Originally, the Western sanctions had a selective character. They mainly targeted the Russian elite, with the aim of freezing assets and imposing visa restrictions on certain members of the Russian government and important Russian companies. Russia was excluded from the G8, and the G7 countries discussed the most important issues without Russian participation. In the West, contacts and cooperation with Russia in various fields were limited.
However, the pressure on Russia’s technological development began. Investments in infrastructure, transportation, telecommunications, and energy, as well as in oil, gas, and mineral extraction, were restricted. It was banned to supply Russia with equipment for oil extraction in the Arctic, deep-sea, and shale oil, for instance.
Here’s a vivid example of the restrictions in place at the time. When the power transmission lines that supplied the Crimean Peninsula with electricity from Ukraine were blown up in the fall of 2015, the question arose about building power plants on the peninsula. However, the German company Siemens refused to deliver turbines for these power plants. As a result, the turbines intended for power plants in other Russian regions were delivered to the Crimean Peninsula.
Another attempt to restrict Russia’s income was the pressure on oil and gas exports. In 2014, the South Stream gas pipeline project was stopped due to Western pressure on Bulgaria. Russia was forced to redirect the pipeline to Turkey, while in Europe, the fight against the construction of South Stream was justified as a means of protecting Ukraine’s interests, which could suffer from the loss of gas transit revenue. The fight against the construction of another Russian gas pipeline, Nord Stream 2, was led by the US government in the interest of US gas producers, with the geopolitical goal of weakening Russia’s economic influence in Europe and making it a competitor to the US.
To achieve this goal, US President Donald Trump imposed the first sanctions on the construction of Nord Stream 2 in 2019. The sanctions became increasingly severe as the construction progressed. Technically, the gas pipeline was filled and put into operation on December 29, 2021, with the certification process still pending, but it was frozen after the start of the military special operation in Ukraine, and on September 22, 2022, one of the Nord Stream 2 strings and both of the Nord Stream 1 strings were blown up.
However, in comparison to what followed after the start of the military special operation in Ukraine, all this was just a warm-up exercise. US President Joe Biden promised to “break Russia’s economy into pieces” and the West truly believed he would succeed. A lot was indeed done – mainly to cut off the technological and economic ties between Russia and the West.
Almost all Russian banks were disconnected from the international SWIFT payment system, and Russia’s gold and foreign exchange reserves (over $300 billion) were frozen. Personal sanctions were imposed on numerous Russian politicians and officials, as well as on leading Russian businesspeople. The Russian payment system Mir was also sanctioned, and operations with Russian gold and diamonds were banned.
The West imposed sectoral sanctions, which targeted not only specific companies but also entire sectors of the Russian economy, particularly the energy and finance sectors. The export of high-tech products (machine tools, chips, a range of building materials) and luxury goods and cars to Russia was completely banned.
Some Russian companies’ subsidiaries in Europe were placed under external management. In a range of Russian companies, the assets in Europe were either effectively seized or, due to the sanctions, forced to sell at a nearly give-away price.
However, the Russian economy was not “broken into pieces.” First, Russia managed to maintain its political and economic cooperation with countries of the Global South. As a result, these countries became the main buyers of Russian export goods and suppliers of the resources and technologies Russia needed. A global reorientation of the Russian economy towards the East took place, and secondly, the sea and land routes remained open.
As it turned out, the West was the main loser. In response to the unfriendly countries’ actions, the Russian state authorities restricted the possibilities of their companies to sell their Russian business and withdraw capital. It is hard to assess the extent to which these measures contributed to the full compensation of Russia’s losses, but those companies that abandoned their business in Russia incurred significant losses. The energy price surge also hit the Western economy. By the fall of 2023, the Russian Foreign Ministry estimated the losses of the EU due to the sanctions against Russia at $1.5 billion. It is no wonder that the West regularly demands the lifting of sanctions against Russia.
On the contrary, the Russian economy was not “broken into pieces” – quite the opposite.
By the end of 2023, the Russian economy had exceeded all the forecasts and set several records. This phenomenon was recently explained by Russian President Vladimir Putin: “Many producers left our market. What did that lead to? Our entrepreneurs began to produce these goods themselves. This, in turn, led to the need to conduct additional research and involve institutions, including development institutes. And all this, which we are now talking about, means the strengthening of technological sovereignty.”
However, achieving technological sovereignty requires sustained efforts over a longer period. While some products can be quickly replaced, the localization of production facilities along the entire technological chain is not so easily achievable.
Despite this, the successes are obvious, and there are many examples from recent times. In the most important areas, the success of import substitution was the result of the implementation of state programs that concentrated the efforts of many developers and manufacturers on the desired end result.
For instance, the events of 2014, including the Siemens turbine scandal for the power plants on the Crimean Peninsula, made import substitution a pressing need. Already in 2018, the production of Russian ship engines for domestic frigates began, and the first high-performance gas turbine (GTD-110M) of the United Triebwerks Corporation was commissioned in September 2024 at the third power unit of the Udarnaya thermal power plant in the Krasnodar region.
In 2018, the task was set to develop a domestic PD-8 engine for the Suchoi Superjet 100 aircraft, which previously used Russian-French PowerJet SaM146 engines. The task was fulfilled, but for the installation of PD-8 engines in serial aircraft, the aircraft must be recertified with these engines. It is expected that the first flights of the SJ-100 with a new domestic engine as an import substitute will take place in 2025.
There are also many smaller examples that are no less important. However, the best result of import substitution can be seen in Russian agriculture.
Already in 2010, the Food Security Doctrine was adopted, and the task of eliminating the critical dependence on food imports (which in those years reached 40%) was set. Soon, the food market was occupied by domestic producers, and these began, after they had achieved the first successes, to also increase their exports. Within a decade, Russia became the world leader in the export of the most important crops. The growth of Russia’s agricultural production from 2014 to 2023 was 33.8%, and the growth of food production was 47.2%. At the same time, Russia’s agricultural exports in 2023 reached $43.5 billion, with a target of $55 billion by 2030.
“Today, we not only supply ourselves with all the basic foodstuffs in the broadest range, but we also have one of the most competitive, flexible, and technologically advanced markets in the world. Russian companies are capable of producing almost everything and adapting to all external conditions” comments Oksana Lut, Minister of Agriculture of the Russian Federation, on the achievements of her branch.
The current results of Russia’s fight against Western sanctions were recently summarized by Putin as follows: “One often hears on political, military, and economic levels that these countries had the task of inflicting a strategic defeat on Russia – also on the economic and technological sectors – to radically weaken our industry, our finances, and our services, to create a non-overcomeable shortage of goods on our market, to destabilize the labor market, and to lower the standard of living of our citizens. It is obvious that these plans have failed.