has introduced a series of countersanctions in response to the international sanctions imposed following its invasion of Ukraine. A broad range of economic, financial, and trade restrictions have been implemented, including nationalization of foreign assets, price control, capital flow restrictions, export bans, and state-directed subsidies – all aimed at mitigating external economic pressure while reinforcing state control over key industries (Garant, 2025).
While it is widely accepted that, in times of crisis, governments may intervene in the economy to provide necessary support, such intervention should remain limited in scope and duration. Prolonged state involvement, particularly through subsidies and market controls, can distort price signals, crowd out private investment, and erode the foundations of competitive market dynamics (Friedman, 2020).
In the case of Russia, intensive government economic interventions, specifically after 2022, have led to mounting inefficiencies, increased inflationary pressures, and weakening long-term growth prospects (SITE, 2024; SITE, 2025). This policy brief discusses how the recent surge in presidential decrees, the sharp expansion of targeted subsidies across nearly all sectors, and the tightening of price regulations reflect the Kremlin’s strategic use of counter sanctions as a means of consolidating economic power and reinforcing centralized control.
An Expansion of Presidential Control
Since 2022, presidential decrees account for 25 percent of all anti-sanctions legislative measures, indicating a significant consolidation of executive control over economic policymaking. The trend of expanding presidential control through issued decrees is illustrated in Figure 1. As shown in the figure, the total number of presidential decrees has nearly doubled since 2019, amounting to 1131 in 2024. The largest share of this decree increase, however, occurred post February 2022.
Figure 1. Number of Presidential Decrees in Russia
Source: ConsultantPlus, 2025.
Beyond the expansion in the number of decrees, what is particularly noteworthy is the breadth of topics they cover. They range from significant interventions on nationalization and economic control to quite detailed low-impact orders.
Among the highly impactful presidential decrees, Decree No. 79 (February 28, 2022) should be mentioned. The decree introduced a mandate that Russian residents engaged in foreign economic activities sell 80 percent of their foreign currency earnings. Further, Decree No. 302 (April 25, 2023), allowed the Russian state to seize foreign assets from “unfriendly states” if necessary for national security or in retaliation for asset confiscations abroad. Global companies from Germany (Uniper), Finland (Fortum), France (Danone), and Denmark (Carlsberg) are among those affected by these expropriations (Garant, 2025). Seized foreign assets were transferred to state-controlled entities, which drastically reduced competition and increased inefficiencies within key Russian industries.
Similarly, Decree No. 416 (June 30, 2022) on the Nationalization of Sakhalin-2, transferred oil and gas projects from foreign operators (Shell, Mitsubishi and Mitsui) to a Russian-controlled legal entity. Moreover, foreign companies from “unfriendly” countries were required to sell their Russian assets at a minimum 50 percent discount when exiting the market. Additionally, they were obliged to pay a “voluntary contribution” to the Russian federal budget at 15 percent of asset value (Garant, 2025).
At the same time, numerous presidential decrees have been adopted to address very specific low-level administrative issues. While their economic impact has been quite limited, they have largely contributed to a growing micromanagement and regulatory complexity (for instance, Decree No. 982 (December 22, 2023) on Temporary State Control Over a Car Dealership, Decree No. 1096 (June 17, 2022) on Transport Credit Holidays etc.).
Apart from the potential negative effects of direct government intervention in the economy, there are several issues with Presidential Decrees. Most importantly, presidential decrees, unlike statutes or other forms of legislation, are not subject to parliamentary approval. Thus, they are bypassing legislative debate and accountability, which makes them less transparent and balanced. Presidential decrees serve as tools to avoid legislative resistance since the Russian judiciary rarely challenges presidential authority, meaning decrees are difficult to contest or reverse through legal means. Further, they often overlap with other legislation, thus duplicating the functions of other legislative (and executive) authorities, leading to regulatory uncertainty. This, in turn, undermines implementation and expands bureaucratic oversight, further increasing inefficiencies and costs (see for instance, Remington, 2014; Pertsev, 2025).
Altogether, the surge in presidential decrees in Russia contributes to increasing institutional instability, an increasing administrative burden and a centralization of power. However, the full impact of these measures on the macro level is yet to unfold.
Targeted Subsidies and Industry Dependence
A key tool in Russia’s counter sanctions strategy is the expansion of state subsidies. Since 2022, substantial subsidies have been directed toward the energy sector; industrial and technological development – including aviation, pharmaceuticals, electronics, and shipbuilding; agriculture and food security; transportation and infrastructure; the banking sector; housing; and consumer lending. The scale of these subsidies indicates growing imbalances and escalating fiscal risks in the Russian economy (Garant, 2025).
However, estimating the total resources going to subsidies is quite challenging. Precise subsidy figures are only explicitly stated in few legislative acts. Most legislative documents mention the form of subsidy without specifying the amount or the source of financing. Nevertheless, some estimates have been made by both Russian and Western experts.
For instance, Russia spent approximately 12 RUB trillion (126 USD billion) on fossil fuel subsidies in 2023 (Gerasimchuk et al., 2024). Subsidies to the agricultural sector were estimated at 1 trillion RUB between 2022 and 2024 (Statista, 2025). Since 2022, Russia has allocated approximately 1.09 trillion RUB (12 billion USD) in subsidies to the aviation sector to maintain operations (Stolyarov, 2023; Garant, 2025). Around 100 billion RUB were allocated to support the tourism industry during 2023–2024 (Ministry of Economic Development of the Russian Federation, 2024; Garant, 2025).
To understand the order of magnitude, it’s worth noting that, for instance, budget revenues from oil and gas amounted to 8.8 trillion RUB in 2023 and 11.1 trillion RUB in 2024 (Figure 2).
Figure 2. Budget revenues and expenditures
Source: SITE, 2025.
In addition, state subsidies for mortgages nearly doubled since 2022, with the total amount reaching 1.7 trillion RUB between 2022 and 2024 (CBR, 2024). Thus, the Russian mortgage market has become heavily dependent on state support, with subsidized mortgage programs accounting for nearly 70 percent of the growth in mortgage lending in early 2024 (CBR, 2024). Although the so-called standard preferential mortgage program was terminated on July 1, 2024, its discontinuation does not remove the substantial fiscal burden created by earlier subsidy schemes.
Moreover, the Russian government has expanded subsidized lending programs to support both businesses and individuals. For instance, preferential loans and credit holidays have been granted to small, medium and large enterprises (see for instance, Presidential Decree: No. 121, March 2022, Federal Law 08.03.2022 No. 46-FZ, and others (Garant, 2025)), further straining the government’s finances.
In many cases, subsidies allocated to state-owned enterprises double as a mechanism for off-budget military financing. For instance, defense-industrial conglomerates like Rostec not only receive targeted support but play also a pivotal role in facilitating military acquisitions and production activities outside of the formal federal budget framework (Kennedy, 2025). This not only obscures the true scale of budget expenditures but again increases the long-term fiscal burden.
As such, these measures have fostered a heavy reliance on state funding, resulting in the accelerated depletion of financial reserves and contributing to increased fiscal risks.
Price Controls, State Regulation and Planned Procurement
As mentioned earlier, the set of countermeasures recently implemented by Russia also indicates a shift toward a planned economy, with hallmark features such as price controls gradually re-emerging as policy tools. As in Belarus, where state-led economic management has long been the norm, the Russian government’s direct intervention in price-setting mechanisms, particularly for essential goods, erodes market signals.
Since 2022, a series of decrees have introduced price controls on essential goods and services to cushion households against rising costs amid inflation. These measures include caps on fare increases for public transportation, limits on tariffs for heating, water supply, and wastewater services; price limits on essential medicines, and staple agricultural products (Garant, 2025).
By limiting the price growth of necessities, these interventions aim to support households in the short term. However, prolonged price controls may entail distorted market signals, increased subsidies dependency for producers, and higher administrative costs for control enforcement.
The deviation from market mechanisms has been even more amplified in procurement, through Federal Law No. 272-FZ (July 14, 2022), which compels businesses to accept government contracts if they receive state subsidies or operate in strategic sectors. In practice, companies cannot refuse government contracts if their products or services are required for so-called counterterrorism and military operations abroad. Refusal to comply with procurement orders may result in criminal liability, as non-performance can be interpreted as economic sabotage under this law.
In addition, the Russian government provides up to 90 percent of procurement contracts in advance (Government Decree No. 505, March 29, 2022). This arrangement weakens the role of contracts, prices, and competition, while increasing the fiscal risks. In effect, it reinforces a central planning logic and undermines competitive procurement, where outcomes should be driven by performance and value rather than access to state funding.
With Russian companies cut off from foreign investment and other external financing due to sanctions, large-scale government support has become even more critical – intensifying dependence on state subsidies and, by extension, state control. The legal changes outlined above have turned procurement into a key instrument of political control over businesses. The scale of these subsidies is contributing to a damaging shift toward a centrally planned system, restricting competition and undermining long-term growth potential.
Fiscal Sustainability at Risk
The extensive use of subsidies, preferential loans, and government-backed financial interventions has placed an increasing burden on Russia’s fiscal system. While these measures were introduced to mitigate the effects of international sanctions, stabilize key industries and support households, they have led to significant structural imbalances, growing budget deficits, and rising financial risks.
State-subsidized loans have surged across multiple sectors, including construction, IT, housing, energy, infrastructure, and agriculture. The result has been a sharp increase in corporate and consumer debt, with unsecured consumer loans growing at an annual rate of 17 percent as of April 2024. Overdue debt on loans to individuals reached 1.34 trillion RUB by February 2025, signaling mounting financial distress for households despite the support measures (CBR, 2025).
The high concentration of corporate debt has further destabilized the financial system. By early 2024, the debt of the five largest companies accounted for 56 percent of the banking sector’s capital, indicating systemic vulnerabilities (CBR, 2025). In addition, the government has implemented new policies that exacerbate the risks connected to state interventions in banking operations. For instance, in March 2022, it introduced a moratorium on bankruptcy proceedings, effectively delaying the official declaration of businesses as insolvent or financially distressed. At the same time, the Central Bank required commercial banks to restructure loans rather than classify them as defaults – masking financial distress and exacerbating long-term risks to the banking sector (Garant, 2025).
Moreover, a growing share of Russia’s war-related spending now flows through off-budget channels – such as state-owned enterprises and regional programs – rather than the federal budget. According to a recent analysis, as much as one-third of military and strategic expenditures bypass formal budget reporting altogether (Kennedy, 2025).
These hidden expenditures distort the actual fiscal position, reduce transparency, and increase the long-term burden on the public sector by masking the true scale of liabilities – raising further questions about the sustainability and accountability of Russia’s fiscal policy.
Conclusions
Since February 2022, Russia’s counter-sanctions measures have markedly shifted its economic governance toward greater state control and elements reminiscent of Soviet-era central planning. Large-scale subsidies, administrative pricing, and deep state involvement in production and procurement have suppressed market competition and efficiency. These interventions have distorted incentives and curtailed the role of market signals, contributing to growing inefficiency across key sectors.
Looking ahead, the long-term economic outlook for Russia is increasingly negative. While the counter-sanctions measures may have softened the initial blow of international sanctions, they have entrenched structural vulnerabilities, reduced fiscal flexibility, and amplified systemic risks, particularly in the financial and real estate sectors. Moreover, by undermining innovation and productivity, Russia’s counter sanctions are accelerating its trajectory toward deeper economic isolation and a centrally managed model, with severe implications for sustainable growth.
References
- Central Bank of Russia (CBR). (2024). Mortgage lending market statistics. https://www.cbr.ru/statistics/bank_sector/mortgage/mortgage_lending_market/
- Central Bank of Russia (CBR). (2025). https://www.cbr.ru/statistics/
- ConsultantPlus. (2025). https://www.consultant.ru/
- Friedman, M. (2020). Capitalism and freedom (40th anniversary ed.). University of Chicago Press.
(Original work published 1962). 272 p. - Garant. (2025). Anti-sanction measures 2022-2025 (special economic measures and measures aimed at supporting businesses and citizens) (in Russian). https://base.garant.ru/57750630/
- Gerasimchuk, I., Laan, T., Do, N., Darby, M., & Jones, N. (2024). The cost of fossil fuel reliance: Governments provided USD 1.5 trillion from public coffers in 2023. International Institute for Sustainable Development (IISD). https://www.iisd.org/articles/insight/cost-fossil-fuel-reliance-governments-provided-15-trillion-2023
- Kennedy, C. (2025). Russia’s hidden war debt: Full report. Navigating Russia. Retrieved March 5, 2025 from https://navigatingrussia.substack.com/p/russias-hidden-war-debt-full-report
- McFaul, M. (2021). Russia’s road to autocracy. Journal of Democracy, 32(4), 11–26. https://www.journalofdemocracy.org/articles/russias-road-to-autocracy/
- Ministry of Economic Development of the Russian Federation. (2024). About 100 billion rubles have been allocated for the national project Tourism and Hospitality Industry in 2023–2024. https://en.economy.gov.ru/material/news/about_100_billion_rubles_have_been_allocated_for_the_national_project_tourism_and_hospitality_industry_in_2023_2024.html
- Pertsev, A. (2025). Auditing the auditors: Does Putin trust anyone now? Carnegie Endowment for International Peace. https://carnegieendowment.org/russia-eurasia/politika/2025/03/russia-putin-elites-control?lang=en
- Remington, T. F. (2014). Presidential decrees in Russia: A comparative perspective. Cambridge University Press.
- Statista. (2025). Annual value of subsidies in the agricultural industry in Russia from 2015 to 2025. https://www.statista.com/statistics/1064082/russia-agricultural-subsidies/
- Stolyarov, G. (2023, December 21). Russia splashes $12 billion to keep aviation sector in the air. Reuters. https://www.reuters.com/business/aerospace-defense/russia-splashes-12-bln-keep-aviation-sector-air-2023-12-21/
- Stockholm Institute of Transition Economics (SITE). (2024). The Russian economy in the fog of war. https://www.hhs.se/en/about-us/news/site-publications/2024/russias-economic-imbalances/
- Stockholm Institute of Transition Economics (SITE). (2025). Financing The Russian War Economy. https://www.hhs.se/contentassets/2ca16d102eed4a1c8ff24b59c9db7c25/site-russian-economy-spring-2025-update.pdf
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Russia’s Car Fleet Dynamics – and Why They Matter
Russia’s car imports have evolved dramatically since its full-scale invasion of Ukraine in February 2022. The invasion and subsequent sanctions have led to a shift away from mainly Western car imports to domestically produced cars, and especially Chinese cars, both of which entail quality concerns. Despite state-sponsored loan relief, the heightened inflation pressures in Russia and increased financial burden on households is catching up to the car market – in the first quarter of 2025, the sales of new cars decreased by 25 percent compared to 2024. This policy brief uses the developments in the Russian primary car market as a lens to examine the spending power of Russian households and highlight the limitations of state interventions under sanctions and inflationary pressure.
From Western Dominance to Domestic Car Sales
Prior to February 2022, imports of American, European, South Korean and Japanese (hereafter called western) cars stood for about 60 percent of all new car sales in Russia. Domestic production took up most of the remaining 40 percent market share (SITE, 2024). In 2023, the number of western car sales was almost zero as most of these automotive firms exited the Russian market following the country’s war on Ukraine. Collaborations between European and Russian automotive companies, such as between Renault and Autovaz, as well as production of western cars in Russia, were also largely abolished. The mass exodus severely impacted the production levels in the Russian automotive industry; in 2021 around 1 350 000 cars were produced in Russia, dropping to around 450 000 in 2022, and increasing to only about 750 000 cars in 2024. However, the sales of new Russian cars fell in the immediate months following the invasion and subsequent sanctions but managed to bounce back to initial levels in 2023 (Figure 1).
Figure 1. New car sales in Russia
Source: Association of European Businesses. Note: Detailed data for 2024 and 2025 is unavailable.
Russia’s Car Dynamics: The Chinese Import Surge
While the sale of Russian cars rebounded following the invasion, the key market player post-2022 is China. As illustrated in Figure 1, in 2023, the sales of newly produced Chinese cars in Russia were eight times the 2020 figures.
Although the imports of Chinese cars made up for a large part of the massive withdrawals of western cars post-invasion, new issues have arisen. Chinese cars are considered unfit for Russian weather conditions, and spare parts are also considered to be of low quality. Additionally, Chinese cars are reported to survive shorter total mileages (about half, compared to many western brands), and to have poor electronic and ergonomic systems. Still, prices for a Chinese car are generally higher than for a Russian car, mostly due to taxes and import tariffs. To dampen the recent Chinese expansion on the car market (in 2025 accounting for 63 percent of the market), Russia in March 2025, hiked the import tax on Chinese cars from nearly $6000 to $7500. Furthermore, the price of Chinese cars is expected to increase in 2025, following a depreciation of the ruble against the yuan.
High Prices, Large Loans
Not only have Chinese cars met criticism when it comes to quality and price. In summer 2022, Autovaz declared that the 22 model of the classic Lada Granta would be void of air bags, an ABS braking system, and a brake assist system, due to a scarcity of imported components. A subset of the model has since been equipped with a driver-seat air bag. Despite such major shortcomings, prices for new Russian-made cars have increased by 67 percent since the onset of the war. These price increases are mirrored on the secondary market where the price for a used foreign car have increased by 60 percent since 2022.
Another feature of the Russia automotive market concerns the large increase in automobile loans granted to businesses and entrepreneurs over the last four years (Figure 2).
Figure 2. Volume of companies’ automobile loans
Source: Rosstat.
While the near doubling in the loan value for companies’ car loans seems large, its growth is small compared to that for individuals. Since the onset of the war, the volume of private car loans has grown more than fivefold. This increase is arguably spurred by the preferential loans scheme for the purchase of new cars, introduced mid-July 2022 and granted to Russians with at least one child under 18, new car owners, people employed within health and education, military personnel and their close relatives, and disabled people. The so-called loan (projected to be in place up until 2027) applies to car purchases in Russia of a maximum 2 million ruble and discounts the price by 20 percent (25 percent for cars sold in the Far East Region). Under this scheme, car loans constituted almost 6 percent of all consumer loans in mid-2024, a sixfold increase in just a year (see Figure 3). This trend has not waned off since 2024. In December 2023, 70 percent of all cars bought in Russia were financed by borrowed funds. The size of an average car loan also grew substantially, around 20 percent, between 2022 and 2023. At the same time, the share of risky borrowers increased. In October 2024, 60 percent of the borrowers had a Debt Service-To-Income (DSTI) Ratio of over 50 percent, indicating that a large segment of car buyers will potentially be unable to repay the debt (CBR, 2024).
Figure 3. Private Automobile Loans
Source: CBR (2024). Note: Figure based on approximation from CBR figure.
Household Strains and Financial Risks
Over the last five years gasoline prices have gone up by about 17 percent (standard petrol), alongside substantial price increases for nearly all major consumption goods in Russia – driven by the rampant inflation. In fact, the price of the Russian consumer basket nearly doubled between February 2022 and August 2024. Progressive income taxes have been introduced for about 3.2 percent of the working population – increasing taxation from 13 percent up to 22 percent. Furthermore, in July 2024, the subsidized mortgages for newly built apartments were scrapped such that all buyers now face a 16-20 percent rate (SITE, 2025). While real wages did increase by 8 to 9 percent in 2023 and 2024, real pensions did not. Furthermore, reported inflation figures are likely severely understated, with actual inflation being around 20, rather than the reported 9.5 percent. If so, the actual real wage growth would be about 0 percent (SITE, 2025).
This undermines the spending power of Russian households, which is now being reflected on the primary car market. There has been a sharp drop in car sales – 25 percent in the first quarter in 2025, and car prices are also on the decline. This, combined with the growing reliance on credit, signals that many consumers are no longer able to make large purchases despite the state driven support scheme – pointing to major affordability issues. Given that the preferential loans scheme will be in place only up until 2027 and that Chinese cars will likely become more expensive, demand may dwindle even further in the years to come. In such situation, the government could be forced to expand their preferential scheme to artificially keep up demand levels, taking on greater financial risks and associated costs. They may also increasingly close off the inflow of Chinese cars, which leave consumers with no options outside of domestically produced cars.
The falling demand for cars may also be considered an indicator of household’s beliefs about the economic conditions to come. That is, the demand for cars could be a signal of consumers understanding that the economy is, or will shortly be in a recession (Attanasio, Larkin, Ravn and Padula, 2022). While the Russian war time economy is not currently displaying recession signs, its persistent issues with rampant inflation, rapidly growing household mortgages and changes in the credit to GDP ratio signals its financial stability is at risk. As discussed in the report “Financing the Russian War Economy”, these are key indicators correlated with banking crises (SITE, 2025). If declining demand for cars is a sign of consumers perceiving the economy as increasingly fragile, this perception could amplify existing vulnerabilities.
Conclusion
The automotive sector offers comparatively timely data, making it a useful window for assessing the financial situation of Russian households. In the current automotive landscape in Russia, buying a new car is becoming increasingly expensive. This has forced not only private buyers but also businesses to increasingly take up loans to cover the payment of a new car – often despite reduced quality and limited choice. The demand for new cars is partly driven by state intervention, particularly the preferential loan scheme. This not only places a growing financial burden on the state but also carries rising risks of borrowers defaulting. At the same time, the current trends in the sector illustrate the growing limitations of both import substitution and state-backed credit schemes as tools for maintaining consumer demand. The recent drop in new car sales, despite state support, may reflect a growing reluctance among households to make large purchases, exposing how Russian households’ purchasing power is eroding in the Russian wartime economy. Importantly, this drop may point not only to affordability issues but also to a broader perception that the financial system is increasingly unstable.
Overall, Russia’s car dynamics suggest that the Russian economy is not performing as well as officially claimed, adding support for the effectiveness of sanctions and company withdrawals from the Russian market.
References
- Attanasio, O., Larkin, K., Ravn, M. O., & Padula, M. (2022). “(S)Cars and the Great Recession”. Econometrica, 90(5), 2319–2356.
- The Central Bank of Russia (CBR). (2024). “Financial Stability Review No. 2. Q2-Q3, 2024”.
- Stockholm Institute of Transition Economics (SITE). (2024). “The Russian Economy in the Fog of War”.
- Stockholm Institute of Transition Economics (SITE). (2025). “Financing the Russian War Economy”.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Should the $60 Price Cap on Russian Oil Exports be Lowered?
Western governments have imposed a $60 price cap on Russian seaborne oil exports using Western services. To evade the policy, Russia has developed a “shadow fleet” which uses no such services. In this policy brief, we claim that the resulting segmentation of Russian oil exports dramatically modifies the conventional analysis of a price cap. Our research shows that lowering the cap would not hurt Russia as intended unless a robust expansion in non-Russian oil supply was to limit the induced increase in the world oil price. If this price increase is not limited, lowering the cap could even moderately increase Russian profits because shadow fleet sales would be more profitable. By contrast, policies that reduce some shadow fleet capacity would reduce Russian profits if undertaken while Russia still relies on some Western services.
In response to Russia’s invasion of Ukraine in February 2022, the EU, the U.S., and other G7 countries (hereafter the West) ceased their imports of Russian oil, leading Russia to export more to India, Turkey, and China instead. In addition, the West imposed sanctions on oil exports from Russia, whose profits are instrumental in supporting its war.
Since more than 80 percent of Russia’s seaborne oil exports relied on the provision of Western services (CREA, 2023) (financial, operational, and commercial) the EU suggested banning the use of these Western services for all Russian seaborne exports. However, governments feared that this would cause a spike in the world oil price. As an alternative, the U.S. suggested a price cap, which the West ultimately imposed in December 2022, limiting Russian revenues from oil shipped using Western services to $60 per barrel.
Oil transported without Western services is exempt from the cap. Therefore, Russia has gradually assembled a “shadow fleet” that uses non-Western services in order to sell oil at prices above the cap.
The price cap on Russian oil is a new, insofar untested economic sanction, currently a subject of active public discussion, with experts recommending potential adjustments and application to more countries, and policymakers currently considering to tighten the price cap – see for example the January 2025 call by Sweden, Denmark, Finland, Latvia, Lithuania and Estonia to lower the price cap below $60. The policy quickly piqued the interest of economists – see for example Spiro, Wachtmeister, and Gars’ (2024) comprehensive review of policy options to limit Russia’s ability to finance the war.
In their pioneering contribution to the literature, Johnson, Rachel, and Wolfram (2025) provide a rich analysis of the effects of the price cap, albeit under the assumption that the shadow fleet has a fixed capacity. In a recent working paper (Cardoso, Salant, and Daubanes, 2025), we present a new dynamic economic model that accounts for the expansion of the Russian shadow fleet. The model is calibrated to reproduce observed facts and used to simulate the effects of (1) various levels of the price cap, including the extreme case of a complete ban, (2) enforcement stringency, and (3) policies targeting the shadow fleet.
Perhaps surprisingly, our analysis shows that, in the absence of any increase in non-Russian oil supply, lowering the level of the price cap below $60 would benefit Russia. This includes lowering the cap to levels so low (below $34) that the policy amounts to a ban as Russia would prefer not to use Western services at all at these cap levels. More generally, the model reveals that a lower cap would have two opposite effects on Russia: On the one hand, it would reduce Russia’s profit (i.e., revenues net of production costs) from sales at the cap. On the other hand, since a lower cap would reduce Russia’s oil exports, it would increase the oil price and, therefore, Russia’s profit from sales through its shadow fleet. Our analysis yields a testable and intuitive condition under which the latter effect dominates the former, making a lower cap counterproductive. This condition depends on the shadow fleet capacity relative to Russian sales at the ceiling price.
Application of this condition shows that when sanctions were imposed, Russia’s shadow fleet capacity was already sufficiently high for Russia to benefit from a reduction in the price ceiling. Russia would even have benefited from a reduction in the cap if the West had prevented any expansion in Russia’s shadow fleet beyond its initial level. With no such limitation, Russia would continue to expand its fleet size regardless of the size of the cap reduction. This leads us to conclude that Russia would also benefit if an unanticipated reduction in the cap (or a complete ban) occurred subsequently.
It should be noted that in the absence of a non-Russian supply response, caps at different levels quantitatively impact Russian total profits in a similar way. For example, the $60 cap reduces Russian profits by about 25 percent compared to a scenario without sanctions, and a complete ban would have impacted Russia only slightly less.
The following figure shows a comparison of prices, shadow fleet capacity, and profits under a price cap sanction (solid lines), a service ban (dotted lines), and the absence of sanctions (grey dashed lines). The simulations assume no supply response from non-Russian producers (none occurred when the cap was first implemented). A lower cap cuts Russian exports and raises the global oil price, increasing Russian profits from its fleet sales. A non-Russian supply response would dampen this oil price spike and would, therefore, diminish the resulting revenue increase from Russian fleet sales.
Figure 1. Outcomes under different sanction scenarios
Source: Authors’ calculations.
Russia sometimes uses Western services to ship oil at a price above the cap, taking the risk that its shipments get sanctioned. Increasing the probability that cheating is punished lowers the price Russia expects to receive, with consequences identical to a reduction in the cap level.
By contrast, policies that reduce some capacity of the shadow fleet (“sidelining” some of its tankers) may harm Russia, even though they prompt Russia to rebuild its fleet rapidly. This happens, for example, if sidelining part of the fleet occurs while oil is also being sold at the ceiling, so that ceiling sales replace the lost fleet sales and there is no increase in the world oil price.
Conclusion
To conclude, we consider a variety of oil-market sanctions that have been have imposed on Russia to reduce the total export profits it uses to finance the war in Ukraine. As seen, tightening these sanctions is more effective if the induced increase in the world price can be significantly mitigated (if not entirely eliminated); otherwise, increased revenues from shadow fleet sales will weaken or undermine the intended effect of the tighter sanctions.
In one case we considered, no supplementary intervention is required for the sanction to be effective. Reducing Russia’s shadow fleet capacity when Russia is still selling at the ceiling price will induce an equal and offsetting increase in Russian sales at the ceiling, resulting in no increase in the world price.
However, other sanctions – lowering the ceiling, increasing its enforcement, or even reducing the shadow fleet capacity after Russian sales at the ceiling have ceased – will induce an increase in the world price sufficient to undermine the sanctions’ intended effect unless accompanied by a simultaneous expansion of non-Russian supply (presumably from the U.S. or OPEC) to dampen the increase in the world price. Supplemented in this way, the potency of each of these sanctions would be restored.
Overall, our results call attention to the need for complementary energy policies that would facilitate the response of non-Russian oil production to higher global prices.
References
- Cardoso, D. S., S. W. Salant, and J. Daubanes. (2025). The Dynamics of Evasion: The Price Cap on Russian Oil Exports and the Amassing of the Shadow Fleet. MIT CEEPR Working Paper 2025-05.
- Centre for Research on Energy and Clean Air. (2023). December 2023 Monthly Analysis on Russian Fossil Fuel Exports and Sanctions.
- Johnson, S., L. Rachel, and C. Wolfram. (2025). A Theory of Price Caps on Non-Renewable Resources. NBER Working Paper No. 31347.
- Spiro, D., H. Wachtmeister, and J. Gars. (2024). Assessing the Impact of Oil Sanctions on Russia. SSRN Working Paper.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Ukraine’s Fight Is Our Fight: The Need for Sustained International Commitment
We are at a critical juncture in the defense of Ukraine and the liberal world order. The war against Ukraine is not only a test of Europe’s resilience but also a critical moment for democratic nations to reaffirm their values through concrete action. This brief examines Western support to Ukraine in the broader context of international efforts, putting the order of magnitudes in perspective, and emphasizing the west’s superior capacity if the political will is there. Supporting Ukraine to victory is not just the morally right thing to do, but economically rational from a European perspective.
As the U.S. support to the long-term survival of Ukraine is becoming increasingly uncertain, European countries need to step up. This is a moral obligation, to help save lives in a democratic neighbor under attack from an autocratic regime. But it is also in the self-interest of European countries as the Russian regime is threatening the whole European security order. A Russian victory will embolden the Russian regime to push further, forcing European countries to dramatically increase defense spending, cause disruptions to global trade flows, and generate another wave of mass-migration. This brief builds on a recent report (Becker et al., 2025) in which we analyze current spending to support Ukraine, put that support in perspective to other recent political initiatives, and discuss alternative scenarios for the war outcome and their fiscal consequences. We argue that making sure that Ukraine wins the war is not only the morally right thing to do, but also the economically rational alternative.
The International Support to Ukraine
The total support provided to Ukraine by its coalition of Western democratic allies since the start of the full-scale invasion exceeded by October 2024 €200 billion. This assistance, which includes both financial, humanitarian, and military support, can be categorized in various ways, and its development over time can be analyzed using data compiled by the Kiel Institute for the World Economy. A summary table of their estimates of aggregate support is provided below.
A particularly relevant aspect in light of recent news is that approximately one-third of total disbursed aid has come from the United States. The U.S. has primarily contributed military assistance, accounting for roughly half of all military aid provided to Ukraine. In contrast, the European Union—comprising both EU institutions and bilateral contributions from member states—stands as the largest provider of financial support. This financial assistance is crucial for sustaining Ukraine’s societal functions and maintaining the state budget.
Table 1. International support to Ukraine, Feb 2022 – Oct 2024
Source: Trebesch et al. (2024).
Moreover, the EU has signaled a long-term commitment to provide, in the coming years, an amount comparable to what has already been given. This EU strategy ensures greater long-term stability and predictability, guaranteeing that Ukraine has reliable financial resources to sustain state operations in the years ahead. Consequently, while a potential shift in U.S. policy regarding future support could pose challenges, it would not necessarily be insurmountable.
What is crucial is that Ukraine’s allies remain adaptable, and that the broader coalition demonstrates the ability to adjust its commitments, as this will be essential for sustaining the necessary level of assistance moving forward.
Putting the Support in Perspective
To assess whether the support provided to Ukraine is truly substantial, it is essential to place it in context through meaningful comparisons. One approach is to examine it in historical terms, particularly in relation to past instances of large-scale military and financial assistance. A key historical benchmark is the Second World War, when military aid among the Allied powers played a decisive role in shaping the outcome of the conflict. Extensive resources were allocated to major military operations spanning multiple continents, with the United States and the United Kingdom, in particular, dedicating a significant share of their GDP to support their allies, including the Soviet Union, France, and other nations. As seen in Figure 1, by comparison, the current level of aid to Ukraine, while substantial and essential to its defense, remains considerably smaller in relation to GDP.
Figure 1. Historical comparisons
Source: Trebesch et al. (2024).
Another way to assess the scale of support to Ukraine is by comparing it to other major financial commitments made by governments in response to crises. While the aid allocated to Ukraine is significant in absolute terms, it remains relatively modest when measured against the scale of other programs, see Figure 2.
A recent example is the extensive subsidies provided to households and businesses to mitigate the impact of surging energy prices since 2022. Sgaravatti et al. (2021) concludes that most European countries implemented energy support measures amounting to between 3 and 6 percent of GDP. Specifically, Germany allocated €157 billion, France and Italy each committed €92 billion, the UK spent approximately €103 billion. These figures represent 5 to 10 times the amount of aid given to Ukraine so far, with some countries, such as Italy, allocating even greater relative sums. On average, EU countries have spent about five times more on energy subsidies than on Ukraine aid. Only the Nordic countries and Estonia have directed more resources toward Ukraine than toward energy-related support. Although not all allocated funds have been fully disbursed, the scale of these commitments underscores a clear political and financial willingness to address crises perceived as directly impacting domestic economies.
Figure 2. EU response to other shocks (billions of €)
Source: Trebesch et al. (2024).
Another relevant comparison is the Pandemic Recovery Fund, also known as Next Generation EU. With a commitment of over €800 billion, this fund represents the EU’s comprehensive response to the economic consequences of the Covid-19 pandemic. Again, the support to Ukraine appears comparatively small, about one seventh of the Pandemic Recovery Fund.
The support to Ukraine is also much smaller in comparison to the so-called “Eurozone bailout”, the financial assistance programs provided to several Eurozone member states (Greece, Ireland, Spain and Portugal) during the sovereign debt crisis between 2010 and 2012. The programs were designed to stabilize the economies hit hard by the crisis and to prevent the potential spread of instability throughout the Eurozone.
Overall, the scale of these commitments underscores a clear political and financial willingness and ability to address crises perceived as directly impacting domestic citizens. This raises the question of whether the relatively modest support for Ukraine reflects a lack of concern among European voters. However, this does not appear to be the case. In survey data from six countries – Belgium, Germany, Hungary, Italy, the Netherlands, and Poland – fielded in June 2024, most respondents express satisfaction with current aid levels, and a narrow majority in most countries even supports increasing aid (Eck and Michel, 2024).
A further illustration comes from the Eurobarometer survey conducted in the spring of 2024 which asked: “Which of the following [crises] has had the greatest influence on how you see the future?”. Respondents could choose between different crises, including those mentioned above, and the full-scale invasion of Ukraine.
Figure 3 illustrates the total commitments made by EU countries for Ukraine up until October 31, 2024, compared to other previously discussed support measures, represented by the blue bars. The yellow bars, on the other hand, show a counterfactual allocation of these funds, based on public priorities as indicated in the Eurobarometer survey. Longer yellow bars indicate that a higher proportion of respondents perceived this crisis as having a greater negative impact on their outlook for the future. By comparing the actual commitments (blue bars) with this hypothetical allocation (yellow bars)—which reflects how resources might have been distributed if they aligned with the population’s stated priorities—it becomes evident that there is substantial public backing for maintaining a high level of support for Ukraine. The results show that the population prioritizes the situation in Ukraine above several other economic issues, including those that directly affect their own personal finances.
Figure 3. Support to Ukraine compared to other EU initiatives – what do voters think?
Source: Trebesch et al. (2024); Niinistö (2024); authors’ calculations.
The Costs of Not Supporting Ukraine
When discussing the costs of support to Ukraine it is important to understand what the correct counterfactual is. The Russian aggression causes costs for Europe irrespective of what actions we take. Those costs are most immediately felt in Ukraine, with devastating human suffering, the loss of lives, and a dramatic deterioration in all areas of human wellbeing. Also in the rest of Europe, though, the aggression has immediate costs, in the economic sphere primarily in the form of dramatically increased needs for defense spending, migration flows, and disruptions to global trade relationships. These costs are difficult to determine exactly, but they are likely to be substantially higher in the case of a Russian victory. Binder and Schularik (2024) estimate increased costs for defense, increased refugee reception and lost investment opportunities for the German industry at between 1-2 percent of GDP in the coming years. As they put it, the costs of ending aid to Ukraine are 10-20 times greater than continuing aid at Germany’s current level.
Any scenario involving continued Russian aggression would demand substantial and sustained economic investments in defense and deterrence across Europe. Clear historical parallels can be drawn looking at the difference in countries’ military spending during different periods of threat intensity. Average military spending in a number of Western countries during the Cold War (1949-1990) was about 4.1 percent of GDP, much higher in the U.S. but also in Germany, France and the UK. In the period after 1989-1991 (the fall of the Berlin Wall, the dissolution of the Soviet Union), the amounts fell significantly. The average for the same group of countries in this period is about 2 percent of GDP and only 1.75 percent if the U.S. is excluded.
Also after 1991 there is evidence of how perceived threats affect military spending. Figure 4 plots the change in military spending over GDP between 2014-2024 against the distance between capital cities and Moscow. The change varies between 0 (Cyprus) and around 2.25 (Poland) and shows a very clear positive correlation between increases in spending and proximity to Moscow. There has also in general been a substantial increase in military spending after 2022 in several European countries, but in a scenario where Russia wins the war, these will certainly have to be increased further and maintained at a high level for longer. An increase in annual military expenditure in relation to GDP in the order of one to two percentage points would mean EUR 200-400 billion per year for the EU, while the total EU support to Ukraine from 2022 to today is just over €100 billion.
Figure 4. Increase in military expenditures in relation to distance to Moscow
Source: SIPRI data, authors’ calculations.
A Russian victory would also have profound consequences for migration flows, with the most severe effects likely in the event of Ukraine’s surrender. The Kiel Institute estimates the cost of hosting Ukrainian refugees at €26.5 billion (4.2 percent of GDP) for Poland, one of the countries that received the largest flows. Beyond migration, a Russian victory would also reshape the global geopolitical order. Putin has framed the war as a broader conflict with the U.S. and its democratic allies, while an emerging alliance of Russia, Iran, North Korea, and China is positioning itself as an alternative to the Western-led system. A Ukrainian defeat would weaken the authority of the U.S., NATO, and the rules-based international order, potentially driving more nations in the Global South toward authoritarian powers for military and economic support. This shift could disrupt global trade, affect access to food, metals, and energy. Estimating the full economic impact of such a shift is difficult, but comparisons can be drawn with other global shocks. The European Union’s GDP experienced a significant contraction due to the Covid-19 pandemic, 5.9 percent contraction in real GDP according to Eurostat, 6.6 percent according to the European Central Bank. While the economy rebounded relatively quickly from the pandemic, a permanent geopolitical realignment caused by a Russian victory would likely have far more severe and lasting economic consequences.
Given that Ukraine is at the forefront of Russia’s aggression, its resilience serves as a critical test of Europe’s ability to withstand potential future threats. Thus, strengthening our own security and economic stability in the long term is inseparable from strengthening Ukraine’s resilience now. The fundamental difference lies in the long-term trajectory of these investments. In a scenario where Ukraine is victorious, military and financial aid during the war would eventually transition into reconstruction efforts and preparations for the country’s integration into the EU. This outcome is undeniably more favorable—both economically and in humanitarian terms—not only for Ukraine but for Europe as a whole. Therefore, an even more relevant question is whether the level of support is enough for Ukraine to win the war.
Is Sufficient Support Feasible?
Is it even reasonable to think that we in the West could be able to support Ukraine in such a way that they can militarily defeat Russia? Russia is spending more on its war industry than it has since the Cold War. In 2023, it spent about $110 billion (about 6 percent of GDP). By 2024, this figure is expected to have increased to about $140 billion (about 7 percent of GDP). These amounts are huge and represent a significant part of Russia’s state budget, but they are not sustainable as long as sanctions against Russia remain in place (SITE, 2024). For the EU, on the other hand, the sacrifices needed to match this expenditure would not be as great. The EU’s GDP is about ten times larger than Russia’s, which means that in absolute terms the equivalent amount is only 0.6-0.7 percent of the EU’s GDP. If the U.S. continues to contribute, the share falls to below 0.3 percent of GDP.
Despite the economic advantage of Ukraine’s allies over Russia, several factors could still shift the balance of power in Russia’s favor. One key issue is military production capacity—Russia has consistently outproduced Ukraine’s allies in ammunition and equipment. While Western economies have the resources to manufacture superior weaponry, actual production remains insufficient, requiring both increased capacity and political will. Another challenge is cost efficiency. Military purchasing power parity estimates suggest that Russia can produce approximately 2.5 times more military equipment per dollar than the EU, giving it a cost advantage in volume production. However, this does not fully compensate for its overall economic disadvantage, particularly when factoring in quality differences.
Manpower is also a critical factor. Russia’s larger population allows for sustained mobilization, but at a steep financial cost. Soldiers are recruited at a minimum monthly salary of $2,500, with additional bonuses bringing the first-year cost per recruit to three times the average Russian annual salary. Compensation for injured and fallen soldiers further strains state finances, with estimated payouts reaching 1.5 percent of Russia’s GDP between mid-2023 and mid-2024. Over time, these costs limit Russia’s ability to fund its war effort, making mass mobilization financially unsustainable.
Overall, advanced Western weaponry and superior economic capacity can match Russia’s advantage in manpower if the political will is there. Additionally, Russia’s already fragile demographic situation is deteriorating due to battlefield losses and wartime emigration. Any measure that weakens Russia’s economic capacity—particularly through sanctions and embargoes—diminishes the strategic advantage of its larger population and serves as a crucial complement to military and financial support for Ukraine.
Conclusion
Ukraine’s western allies have provided the country with substantial military and financial support since the onset of the full-scale invasion. Yet, relative to the gravity of the risks involved, previous responses to economic shocks, and citizens’ concerns about the situation, the support is insufficient. The costs of a Russian victory will be higher for Europe, even disregarding the human suffering involved. With U.S. support potentially waning, EU needs to pick up leadership.
References
- Becker, Torbjörn; and Anders Olofsgård; and Maria Perrotta Berlin; and Jesper Roine. (2025). “Svenskt Ukrainastöd i en internationell kontext: Offentligfinansiella effekter och framtidsscenarier”, Commissioned by the Swedish Fiscal Policy Council.
- Binder, J. & Schularick, M. (2024). “Was kostet es, die Ukraine nicht zu unterstützen?” Kiel Policy Brief No. 179.
- Eck, B & Michel, E. (2024). “Breaking the Stalemate: Europeans’ Preferences to Expand, Cut, or Sustain Support to Ukraine”, OSF Preprints, Center for Open Science.
- Niinistö, S. (2024) .“Safer Together – Strengthening Europe’s Civilian and Military Preparedness and Readiness” European Commission Report.
- Sgaravatti, G., S. Tagliapietra, C. Trasi and Zachmann, G. (2021). “National policies to shield consumers from rising energy prices”, Bruegel Datasets, first published 4 November 2021.
- SITE. (2024). “The Russian Economy in the Fog of War”. Commissioned by the Swedish Government.
- Trebesch, C., Antezza, A., Bushnell, K., Bomprezzi, P., Dyussimbinov, Y., Chambino, C., Ferrari, C., Frank, A., Frank, P., Franz, L., Gerland, C., Irto, G., Kharitonov, I., Kumar, B., Nishikawa, T., Rebinskaya, E., Schade, C., Schramm, S., & Weiser, L. (2024). “The Ukraine Support Tracker: Which countries help Ukraine and how?” Kiel Working Paper No. 2218. Kiel Institute for the World Economy.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Belarus’s Progressing Economic Dependence on Russia and Its Implications
This policy brief examines the complexities surrounding Belarus’s economy as it deepens its economic dependence on Russia. Recent growth, driven by increased domestic demand and a resurgence in exports to Russia, has surpassed expectations. This trajectory is largely due to Belarus’s mounting dependence on Russia across trade, energy, finance, logistics, and other domains, a dependency that poses significant long-term risks and uncertainties. The Belarusian regime has begun to see this relationship not only as a lifeline but also as a potential source of economic enhancement. However, this approach may blur the lines between sustainable growth and short-term gains, fostering uncertainties about the true nature of this economic uptick. Hence, questions on whether this growth is viable or merely cyclical persist. The uncertainty and progressing dependence on Russia, in turn, imply numerous challenges for the political domain.
New Issues on the Belarusian Economic Agenda
The Belarusian economy continues to surprise, displaying output growth substantially higher than previous forecasts (see e.g. BEROC, 2024). In 2024, the economy is projected to grow by around 4.0 percent. The growth is being driven by domestic demand, fueled by rising real wages and labor shortages. However, an underlying factor is the recent resurgence of exports to Russia. The unexpectedly high growth has allowed for the Belarusian economy to surpass pre-war output levels, at the moment defying earlier predictions of stagnation or decline.
Although the growth period has now extended beyond what could be considered a mere “recovery”, the overall picture – as suggested in Kruk (2024) – still appears relevant. Despite the upturn, the economy remains significantly behind the counterfactual ‘no sanctions, no war’ scenario (see Figure 1).
Figure 1. The Dynamics of Output (seasonally adjusted, index, 2018=100): Actual vs. Counterfactual
Source: Own estimations based on Belstat data. Note: The counterfactual scenario assumes that the Belarusian economy continued to grow uniformly from Q2 2021 to the present, at a sluggish growth rate of 1 percent per annum (a conservative estimate of the potential growth rate before the sanctions were implemented (Kruk & Lvovskiy, 2022)).
Moreover, all the risks to long-term growth associated with total dependence on Russia, potential contagion effects from Russia, etc. are still relevant (KAS, 2024; Bornukova, 2023).
At the same time, a prolonged period of growth gives grounds to think about recent trends also from the perspective of ongoing structural changes in the Belarusian economy. Can these changes, besides implying numerous risks, enhance Belarus’s growth potential and degree of sustainability? If so, to what extent, for how long, and under which conditions? With these questions in mind, it is important to gain a better understanding of what aspects of the Belarusian economy are being transformed due to the increased coupling with Russia and which effects, besides increased dependency and corresponding risks, this coupling generates. Are there any growth-enhancing effects? If so, how sustainable are they?
Belarus’s Growing Economic Dependence on Russia
Belarus’s economic dependence on Russia is reaching unprecedented levels, spanning various critical sectors, with new dimensions of reliance emerging in recent years. This dependence is deeply embedded in the trade, energy, financial, and technological sectors of the Belarusian economy, and recent geopolitical shifts have further intensified these connections.
One of the most evident signs of Belarus’s economic reliance on Russia is reflected in its foreign trade. Russian imports make up around 55-60 percent of all imports to Belarus, with a staggering 80 percent consisting of intermediate goods crucial for industrial production. Energy products, including crude oil and natural gas, form the largest part of these imports, with almost all of Belarus’s energy needs being met by Russia. Exports have also become increasingly concentrated to the Russian market. In 2022-2023 there were several periods when about 70 percent of Belarusian exports were directed to Russia, an increase from about 35-40 percent prior to 2022. This surge was driven by new opportunities for Belarusian firms on the Russian market following Western companies withdrawals. Although competition in the Russian market has since intensified, Russia still accounts for around 60-65 percent of Belarus’s total exports (see Figure 2).
Figure 2. The Evolution of Physical Volume of Exports (2018=100) and the Share of Exports to Russia (in percent)
Source: Own estimations based on data from the National Bank of Belarus.
A major new development since 2022 is Belarus’s reliance on Russia for transportation and logistics. Sanctions and the war in Ukraine have forced Belarus to abandon its traditional export routes through European ports, leaving Russian seaports as the only viable option for further exports. In 2023, Belarus secured around 14 million tons of port capacity in Russia, primarily for potash fertilizers and oil products exports. Although it is still below the needed volumes, this logistics dependency significantly exacerbates Belarus’s external trade dependency. Taking into account direct exports and imports to and from Russia, as well as mechanisms of logistics and transport control, Russia essentially “controls” up to 90 percent of Belarusian exports and about 80 percent of its imports.
Energy dependency is another critical factor to consider. Belarus imports over 80 percent of its energy resources from Russia, making it vulnerable to any shifts in Russian energy policy. In fact, Russian energy subsidies have played a crucial role in keeping Belarusian industries competitive. In 2022, when global energy prices spiked, the low and fixed price that Belarus paid for Russian gas and the steep discount on oil supplies translated into record-high energy subsidies. These amounted to billions of US dollars and shielded Belarus from the economic fallout other countries experienced due to rising energy prices. Although the value of these subsidies has somewhat decreased in 2023-2024, they remain significant and vital for Belarus.
Belarus’s fiscal situation has also become increasingly tied to Russia. After years of running budget deficits, Belarus achieved a budget surplus in 2023, largely due to Russian financial assistance. For instance, the budgetary item ‘gratuitous revenues’, which mainly includes reverse excise tax and other transfers from Russia, reached a historical high in 2023, securing revenues of around 3.0 percent of GDP. Without this external support, Belarus would likely face a severe fiscal deficit, forcing cuts in social spending and other areas. The scale of Russian financial aid has become a key factor in maintaining budgetary stability, imposing a serious risk for Belarus. Were Russia to restrict such financing, Belarus would almost instantly lose its fiscal stability.
In the monetary sphere, Belarus’s dependence on Russia manifests through the informal peg of the Belarusian ruble to the Russian ruble. Given the deep trade ties and shared currency use in bilateral transactions, Belarusian monetary policy is effectively constrained by Russian economic conditions. The Belarusian National Bank has little room for maneuver, as any nominal devaluation or appreciation of the ruble tends to self-correct through inflation or price adjustments tied to Russian trade. This linkage limits Belarus’s monetary sovereignty and aligns its inflation trajectory closely with Russia’s.
Belarus’s debt structure underscores this dependency further. Of the country’s roughly 17.0 billion US dollars in external debt, about 65 percent is owed directly to Russia or Russia-controlled entities like the Eurasian Fund for Stabilization and Development. In 2022-2023, Russia granted Belarus a six-year deferment on debt repayments, providing crucial breathing room for the regime. This deferment, along with Belarus’s limited access to other international financial sources due to sanctions, has cemented Russia’s role as the primary creditor and financial lifeline for Belarus.
New dimensions of dependence have also emerged within infrastructure, technology, and cyberspace. As Belarus is cut off from Western technologies and financial systems, it increasingly relies on Russian alternatives. Belarus has adopted Russian software for critical functions such as tax administration, giving Moscow access to sensitive financial data. Similarly, with several Belarusian banks disconnected from SWIFT, the country has integrated into Russia’s financial messaging system, further entrenching its reliance on Russian infrastructure. Belarusian companies, particularly in sectors like accounting and logistics, have also shifted to using Russian business software, while consumers increasingly rely on Russian digital platforms for social networks, payments, and entertainment.
An Attempt to Spur Growth Through Coupling with Russia
From the perspective of macroeconomic stability and the traditional view on strengthening growth potential, Belarus’s progressing dependence on Russia is obviously an evil (Kruk, 2023; Kruk, 2024). However, the Belarusian regime sees it as a necessary trade-off, or a “lesser evil”. In 2021-2023, the coupling was done in exchange for economic survival. Firstly, production coupling allowed to counterweight the losses in output associated with sanctions (as niches were freed up in the Russian market) (Kruk & Lvovskiy, 2022). Secondly, the coupling was driven by pressure from Russia and a desire from Belarusian authorities to rapidly obtain some compensations if accepting Russia’s demands. For example, in 2022-2023, Belarusian enterprises were granted a credit line of 105 billion rubles within so-called import-substitution projects.
However, in 2024, coupling with Russia is beginning to look more like a purposeful strategy by the Belarusian economic authorities rather than just a survival strategy. The regime seems willing to sacrifice sustainability considerations in favor of strengthening the growth potential by ‘directive production coupling’, i.e. artificially shaping value-added chains between producers in Belarus (mainly state-owned enterprises) and Russia. For instance, the regime accepted the co-called Union programs for 2024-2026 (Turarbekova, 2024), which encompass numerous activities by the governments of Belarus and Russia aimed at securing ‘production coupling’ in sectors such as machine building, agricultural and automotive engineering, aviation industry, and elevator manufacturing. In some cases, the Belarusian party solely initiates such kind of sectoral activities. It seems that the authorities either accepted the dependency due to the lack of outside options, or they became more optimistic regarding the possibility to spur economic growth through coupling with Russia based on the experiences from the last couple of years. And to some extent, this logic might hold true.
As in the previous two years, the coupling with Russia may, in the short to medium term, more than compensate for certain institutional weaknesses and vulnerabilities in the Belarusian economy. The positive effects may even extend beyond mere cyclical impacts and, under certain conditions, contribute to a semblance of stability for a period of time. For example, economic growth in Belarus could reach some degree of stability under the following conditions:
- (a) if the war in Ukraine becomes protracted and military demand from Russia remains steady;
- (b) if the Russian economy continues to grow (albeit modestly) in an environment with limited competition in Russian commodity markets;
- (c) if specific tools and forms of support for the Belarusian economy remain in place.
Growth driven by a combination of these preconditions could be sufficiently stable as long as they persist. However, the existence of such a status quo is not inherently sustainable and could vanish at any moment. Each of these preconditions is highly unreliable and comes with its own set of determining factors. Thus, one cannot count on the preservation of the entire “package” of preconditions in the long term.
Conclusions
Belarus and its economic prospects are currently in a highly complex situation. The Belarusian economy has been steadily increasing its degree of coupling with Russia, with the ties strengthening both in the range of economic sectors involved and the depth of their integration.
From a long-term growth perspective, the unprecedented level of dependence on Russia is undoubtedly detrimental. In this regard, Kruk’s (2024) conclusion about the economic and political deadlocks remains entirely relevant.
However, as the past two years have shown, this situation can achieve a certain semblance of stability in the medium term. The Belarusian regime is increasingly viewing its coupling with Russia not only as a mechanism for economic survival but also as a means to enhance economic potential. In this way, the growing dependence on Russia, which brings substantial macroeconomic risks, is seen as an unavoidable cost entailed to the only available mechanism to sustain economic growth in Belarus.
How then, should we interpret the related fluctuations in Belarus’s economy? As an increase in economic potential (equilibrium growth rate) or as cyclical acceleration? Traditional economic logic encounters a contradiction here, as the line between equilibrium growth and cyclical fluctuations becomes blurred. An increase in economic potential should inherently be sustainable, whereas cyclical acceleration is inherently transient. Yet, how should we treat a mechanism that might be somewhat sustainable under certain conditions?
This contradiction creates numerous uncertainties, both strictly within the economic domain and beyond it. Economically, it diminishes the effectiveness of conventional macro forecasting tools, making them more dependent on ad-hoc assumptions. For example, if there is indeed an increase in potential, then macroeconomic projections generated without accounting for this channel (e.g. BEROC, 2024) would likely underestimate output growth while overestimating the risks of overheating and destabilization. Conversely, if the model assumes higher equilibrium growth but it proves unsustainable, the forecast could significantly overestimate growth while underestimating macroeconomic imbalances. In other words, the seemingly favorable situation could ultimately be a harbinger of a macroeconomic storm.
These uncertainties are even more pronounced in the political domain. Up to what threshold can an increasing economic dependency on Russia yield macroeconomic gains for the regime? What political consequences can arise if the strategy of coupling with Russia for growth enhancement fails? Can the progressing dependency on Russia undermine the regime politically? If political barriers for democratization are eliminated, what should and can be done to get rid of the dependence on Russia? Are the estimations and prescriptions in Hartwell et al. (2022) – which considers the perspectives of economic reconstruction for a democratic Belarus and the costs of eliminating the dependency on Russia in pre-war reality – still relevant today?
Answering such questions meaningfully using formal research tools ex-ante is nearly impossible. The dependence of macroeconomic sustainability on non-economic factors and motivations leaves little room for an accurate ex-ante diagnosis of the current state of affairs. Only ex-post will we likely be able to reliably assess which diagnosis is closer to the truth. This, in turn, means that we must accept an additional degree of uncertainty in today’s forecasts and projections. Similar challenges are faced by decision-makers in Belarus. As a result, the likelihood of incorrect economic and political decisions due to misdiagnosing the current situation is relatively high, even in the (more optimistic) scenario where the authorities recognize and account for these uncertainties. Such decisions, if made, could not only be costly but might even trigger rapid and drastic economic and political changes.
References
- BEROC. (2024). Macroeconomic Forecast for Belarus. 2024-2025 (in Russian). BEROC. https://beroc.org/publications/view/makroprognoz-dlya-belarusi-2024-2025/
- Bornukova, K. (2023). The Economic Dimension of the Russian Policy toward Belarus. In A. Moshes & R. Nizhnikau (Eds.), Russian Policy toward Belarus after 2020: At a Turning Point? (pp. 29–46). Lexington Books.
- Hartwell, C., Bornukova, K., Kruk, D., & Zoller-Rydzek, B. (2022). The Economic Reconstruction of Belarus: Next Steps after a Democratic Transition (EP/EXPO/AFET/FWC/2019-01/Lot1/R/03). European Parliament. Directorate General for External Policies. https://www.europarl.europa.eu/thinktank/en/document/EXPO_STU(2022)653663
- Konrad Adenauer Stiftung. (2024). EU Sanctions against the regime in Minsk (in Russian). https://www.kas.de/documents/285805/31503540/sanctions-6.pdf/4b6d787d-60fa-ba9a-9ff3-a546946dae31?version=1.0&t=1721109230965
- Kruk, D. (2024). Cognitive Dissonance on Belarus: Recovery and Adaptation or Stalemate? (Policy Brief Series). FREE Network. https://freepolicybriefs.org/2024/01/08/belarusian-economy-outlook/
- Kruk, D. (2023). What is Needed to Reinforce Macroeconomic Stability in Belarus? (In Russian) (85; BEROC Working Paper Series, p. 52). BEROC. https://beroc.org/publications/working_papers/chto-nuzhno-dlya-ukrepleniya-makroekonomicheskoy-stabilnosti-v-belarusi/
- Kruk, D., & Lvovskiy, L. (2022). Belarus Under War Sanctions (Policy Brief Series). FREE Network. https://freepolicybriefs.org/2022/10/17/belarus-under-sanctions/
- Turarbekova, R. (2024). The Union State: Belarus’ Increasing Dependence on Russia and the Risk of Sovereignty Erosion, 2020-2023 [SCEEUS Guest Commentary]. https://sceeus.se/en/publications/the-union-state-belarus-increasing-dependence-on-russia-and-the-risk-of-sovereignty-erosion-2020-2023/
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Navigating Market Exits: Companies’ Responses to the Russian Invasion of Ukraine
Russia’s invasion of Ukraine on 24 February 2022 led to widespread international condemnation. As governments imposed sanctions on Russian businesses and individuals tied to the war, international companies doing business in Russia came under increasing pressure to withdraw from Russia voluntarily. In the first part of this policy brief, we show what kind of companies decided to leave the Russian market using data collected by the LeaveRussia project. In the second part, we focus on prominent Swedish businesses which announced a withdrawal from Russia, but whose products were later found available in the country by investigative journalists from Dagens Nyheter (DN). We collect the stock prices for these companies when available and show how investors respond to these news.
Business Withdrawal from Russia
The global economy is highly interconnected, and Russia forms an important part. Prior to the invasion, Russia ranked 13th in the world in terms of global goods exports value and 22nd in terms of imports (Schwarzenberg, 2023). In the months following the full-scale invasion of Ukraine, Russia’s imports dropped sharply (about 50 percent according to Sonnenfeld et al., 2022). Before February 24th, Russia’s main trading partners were China, the European Union (in particular, Germany and the Netherlands) and Belarus (as illustrated in Figure 1). While there is some evidence of Russia shifting away from Western countries and towards China following the annexation of Crimea in 2014 and the resulting sanctions, Western democracies still made up about 60 percent of Russia’s trade in 2020 (Schwarzenberg, 2023). In the same year, Sweden’s exports to Russia accounted for 1.4 percent of Sweden’s total goods exports, of which 59 percent were in the machinery, transportation and telecommunications sectors. 1.3 percent of Swedish imports were from Russia (Stockholms Handelskammare, 2022).
Figure 1. Changes in trade with Russia, 2013-2020.
Source: IMF Direction of Trade Statistics, data until 2020. From Lehne (2022).
In response to Russia’s invasion of Ukraine in February 2024, Western governments imposed strict trade and financial sanctions on Russian businesses and individuals involved in the war (see S&P Global, 2024). These sanctions are designed to hamper Russia’s war effort by reducing its ability to fight and finance the war. The sanctions make it illegal for, e.g., European companies to sell certain products to Russia as well as to import select Russian goods (Council of the European Union, 2024). Even though sanctions do not cover all trade with Russia, many foreign businesses have been pressured to pull out of Russia in an act of solidarity. The decision by these businesses to leave is voluntary and could reflect their concerns over possible consumer backlash. It is not uncommon for consumers to put pressure on businesses in times of geopolitical conflict. For instance, Pandya and Venkatesan (2016) find that U.S. consumers were less likely to buy French-sounding products when the relationship between both countries deteriorated.
The LeaveRussia Project
The LeaveRussia project, from the Kyiv School of Economics Institute (KSE Institute), systematically tracks foreign companies’ responses to the Russian invasion. The database covers a selection of companies that have either made statements regarding their operations in Russia, and/or are a large global player (“major companies and world-famous brands”), and/or have been mentioned in relation to leaving/waiting/withdrawing from Russia in major media outlets such as Reuters, Bloomberg, Financial times etc. (LeaveRussia, 2024). As of April 5th, 2024, the list contains 3342 firms, the companies’ decision to leave, exit or remain in the Russian market, the date of their announced action, and company details such as revenue, industry etc. The following chart uses publicly available data from the LeaveRussia project to illustrate patterns in business withdrawals from Russia following the invasion of Ukraine.
Figure 2a shows the number of foreign companies in Russia in the LeaveRussia dataset by their country of headquarters. Figure 2b shows the share of these companies that have announced a withdrawal from Russia by April 2024, by their country of headquarters.
Figure 2a. Total number of companies by country.
Figure 2b. Share of withdrawals, by country.
Source: Authors’ compilation based on data from the LeaveRussia project and global administrative zone boundaries from Runfola et al. (2020).
Some countries (e.g. Canada, the US and the UK) that had a large presence in Russia prior to the war have also seen a large number of withdrawals following the invasion. Other European countries, however, have seen only a modest share of withdrawals (for instance, Italy, Austria, the Netherlands and Slovakia). Companies headquartered in countries that have not imposed any sanctions on Russia following the invasion, such as Belarus, China, India, Iran etc., show no signs of withdrawing from the Russian market. In fact, the share of companies considered by the KSE to be “digging in” (i.e., companies that either declared they’d remain in Russia or who did not announce a withdrawal or downscaling as of 31st of March 2024) is 75 percent for more than 25 countries, including not only the aforementioned, but also countries such as Argentina, Moldova, Serbia and Turkey.
Withdrawal Determinants
The decision for companies to exit the market may range from consumer pressure to act in solidarity with Ukraine, to companies’ perceived risk from operating on the Russian market (Kiesel and Kolaric, 2023). Out of the 3342 companies in the LeaveRussia project’s database, about 42 percent have, as of April 5th, 2024, exited or stated an intention to exit the Russian market. This number increases only slightly to 49 percent when considering only companies headquartered in democratic (an Economist Intelligence Unit Democracy Index score of 7 or higher) countries within the EU. Figure 3 shows the number of companies that announced their exit from the Russian market, by month. A clear majority of companies announce their withdrawal in the first 6 months following the invasion.
Figure 3. Number of foreign companies announcing an exit from the Russian market, 2022-2024.
Source: Authors’ compilation based on data from the LeaveRussia project.
Similarly to the location of companies’ headquarters, the decision to exit the Russian market varies by industry. Figure 4 a depicts the top 15 industries with the highest share of announced withdrawals from the Russian market among industries with at least 10 companies. Most companies with high levels of withdrawals are found in consumer-sensitive industries such as the entertainment sector, tourism and hospitality, advertising etc.
Figure 4a. Top 15 industries in terms of withdrawal shares.
Figure 4b. Bottom 15 industries in terms of withdrawal shares.
Source: Authors’ compilation based on data from the LeaveRussia project.
In contrast, Figure 4b details the industries with the lowest share of companies opting to withdraw from the Russian market. Only around 10 percent of firms in the “Defense” and “Marine Transportation” industries chose to withdraw. Two-thirds of firms within the “Energy, oil and gas” and “Metals and Mining” sectors have chosen to remain in business in Russia following the war in Ukraine.
Several sectors have been identified as crucial in supplying the Russian military with necessary components to sustain their military aggression against Ukraine, mainly electronics, communications, automotives and related categories. We find that many of these sectors are among those with the lowest share of companies withdrawing from Russia. Companies for which Russia constitute a large market share have more to lose from exiting than others. Another reason for not exiting the market relates to the current legal hurdles of corporate withdrawal from Russia (Doherty, 2023). Others may simply not have made public announcements or operate within an industry dominated by smaller companies that are not on the radar of the LeaveRussia project. Nonetheless, Bilousova et al. (2024) detail that products from companies within the sanction’s coalition continue to be found in Russian military equipment destroyed in Ukraine. This is due to insufficient due diligence by companies as well as loopholes in the sanctions regime such as re-exporting via neighboring countries, tampering with declaration forms or challenges in jurisdictional enforcement due to lengthy supply chains, among others. (Olofsgård and Smitt Meyer, 2023).
And Those Who Didn’t Leave After All
The data from the LeaveRussia project details if and when foreign businesses announce that they will leave Russia. However, products from companies that have announced a departure from the Russian market continue to be found in the country, including in military components (Bilousova, 2024). In autumn 2023, investigative journalists from the Swedish newspaper Dagens Nyheter exposed 14 Swedish companies whose goods were found entering Russia, in most cases contrary to the companies’ public claims (Dagens Nyheter, 2023; Tidningen Näringslivet, 2023). For this series of articles, the journalists used data from Russian customs and verified it with information from numerous Swedish companies, covering the time period up until December 2022. This entailed reviewing thousands of export records from Swedish companies either directly to Russia or via neighboring countries such as Armenia, Kazakhstan, and Uzbekistan. All transactions mentioned in the article series have been confirmed with the respective companies, who were also contacted by DN prior to publication (Dagens Nyheter, 2023b). DNs journalists also acted as businessmen, interacting with intermediaries in Kazakhstan and Uzbekistan, exposing re-routing of Swedish goods from a company stated to have cut all exports to Russia in the wake of the invasion (Dagens Nyheter, 2023d).
For Sweden headquartered companies exposed in DN and that are traded on the Swedish Stock Exchange, we collect their stock prices and trading volume. Our data includes information on each stock’s average price, turnover, number of trades by date from around the date of the DN publications as well as the date of each company’s prior public announcement of exiting Russia. Table 1 details the companies who were exposed of doing direct or indirect business with Russia by DN and who had announced an exit from the Russian market previously. In their article series, DN also shows that goods from the following companies entered Russia; AriVislanda, Assa Abloy, Atlas Copco, Getinge, Scania, Securitas Tetra Pak, and Väderstad. Most of the companies exposed by DN operate within industries displaying low withdrawal shares.
Table 1. Select Swedish companies’, time of exit announcement and exposure in Dagens Nyheter and stock names.
Source: The LeaveRussia project, 2023; Dagens Nyheter, 2023b, 2023c, 2023d. Note: The exit statements have been verified through companies’ press statements and/or reports when available. For Epiroc, the claim has been verified via a previous Dagens Nyheter article (Dagens Nyheter, 2023a).
In Figure 5, we show the average stock price and trades-weighted average stock price of the Swedish companies in Table 1 around the time when the companies announced that they are leaving Russia.
Figure 5. Average stock price of companies in Table 1 around Russian exit announcements.
Source: Author’s compilation based on data from Nasdaq Nordic.
There appears to be an immediate increase in stock prices after firms announced their exit from the Russian market. Stock prices, however, reverse their gains over the next couple of days. In general, stock prices are volatile, and we also see similar-sized movements immediately before the announcement. Due to this volatility and the fact that we cannot rule out other shocks impacting these stock prices at the same time, it is difficult to attribute any movements in the stock prices to the firms’ decisions to leave Russia.
The academic evidence on investors’ reactions to firms divesting from Russia is mixed. Using a sample of less than 300 high-profile firms with operations in Russia compiled by researchers at the Yale Chief Executive Leadership Institute, Glambosky and Peterburgsky (2022) find that firms that divest within 10 days after the invasion experience negative returns, but then recover within a two-week period. Companies announcing divesting at a later stage do not experience initial stock price declines. In contrast, Kiesel and Kolaric (2023) use data from the LeaveRussia project to find positive stock price returns to firms’ announcements of leaving Russia, while there appears to be no significant investor reaction to firms’ decisions to stay in Russia.
When considering the effect from DN’s publications, the picture is almost mirrored, with the simple and trades-weighted average stock prices dipping in the days following the negative media exposure before not only recovering, but actually increasing. Similar caveats apply to the interpretation of this chart. In addition, the DN publication occurred shortly after the Hamas attacks on Israel on October 7 and Israel’s subsequent war on Gaza. While conflict and uncertainty typically dampen the stock market, the events in the Middle East initially caused little reaction on the stock market (Sharma, 2023).
Figure 6. Average stock price for companies listed in Table 1 around the time of DN exposure.
Source: Author’s compilation based on data from Nasdaq Nordic.
Discussion
As discussed in Becker et al. (2024), creating incentives and ensuring companies follow suit with the current sanctions’ regime should be a priority if we want to end Russia’s war on Ukraine and undermine its wider geopolitical ambitions. Nevertheless, Bilousova et al. (2024), and Olofsgård and Smitt Meyer (2023), highlight that there is ample evidence of sanctions evasions, including for products that are directly contributing to Russia’s military capacity. Even in countries that have a strong political commitment to the sanctions’ regime, enforcement is weak. For instance, in Sweden, it is not illegal to try and evade sanctions according to the Swedish Chamber of Commerce (2024). There is little coordination between the numerous law enforcement agencies that are responsible for sanction enforcement and there have been very few investigations into sanctions violations.
Absent effective sanctions enforcement and for the many industries not covered by sanctions, can we rely on businesses to put profits second and voluntarily withdraw from Russia? Immediately after the start of Russia’s invasion of Ukraine, as news stories about the brutality of the war proliferated, many international companies did announce that they will be leaving Russia. However, a more systematic look at data collected by the LeaveRussia project and KSE Institute reveals that more than two years into the war, less than half of companies based in Western democracies intend to distance themselves from the Russian market. A closer look at companies who are continuing operations in Russia reveals that they tend to be in sectors that are crucial for the Russian economy and war effort, such as energy, mining, electronics and industrial equipment. Many of these companies are probably seeing the war as a business opportunity and are reluctant to put human lives before their bottom line (Sonnenfeld and Tian, 2022).
Whether companies who announce that they are leaving Russia actually do leave is difficult to independently verify. A series of articles published in a prominent Swedish newspaper (Dagens Nyheter) last autumn revealed that goods from 14 major Swedish firms continue to be available in Russia, despite most of these firms publicly announcing their withdrawal from the country. The companies’ reactions to the exposé were mixed. A few companies, such as Scania and SSAB, have decided to cut all exports to the intermediaries exposed by the undercover journalists (for instance, in Kazakhstan, Uzbekistan and Kyrgyzstan). Other companies stated that they are currently investigating DN’s claims or that the exports exposed in the DN articles were final or delayed orders that were accepted before the company decided to withdraw from Russia. Another company, Trelleborg – a leading company within polymer solutions for a variety of industry purposes – reacted to the DN exposure by backtracking from its earlier commitment to exit the Russian market (Dagens Nyheter 2023b, 2023d). Wider reaction to these revelations was muted. Looking at changes in stock prices for the exposed companies, we find little evidence that investors are punishing companies for not honoring their public commitment to withdraw from Russia.
In an environment, where businesses themselves withdraw at low rates and investors do not shy away from companies contradicting their own claims, the need for stronger enforcement of sanctions seems more pressing than ever.
References
- Becker, T., Fredheim, K., Gars, J., Hilgenstock, B., Katinas, P., Le Coq, C., Mylovanov, T., Olofsgård, A., Perrotta Berlin, M., Pavytska, Y., Ribakova, E., Shapoval, N., Spiro, D. and Wachtmeister, H. (2024). Sanctions on Russia: Getting the Facts Right. FREE Policy Brief. https://freepolicybriefs.org/2024/03/14/sanctions-russia-war-ukraine/
- Bilousova, O., Hilgenstock, B., Ribakova, E., Shapoval, N., Vlasyuk, A. and Vlasiuk, V. (2024). CHALLENGES OF EXPORT CONTROLS ENFORCEMENT HOW RUSSIA CONTINUES TO IMPORT COMPONENTS FOR ITS MILITARY PRODUCTION. Yermak-McFaul International Working Group on Russian Sanctions & KSE Institute. https://kse.ua/wp-content/uploads/2024/01/Challenges-of-Export-Controls-Enforcement.pdf
- Council of the European Union. (2023). Sanctions against Russia explained. European Council. https://www.consilium.europa.eu/en/policies/sanctions-against-russia/sanctions-against-russia-explained/#services
- Dagens Nyheter. (2023a). DN avslöjar: Wallenbergs gruvjätte gjorde affärer med ryskgrundat bolag – efter krigsutbrottet.
- Dagens Nyheter. (2023b). DN avslöjar: Svenska storbolagen i affärer med Rvssland – trots löftena.
- Dagens Nyheter. (2023c). Svenska miljardbolaget svek löftet – sålde till ryska hamnprojekt.
- Dagens Nyheter (2023d). Mellanhanden avslöjar: Så levereras stålet från SSAB till Ryssland.
- Doherty, B. (2023). Business in Russia: Why some firms haven’t left. BBC. https://www.bbc.com/worklife/article/20230918-business-in-russia-why-some-firms-havent-left
- Glambosky, M. and Peterburgsky, S. (2022). Corporate activism during the 2022 Russian invasion of Ukraine, Economics Letters, 217, 110650. https://doi.org/10.1016/j.econlet.2022.110650
- Kiesel, F. and Kolaric, S. (2023) Should I stay or should I go? Stock market reactions to companies’ decisions in the wake of the Russia-Ukraine conflict. Journal of International Financial Markets, Institutions and Money, Forthcoming. http://dx.doi.org/10.2139/ssrn.4088159
- LeaveRussia Project. (2024). https://leave-russia.org/our-methodology
- Lehne, J. (2022). https://www.youtube.com/watch?v=I1EFcZdj2Gw
- Olofsgård, A. and Smitt Meyer, C. (2024) How to Undermine Russia’s War Capacity: Insights from Development Day 2023. FREE Policy Brief. https://freepolicybriefs.org/2024/01/15/undermine-russias-war-capacity/
- Pandya, S. S., and Venkatesan, R. (2016) French roast: consumer response to international conflict—evidence from supermarket scanner data. Review of Economics and Statistics, 98(1), 42-56.
- Runfola, D., Rogers, L., Habib, J., Horn, S., Murphy, S., Miller, D., Day, H., Troup, L., Fornatora, D., Spage, N., Pupkiewicz, K., Roth, M., Rivera, C., Altman, C., Schruer, I., McLaughlin, T., Biddle, R., Ritchey, R., Topness, E., Turner, J., Updike, S., Buckman, H., Simpson, N., Lin, J., Anderson, A., Baier, H., Crittenden, M., Dowker, E., Fuhrig, S., Goodman, S., Grimsley, G., Layko, R., Melville, G., Mulder, M., Oberman, R., Panganiban, J., Peck, A., Seitz, L., Shea, S., Slevin, H., Yougerman, R. and Hobbs, L. (2020). geoBoundaries: A global database of political administrative boundaries. Plos One, 15(4), e0231866.
- Schwarzenberg. A. (2023). Russia’s Trade and Investment Role in the Global Economy. Congressional Research Services, Report IF12066. https://crsreports.congress.gov/product/pdf/IF/IF12066
- Sharma, R. (2023). Why markets are relatively calm in the geopolitical storm. Financial Times. https://www.ft.com/content/d194a8a2-60c1-4afe-83bf-44e529e16d40
- Sonnenfeld, J. and Tian, S. (2022). Some of the Biggest Companies Are Leaving Russia. Others Just Can’t Quit Putin. Here’s a List. The New York Times. https://www.nytimes.com/interactive/2022/04/07/opinion/companies-ukraine-boycott.html
- Sonnenfeld, J., Tian, S., Sokolowski, F., Wyrebkowski, M., and Kasprowicz, M. (2022). Business Retreats and Sanctions Are Crippling the Russian Economy. http://dx.doi.org/10.2139/ssrn.4167193
- Stockholms Handelskammare. (2022). Regionala handelsmönster med Ryssland. https://www.mynewsdesk.com/se/stockholmshandelskammare/documents/siffror-se-ru-punkt-pdf-420259
- Swedish Chamber of Commerce. (2024). Förslag på åtgärder mot kringgående av sanktioner. https://www.kommerskollegium.se/globalassets/publikationer/rapporter/2024/forslag-pa-atgarder-mot-kringgaenden-av-sanktioner.pdf
- S&P Global. (2024). Sanctions against Russia – a timeline. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/sanctions-against-russia-8211-a-timeline-69602559
- Tidningen Näringslivet (2023). Svensk export till Rysslands grannar rusar. https://www.tn.se/naringsliv/30641/svensk-export-till-rysslands-grannar-rusar/
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Sanctions on Russia: Getting the Facts Right
The important strategic role that sanctions play in the efforts to constrain Russia’s geopolitical ambitions and end its brutal war on Ukraine is often questioned and diminished in the public debate. This policy brief, authored by a collective of experts from various countries, shares insights on the complexities surrounding the use of sanctions against Russia, in light of its illegal aggression towards Ukraine. The aim is to facilitate a public discussion based on facts and reduce the risk that the debate falls prey to the information war.
Sanctions are a pivotal component in the array of strategies deployed to address the threat posed by Russia to the rule-based international order. Contrary to views minimizing their impact, evidence and research suggest that sanctions, particularly those targeting Russian energy exports, have significantly affected Russia’s macroeconomic stability [1,2,3]. Between 2022 and 2023:
- merchandise exports fell by 28 percent,
- the trade surplus decreased by 62 percent,
- and the current account surplus dropped by 79 percent (see the Bank of Russia’s external sector statistics here).
Although 2022 represents an extraordinarily high baseline due to the delayed impacts of energy sanctions, the $190 billion decrease in foreign currency inflows during this time has already made a significant difference for Russia. This amount is equivalent to about two years of Russia’s current military spending, or around 10 percent of Russia’s yearly GDP, depending on the figures. Our estimates suggest that Russia’s losses due to the oil price cap and import embargo alone amount to several percent of its GDP [3,4]. These losses have contributed to the ruble’s continued weakness and have forced Russian authorities to sharply increase interest rates, which will have painful ripple effects throughout the economy in the coming months and years. Furthermore, the international sanctions coalition’s freezing of about $300 billion of the Bank of Russia’s reserves has significantly curtailed the central bank’s ability to manage the Russian economy in this era of war and sanctions.
Sanctions Enforcement
Addressing the enforcement of sanctions, it is crucial to acknowledge the extensive and continuous work undertaken by governments, think tanks, and the private sector to identify and close loopholes that facilitate sanctions evasion. Suggesting that such efforts are futile, often with arguments that lack solid evidence, potentially undermines these contributions, and furthermore provides (perhaps unintended) support to those advocating for a dismantling of the sanctions regime. We do not deny that several key aspects are facing challenges, from the oil price cap to export controls on military and dual-use goods. However, the path forward is to step up efforts and strengthen the implementation and enforcement – not to abandon the strategy altogether. Yes, Russia’s shadow fleet threatens the fundamental mechanism of the oil sanctions and, namely its reliance on Western services [4,5,6]. However, recent actions by the U.S. Treasury Department have shown that the sanctioning coalition can in fact weaken Russia’s ability to work around the energy sanctions. Specifically, the approach to designate (i.e., sanction) individual tankers has effectively removed them from the Russian oil trade. More vessels could be targeted in a similar way to gradually step-up the pressure on Russia [7]. While Russia continues to have access to many products identified as critical for the military industry (for instance semiconductors) [8], it has been shown that Russia pays significant mark-ups for these goods to compensate for the many layers of intermediaries involved in circumvention schemes. Sanctions, even when imperfect, thus still work as trade barriers. In addition to existing efforts and undertakings, companies which help Russia evade export controls can be sanctioned, even when registered in countries outside of the sanctioning coalition. Furthermore, compliance efforts within, and against, western companies, who remain extremely important for Russia, can be stepped up.
The Russian Economy
Many recent newspaper articles have been centered around the theme of Russia’s surprisingly resilient economy. We find these articles to generally be superficial and missing a key point: Russia is transitioning to a war economy, driven by massive and unsustainable public spending. In 2024, military spending is projected to boost Russia’s GDP growth by at least 2.5 percentage points, driven by a planned $100 billion in defense expenditures [9]. However, seeing this for what it is, namely war-spending, raises significant concerns about the sustainability of this growth, as it eats into existing reserves and crowds out investments in areas with a larger long-term growth potential. The massive spending also feeds inflation in consumer prices and wages, in particular as private investment levels are low and the labor market is short on competent labor. This puts pressure on monetary policy causing the central bank to increase interest rates even further, to compensate for the overly stimulating fiscal policy.
Further, it is important to bear in mind that, beyond this stimulus, the Russian economy is characterised by fundamental weaknesses. Russia has for many years dealt with anaemic growth due to low productivity gains and unfavourable demographics. Since the first round of sanctions was imposed on Russia, following its illegal annexation of Crimea in 2014, growth has hovered at around 1 percent per year on average – abysmal for an emerging market with catch-up potential. More recently, current sanctions and war expenditures have made Russia dramatically underperform compared to other oil-exporting countries [10]. Moreover, none of the normal (non-war related) growth fundamentals is likely to improve. Rather, the military aggression and the ensuing sanctions have made things worse. Hundreds of thousands of Russians have been killed or wounded in the war; many more have left the country to either escape the Putin regime or mobilization. Those leaving are often the younger and better educated, worsening the already dire demographic situation, and reinforcing the labor market inefficiencies. Additionally, with the country largely cut off from the world’s most important financial markets, investments in the Russian economy are completely insufficient [11].
As a result, Russia will be increasingly dependent on fossil fuel extraction and exports, a strategy that holds limited promise as considerations related to climate change continue to gain importance. With the loss of the European market, either due to sanctions or Putin’s failed attempt to weaponize gas flows to Europe, Russia finds itself dependent on a limited number of buyers for its oil and gas. Such dependency compels Russia to accept painful discounts and increases its exposure to market risks and price fluctuations [12].
The Cost of Sanctions
Sanctions have not been without costs for the countries imposing them. Nonetheless, the sanctioning countries are in a much better position than Russia. Any sanction strategy is necessarily a tradeoff between maximizing the sanctioned country’s economic loss while minimizing the loss to the sanctioning countries [9], but there are at least two qualifications to bear in mind. The first is that some sanctions imply very low losses – if any – while others may carry limited short term losses but longer term gains. This includes the oil-price cap that allows many importing countries to buy Russian oil at a discount [3], and policies to reduce energy demand, which squeezes Russia’s oil-income [13]. These policies may also initially hurt sanctioning countries, but in the long term facilitate an investment in energy self-sufficiency. Similarly, trade sanctions also imply some protection of one’s own industry, meaning that such sanctions may in fact bring benefits to the sanctioning countries – at least in the short run. The second qualification is that, in cases where sanctions do imply a cost to the sanctioning countries, the question is what cost is reasonable. Russia’s economy is many times smaller than, for instance, the EU’s economy. This gives the EU a strategic advantage akin to that in Texas hold’em poker: going dollar for dollar and euro for euro, Russia is bound to go bankrupt. Currently, Russia allocates a significantly larger portion of its GDP to its war machine than most sanctioning countries spend on their defense. That alone suggests sanctioning countries may want to go beyond dollar for dollar as it is cheaper to stop Russia economically today than on a future battlefield. This points to the bigger question: what would be the future cost of not sanctioning Russia today? Many accredit the weak response from the West to the annexation of Crimea in 2014 as part of the explanation behind Putin’s decision to pursue the current full-scale invasion of Ukraine. Similarly, an unwillingness to bear limited costs today may entail much more substantial costs tomorrow.
When discussing the cost of sanctions, one must also take into account Russia’s counter moves and whether they are credible [14]. Often, they are not [3, 15]. Fear-inducing platitudes, such that China and Russia will reshape the global financial system to insulate themselves from the West’s economic statecraft tools, circulate broadly. We do not deny that these countries are undertaking measures in this direction, but it is much harder to do so in practice than in political speeches. For instance, moving away from the U.S. dollar (and the Euro) in international trade (aside from in bilateral trade relations that are roughly balanced) is highly challenging. In such a trade, conducted without the U.S. dollar, one side of the bargain will end up with a large amount of currency that it does not need and cannot exchange, at scale, for hard currency. As long as a transaction is conducted in U.S. dollar, the U.S. financial system is involved via corresponding accounts, and the threat of secondary sanctions remains powerful. We have seen examples of this in recent months, following President Biden’s executive order on December 22, 2023.
One of Many Tools
Finally, we and other proponents of sanctions do not view them as a panacea, or an alternative to the essential military and financial support that Ukraine requires. Rather, we maintain that sanctions are a critical component of a multi-pronged strategy aimed at halting Putin’s unlawful and aggressive war against Ukraine, a war that threatens not only Ukraine, but peace, liberty, and prosperity across Europe. The necessity for sanctions becomes clear when considering the alternative: a Russian regime with access to $300 billion in the central bank’s reserves, the ability to earn billions more from fossil fuel exports, and to freely acquire advanced Western technology for its military operations against Ukrainian civilians. In fact, the less successful the economic statecraft measures are, the greater the need for military and financial aid to Ukraine becomes, alongside broader indirect costs such as increased defense spending, higher interest rates, and inflation in sanctioning countries. A case in point is the West’s provision of vital – yet expensive – air defense systems to Ukraine, required to counteract Russian missiles and drones, which in turn are enabled by access to Western technology. Abandoning sanctions would only exacerbate this type of challenges.
Conclusion
The discourse on sanctions against Russia necessitates a nuanced understanding of their role within the context of the broader strategy against Russia. It is critical to understand that shallow statements and misinformed opinions become part of the information war, and that the effectiveness of sanctions also depends on all stakeholders’ perceptions about the sanctioning regime’s effectiveness and long run sustainability. Supporting Ukraine in its struggle against the Russian aggression is not a matter of choosing between material support and sanctions; rather, Ukraine’s allies must employ all available tools to ensure Ukraine’s victory. While sanctions alone are not a cure-all, they are indispensable in the concerted effort to support Ukraine and restore peace and stability in the region. The way forward is thus to make the sanctions even more effective and to strengthen the enforcement, not to abandon them.
References
[1] “Russia Chartbook”. KSE Institute, February 2024
[2] “One year of sanctions: Russia’s oil export revenues cut by EUR 34 bn”. Center for Research on Energy and Clean Air, December 2023
[3] “The Price Cap on Russian Oil: A Quantitative Analysis”. Wachtmeister, H., Gars, J. and Spiro, D, July 2023
[4] Spiro, D. Gars, J, and Wachtmeister, H. (2023). “The effects of an EU import and shipping embargo on Russian oil income,” mimeo
[5] “Energy Sanctions: Four Key Steps to Constrain Russia in 2024 and Beyond”. International Working Group on Russian Sanctions & KSE Institute, February 2024
[6] “Tracking the impacts of G7 & EU’s sanctions on Russian oil”. Center for Research on Energy and Clean Air
[7] “Russia Oil Tracker”. KSE Institute, February 2024
[8] “Challenges of Export Controls Enforcement: How Russia Continues to Import Components for Its Military Production”. International Working Group on Russian Sanctions & KSE Institute, January 2024
[9] “Russia Plans Huge Defense Spending Hike in 2024 as War Drags”. Bloomberg, September 2023
[10] “Sanctions and Russia’s War: Limiting Putin’s Capabilities”. U.S. Department of the Treasury, December 2023
[11] “World Investment Report 2023”. UNCTAD
[12] “Russia-China energy relations since 24 February: Consequences and options for Europe”. Swedish Institute of International Affairs, June 2023
[13] Gars, J., Spiro, D. and Wachtmeister, H. (2022). “The effect of European fuel-tax cuts on the oil income of Russia”. Nature Energy, 7(10), pp.989-997
[14] Spiro, D. (2023). “Economic Warfare”. Available at SSRN 4445359
[15] Gars, J., Spiro, D. and Wachtmeister, H., (2023). “Were Russia’s threats of reduced oil exports credible?”. Working paper
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
Monetary Policy in Belarus Since Mid-2020: From Rules to Discretion
The most important “safeguard” against negative consequences from government’s economic policy mistakes is an independent monetary policy aimed at maintaining inflation near a pre-announced target and smoothing out short-term fluctuations. In Belarus, various monetary policy regimes have been employed and, for most of history, the ability of the National Bank of Belarus to set goals and deploy monetary policy instruments without government intervention has been limited. As a result, monetary policy in Belarus tend to exacerbate negative shocks to the Belarusian economy rather than play a stabilizing role. Since mid-2020, the National Bank has de facto lost operational and institutional independence, and monetary policy has become discretionary – focused on stimulating economic activity. As of 2024 this discretionary and expansionary monetary policy has increasingly come into conflict with the need to ensure macroeconomic stability.
Monetary Policy Design in Belarus: Developments in the Last Decade
Since 2015, the National Bank of Belarus (henceforth the National Bank) has declared its monetary policy regime to be monetary targeting. The primary goal of such policy is price stability, while the intermediate target is broad money supply growth. However, research results show that monetary targeting was employed only until mid-2016. From mid-2016 to mid-2020, the National Bank implicitly employed flexible inflation targeting (Kharitonchik, 2023b).
In mid-2020 the National Bank de facto lost its operational independence as the bank was no longer in control of the rules concerning monetary policy (Kharitonchik, 2023a). In 2022-2024, among other things, targets were set for inflation, the growth of the ruble monetary base, broad money supply, the banks’ claims on the economy, and the refinancing rate level. Thus, the National Bank seeks to simultaneously control both the volume of money in the economy and the prices. This is, in practice, expressed in the implementation of discretionary and situational monetary policy.
Under pressure from the government, the National Bank’s monetary policy has since mid-2020 focused on stimulating economic activity, with a high degree of tolerance to inflationary risks. After the US, EU, UK, and several other countries imposed strict sanctions on Belarus in the beginning of 2022, the government’s pressure on the National bank to support economic activity increased even further.
Since October 2022, the only inflation regulator has been strict price controls, exercised by the government in the form of a system of price regulations for approximately 85 percent of the items in the consumer basket. According to the system, manufacturers are obliged to coordinate wholesale prices with government authorities and retailers were in Q4 2022 forced to adjust prices. The system has been modified several times, but as of 2024, it continues to operate in an extremely rigorous version.
Besides the erosion of operational independence, the recent years have been characterized by a marked decline in the institutional framework for executing monetary policy. Aspirations to enhance transparency and accountability of the National Bank to the public seem to be history, at least for the time being. The frequency of the bank’s communication has decreased significantly and its content, as well as the bank’s published data and analytical materials have deteriorated. There are no longer any National Bank briefings on the outcomes of its board meetings, nor are there clear explanations of the decisions made or meetings with the expert community.
The National Bank also introduces uncertainty and undermines confidence in its policies with its strange approach to setting and announcing inflation targets. The increased inflation target, from the previous 5, to 7-8 percent for 2023 is unexplained, the explicit inflation target for 2024 was not presented until the end of August 2023, and the medium-term inflation target is nonexistent. Under such conditions, investment planning and forecasting becomes challenging, necessitating substantial efforts to rebuild trust in monetary authorities for the future.
Figure 1. Inflation and inflation targets in Belarus, 2015–2023.
Source: Author’s estimates based on data from Belstat and the National Bank of Belarus.
Between 2020 and 2023, the National Bank was unable to effectively implement monetary policy in a coordinated manner, falling short in achieving de jure primary and intermediate targets. Thus, inflation in 2020–2022 was significantly higher than targeted levels, while the money supply growth was close to the lower bound of its target range (see Figure 1 and 2).
Figure 2. Broad money growth and its target in Belarus, 2015–2023.
Source: Author’s estimates based on data from the National Bank of Belarus.
In 2023, the inflation was below its target due to total price controls, while money supply growth was twice its target (see Figure 2). Such targeted monetary policy dynamics indicate the instability of the economy’s demand for money and the money multiplier, the instability and poor predictability of money velocity in the face of shocks to the Belarusian economy, as well as the lack (or inability) of a strict commitment by the National Bank to achieve the primary goal of monetary policy.
Monetary Conditions Between 2020 and 2023
Monetary conditions are calculated as a weighted combination of deviations of real interest rates on assets in Belarusian rubles and the real effective exchange rate of the Belarusian ruble from their equilibrium levels. As detailed in Figure 3, the monetary conditions for 2020–2023 are considered stimulative for economic activity and pro-inflationary.
Figure 3. Monetary conditions in Belarus,2015–2023.
Source: Author’s estimates based on QPM BEROC (Kharitonchik, 2023b).
Note: Monetary conditions are estimated as a combination of deviations of real interest rates on the Belarusian ruble assets and of the real effective Belarusian ruble exchange rate from their equilibrium (or inflation-neutral) levels (assessed within the model). Positive monetary condition values indicate their restraining-economic-activity and disinflationary stance, and negative monetary condition values indicate their stimulating and pro-inflationary stance.
In 2020, the soft monetary conditions (the combined effect of interest rates and the exchange rate on the economy) were determined by the behavior of the exchange rate. The Belarusian ruble weakened significantly and became undervalued in 2020 due to a sharp increase in demand for foreign currency at the onset of the Covid-19 pandemic in Belarus and following the presidential elections in August 2020.
As a result of the National Bank’s discretionary monetary policy, interest rates’ volatility significantly increased. A deterioration of the liquidity situation in the banking system and increased risks to the economy during the acute phase of the socio-political crisis in 2020 resulted in interest rates restraining economic activity in September-December 2020.
In 2021, there was a notable improvement in the economic situation in Belarus compared to the crisis experienced in 2020. External demand for Belarusian goods and services rose, and export prices increased significantly which contributed to an increase in foreign currency earnings. As a result, the undervaluation of the Belarusian ruble neutralized during 2021, the banking system moved to a liquidity surplus, and interest rates decreased noticeably, creating soft monetary conditions (see Figure 3).
In 2022–2023, monetary conditions became even softer against the backdrop of increasing priority for the National Bank to support economic activity over inflation containment. The Belarusian ruble again became undervalued which increased foreign trade and allowed for the banking system’s liquidity surplus to expand significantly (see Figure 4).
The realization of a substantial liquidity surplus in 2022 resulted from the National Bank’s active emission policy, likely associated with considerable government pressure. The National Bank injected at least 1.7 billion Belarusian rubles (0.9 percent of GDP) into the financial system through lending to non-deposit financial organizations in 2022, and more than 1.9 billion Belarusian rubles (1 percent of GDP) in 2022 and 1.1 billion Belarusian rubles (0.5 percent of GDP) in 2023, through the purchase of government bonds on the secondary market.
Figure 4. Banking system liquidity in Belarus, 2017–2023.
Source: Author’s estimates based on data from Belstat and the National Bank of Belarus.
Under a colossal and stable liquidity surplus – not withdrawn by the National Bank – interest rates in the money and credit-deposit markets, in 2022-2023, repeatedly reached historically low levels in nominal terms, and in real terms remained significantly below their equilibrium levels (see Figure 3).
The Monetary Conditions’ Impact on Economic Activity and Inflation in Belarus, 2022–2024
Under loose monetary conditions there was a significant strengthening of the credit impulse (share of new loans in GDP) from Q3 2022 and onwards (BEROC, 2023). In this environment of increased credit activity, the money supply grew at a rapid pace in the second half of 2022–2023 (see Figure 2). The money supply growth significantly exceeded an inflation-neutral pace and by the end of 2023, the volume of real money supply exceeded the inflation-neutral level by almost 10 percent.
Expansionary monetary policy was one of the drivers of the rapid economic recovery in the second half of 2022–2023. The negative output gap, which widened in Q2 2022, following increased sanctions against Belarus, was offset in Q1 2023. Moreover, in Q2–Q4 2023, GDP surpassed its equilibrium level (see Figure 5).
Figure 5. Output gap decomposition in Belarus, 2015–2023.
Source: Author’s estimates based on QPM BEROC (Kharitonchik, 2023b).
Note: The output gap is the deviation of real GDP from its potential (or equilibrium) level, where potential is understood as such a volume of GDP that does not exert any additional pro-inflationary or disinflationary pressure.
By 2024, the Belarusian economy reached a state of moderate overheating (see Figure 5). Currently, loose monetary policy fuels demand but the ability to adjust supply to increased demand levels is limited under sanctions and labor shortages. This mismatch between supply and demand would normally lead to a significant acceleration of inflation. However, due to the strict price controls, this is yet to realize. In fact, inflation reached a historically low value of 2.0 percent Year over Year (YoY), in September 2023. Nonetheless, inflation in Belarus began to accelerate in Q4 in 2023 and amounted to 5.8 percent YoY at the end of the year. In an environment of excess demand and a shortage of workers, firms’ costs rise and translate into higher selling prices, albeit on a limited scale and with a time lag due to the price controls (see Figure 6).
Figure 6. CPI inflation in Belarus, 2015–2023.
Source: Author’s estimates based on data from Belstat. Calculations based on QPM BEROC (Kharitonchik, 2023b).
A prolonged combination of total price controls and loose monetary policy leads to an inflationary overhang – the potential for delayed accelerated price growth. Inflation overhang is a highly undesirable phenomenon since it increases the risk of a price surge in the future and the need for a sharp and aggressive tightening of monetary policy. The inflationary overhang in Belarus is estimated at 5–9 percent (for the end of 2023). This means that there is a risk of a sharp increase in prices by 5-9 percent if price controls are removed or significantly relaxed.
Conclusion
Since mid-2020, the National Bank has de facto lost its operational independence, and monetary policy has become discretionary, focused on stimulating economic activity. By the beginning of 2024, this discretionary and overly loose monetary policy has increasing come into conflict with the task of ensuring macroeconomic stability.
The Belarusian economy enters 2024 in a state of low economic growth potential (about 1 percent per year) and an imbalance of supply and demand, which creates threats of intensified inflation and a decline in foreign trade.
Attempts by the authorities to artificially maintain high rates of GDP growth and low inflation through excessively stimulating economic policies and archaic price controls may lead to an economic overheating by the end of 2024 similar to the situations leading up to the currency crises in 2009, 2011 and 2015. Under such developments, the fragility of the economy and the likelihood of an economic crisis in Belarus will increase.
To prevent such negative development, it is critical to gradually normalize the monetary policy design in coordination with fiscal policy. Key recommendations from experts for a strengthening of the stabilizing role of monetary policy include ensuring the National Bank’s independence, eliminating discretionary and subjective policymaking, and outlining a clear hierarchy of monetary policy goals (Kruk, 2023).
Simulation results indicate that the use of flexible inflation targeting is the most preferable monetary policy strategy for Belarus under existing sanctions and internal and external capital control measures (as discussed in Kharitonchik, 2023a).
Lastly, as monetary policy is about managing expectations for which trust (i.e. credibility) plays a key role, restoring the public’s trust in the National Bank is essential. To achieve this, the National Bank needs to reestablish communication with the public and resume the publication of analytical and statistical reports, at a minimum matching the extent seen in early 2021.
References
- BEROC (2023). Monetary Environment Review. Q3-2023.
- Kharitonchik, А. (2023a). Optimal Monetary Policy Framework in Belarus. BEROC Working Paper Series, 88.
- Kharitonchik, А. (2023b). Quarterly Projection Model for Belarus: Methodological Aspects and Practical Applications. (QPM BEROC). BEROC Working Paper Series, 82.
- Kruk, D. (2023). What is Needed to Reinforce macroeconomic stability in Belarus? BEROC Working Paper Series, 85.
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.
How to Undermine Russia’s War Capacity: Insights from Development Day 2023
As Russia’s full-scale invasion of Ukraine continues, the future of the country is challenged by wavering Western financial and military support and weak implementation of the sanction’s regime. At the same time, Russia fights an information war, affecting sentiments for Western powers and values across the world. With these challenges in mind, the Stockholm Institute for Transition Economics (SITE) invited researchers and stakeholders to the 2023 Development Day Conference to discuss how to undermine Russia’s capacity to wage war. This policy brief shortly summarizes the featured presentations and discussions.
Holes in the Net of Sanctions
In one of the conference’s initial presentations Aage Borchgrevink (see list at the end of the brief for all presenters’ titles and affiliations) painted a rather dark picture of the current sanctions’ situation. According to Borchgrevink, Europe continuously exports war-critical goods to Russia either via neighboring countries (through re-rerouting), or by tampering with goods’ declaration forms. This claim was supported by Benjamin Hilgenstock who not only showed that technology from multinational companies is found in Russian military equipment but also illustrated (Figure 1) the challenges to export control that come from lengthy production and logistics chains and the various jurisdictions this entails.
Figure 1. Trade flows of war-critical goods, Q1-Q3, 2023.
Source: Benjamin Hilgenstock, Kyiv School of Economics Institute.
Offering a central Asian perspective, Eric Livny highlighted how several of the region’s economies have been booming since the enforcement of sanctions against Russia. According to Livny, European exports to Central Asian countries have in many cases skyrocketed (German exports to the Kyrgyzs Republic have for instance increased by 1000 percent since the invasion), just like exports from Central Asian countries to Russia. Further, most of the export increase from central Asian countries to Russia consists of manufactured goods (such as telephones and computers), machinery and transport equipment – some of which are critical for Russia’s war efforts. Russia has evidently made a major pivot towards Asia, Livny concluded.
This narrative was seconded by Michael Koch, Director at the Swedish National Board of Trade, who pointed to data indicating that several European countries have increased their trade with Russia’s neighboring countries in the wake of the decreased direct exports to Russia. It should be noted, though, that data presented by Borchgrevink showed that the increase in trade from neighboring countries to Russia was substantially smaller than the drop in direct trade with Russia from Europe. This suggests that sanctions still have a substantial impact, albeit smaller than its potential.
According to Koch, a key question is how to make companies more responsible for their business? This was a key theme in the discussion that followed. Offering a Swedish government perspective, Håkan Jevrell emphasized the upcoming adoption of a twelfth sanctions package in the EU, and the importance of previous adopted sanctions’ packages. Jevrell also continued by highlighting the urgency of deferring sanctions circumvention – including analyzing the effect of current sanctions. In the subsequent panel Jevrell, alongside Adrian Sadikovic, Anders Leissner, and Nataliia Shapoval keyed in on sanctions circumvention. The panel discussion brought up the challenges associated with typically complicated sanctions legislation and company ownership structures, urging for more streamlined regulation. Another aspect discussed related to the importance of enforcement of sanctions regulation and the fact that we are yet to see any rulings in relation to sanctions jurisdiction. The panelists agreed that the latter is crucial to deter sanctions violations and to legitimize sanctions and reduce Russian government revenues. Although sanctions have not yet worked as well as hoped for, they still have a bite, (for instance, oil sanctions have decreased Russian oil revenues by 30 percent).
Reducing Russia’s Government Revenues
As was emphasized throughout the conference, fossil fuel export revenues form the backbone of the Russian economy, ultimately allowing for the continuation of the war. Accounting for 40 percent of the federal budget, Russian fossil fuels are currently mainly exported to China and India. However, as presented by Petras Katinas, the EU has since the invasion on the 24th of February, paid 182 billion EUR to Russia for oil and gas imports despite the sanctions. In his presentation, Katinas also highlighted the fact that Liquified Natural Gas (LNG) imports for EU have in fact increased since the invasion – due to sanctions not being in place. The EU/G7 imposed price cap on Russian oil at $60 per barrel was initially effective in reducing Russian export revenues, but its effectiveness has over time being eroded through the emergence of a Russia controlled shadow fleet of tankers and sales documentation fraud. In order to further reduce the Russian government’s income from fossil fuels, Katinas concluded that the whitewashing of Russian oil (i.e., third countries import crude oil, refine it and sell it to sanctioning countries) must be halted, and the price cap on Russian oil needs to be lowered from the current $60 to $30 per barrel.
In his research presentation, Daniel Spiro also focused on oil sanctions targeted towards Russia – what he referred to as the “Energy-economic warfare”. According to Spiro, the sanctions regime should aim at minimizing Russia’s revenues, while at the same time minimizing sanctioning countries’ own costs, keeping in mind that the enemy (i.e. Russia) will act in the exact same way. The sanctions on Russian oil pushes Russia to sell oil to China and India and the effects from this are two-fold: firstly, selling to China and India rather than to the EU implies longer shipping routes and secondly, China and India both get a stronger bargaining position for the price they pay for the Russian oil. As such, the profit margins for Russia have decreased due to the price cap and the longer routes, while India and China are winners – buying at low prices. Considering the potential countermoves, Spiro – much like Katinas – emphasized the need to take control of the tanker market, including insurance, sales and repairs. While the oil price cap has proven potential to be an effective sanction, it has to be coupled with an embargo on LNG and preferrable halted access for Russian ships into European ports – potentially shutting down the Danish strait – Spiro concluded.
Chloé Le Coq presented work on Russian nuclear energy, another energy market where Russia is a dominant player. Russia is currently supplying 12 percent of the United States’ uranium, and accounting for as much as 70 percent on the European market. On top of this, several European countries have Russian-built reactors. While the nuclear-related revenues for Russia today are quite small, the associated political and economic influence is much more prominent. The Russian nuclear energy agency, Rosatom, is building reactors in several countries, locking in technology and offering loans (e.g., Bangladesh has a 20-year commitment in which Rosatom lends 70 percent of the production cost). In this way Russia exerts political influence on the rest of the world. Le Coq argued that energy sanctions should not only be about reducing today’s revenues but also about reducing Russian political and economic influence in the long run.
The notion of choke points for Russian vessels, for instance in the Danish strait, was discussed also in the following panel comprising of Yuliia Pavytska, Iikka Korhonen, Aage Borchgrevink, and Lars Schmidt. The panelists largely agreed that while choke points are potentially a good idea, the focus should be on ensuring that existing sanctions are enforced – noting that sanctions don’t work overnight and the need to avoid sanctions fatigue. Further, the panel discussed the fact that although fossil fuels account for a large chunk of federal revenues, a substantial part of the Russian budget come from profit taxes as well as windfall taxes on select companies, and that Russian state-owned companies should in some form be targeted by sanctions in the future. In line with the previous discussion, the panelists also emphasized the importance of getting banks and companies to cooperate when it comes to sanctions and stay out of the Russian market. Aage Borchgrevink highlighted that for companies to adhere to sanctions legislation they could potentially be criminally charged if they are found violating the sanctions, as it can accrue to human rights violations. For instance, if companies’ parts are used for war crimes, these companies may also be part of such war crimes. As such, sanctions can be regarded as a human rights instrument and companies committing sanctions violations can be prosecuted under criminal law.
Frozen Assets and Disinformation
The topic of Russian influence was discussed also in the conference’s last panel, composed of Anders Ahnlid, Kata Fredheim, Torbjörn Becker, Martin Kragh, and Andrii Plakhotniuk. The panelists discussed Russia’s strong presence on social media platforms and how Russia is posting propaganda at a speed unmet by legislators and left unchecked by tech companies. The strategic narrative televised by Russia claims that Ukraine is not a democracy, and that corruption is rampant – despite the major anti-corruption reforms undertaken since 2014. If the facts are not set straight, the propaganda risks undermining popular support for Ukraine, playing into the hands of Russia. Further, the panelists also discussed the aspect of frozen assets and how the these can be used for rebuilding Ukraine. Thinking long-term, the aim is to modify international law, allowing for confiscation, as there are currently about 200 billion EUR in Russian state-owned assets and about 20 billion EUR worth of private-owned assets, currently frozen.
The panel discussion resonated also in the presentation by Vladyslav Vlasiuk who gave an account of the Ukrainian government’s perspective of the situation. Vlasiuk, much like other speakers, pointed out sanctions as one of the main avenues to stop Russia’s continued war, while also emphasizing the need for research to ensure the implications from sanctions are analyzed and subsequently presented to the public and policy makers alike. Understanding the effects of the sanctions on both Russia’s and the sanctioning countries’ economies is crucial to ensure sustained support for the sanction’s regime, Vlasiuk emphasized.
Joining on video-link from Kyiv, Tymofiy Mylovanov, rounded off the conference by again emphasizing the need for continued pressure on Russia in forms of sanctions and sanctions compliance. According to Mylovanov, the Russian narrative off Ukraine struggling must be countered as the truth is rather that Ukraine is holding up with well-trained troops and high morale. However, Mylovanov continued, future funding of Ukraine’s efforts against Russia must be ensured – reminding the audience how Russia poses a threat not only to Ukraine, but to Europe and the world.
Concluding Remarks
The Russian attack on Ukraine is military and deadly, but the wider attack on the liberal world order, through cyber-attacks, migration flows, propaganda, and disinformation, must also be combatted. As discussed throughout the conference, sanctions have the potential for success, but it hinges on the beliefs and the compliance of citizens, companies, and governments around the world. To have sanctions deliver on their long-term potential it is key to include not only more countries but also the banking sector, and to instill a principled behavior among companies – having them refrain from trading with Russia. Varying degrees of enforcement undermine sanctions compliant countries and companies, ultimately making sanctions less effective. Thus, prosecuting those who breach or purposedly evade sanctions should be a top priority, as well as imposing control over the global tanker market, to regain the initial bite of the oil price cap. Lastly, it is crucial that the global community does not forget about Ukraine in the presence of other conflicts and competing agendas. And to ensure success for Ukraine we need to restrain the Russian war effort through stronger enforcement of sanctions, and by winning the information war.
List of Participants
Anders Ahnlid, Director General at the National Board of Trade
Aage Borchgrevink, Senior Advisor at The Norwegian Helsinki Committee
Torbjörn Becker, Director at the Stockholm Institute of Transition Economics
Chloé Le Coq, Professor of Economics, University of Paris-Panthéon-Assas, Economics and Law Research Center (CRED)
Benjamin Hilgenstock, Senior Economist at Kyiv School of Economics Institute
Håkan Jevrell, State Secretary to the Minister for International Development Cooperation and Foreign Trade
Michael Koch, Director at Swedish National Board of Trade
Iikka Korhonen, Head of the Bank of Finland Institute for Emerging Economies (BOFIT)
Martin Kragh, Deputy Centre Director at Stockholm Centre for Eastern European Studies (SCEEUS)
Eric Livny, Lead Regional Economist for Central Asia at European Bank for Reconstruction and Development (EBRD)
Anders Leissner, Lawyer and Expert on sanctions at Advokatfirman Vinge
Tymofiy Mylovanov, President of the Kyiv School of Economics
Vladyslav Vlasiuk, Sanctions Advisor to the Office of the President of Ukraine
Nataliia Shapoval, Chairman of the Kyiv School of Economics Institute
Yuliia Pavytska, Manager of the Sanctions Programme at KSE Institute
Andrii Plakhotniuk, Ambassador Extraordinary and Plenipotentiary of Ukraine to the Kingdom of Sweden
Daniel Spiro, Associate Professor, Uppsala University
Adrian Sadikovic, Journalist at Dagens Nyheter
Kata Fredheim, Executive Vice President of Partnership and Strategy and Associate Professor at SSE Riga
Lars Schmidt, Director and Sanctions Coordinator at the Ministry for Foreign Affairs, Sweden
Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.