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1 [1] (February 20, 2025)

handle is hein.crs/govesno0001 and id is 1 raw text is: The Economic Impact of Russia Sanctions In response to Russia's full-scale invasion of Ukraine starting in February 2022, a broad, multilateral coalition, including the United States, the European Union (EU), the United Kingdom, Canada, Australia, Japan, and others, imposed sweeping new sanctions on Russia. The sanctions-unprecedented in terms of scope, coordination, and speed-target Russia's key decisionmakers and influential business elites, among others. Sanctions also target Russia's financial, military, and energy sectors as well as access to U.S. technology and the dollar, among other measures. Russia's economy has largely withstood sanctions to date, but economic pressures within Russia are building. On February 12, President Trump announced that, following a call with Russian President Vladimir Putin, negotiations to end the war would start immediately. U.S. Secretary of State Macro Rubio has indicated that sanctions relief could be a concession in a negotiated settlement to end the war. U.S. sanctions policy is set by Congress and, via emergency authorities delegated by Congress, the President. Congress might consider the conditions under which the United States should lift, maintain, or tighten sanctions on Russia. Congress might choose to exercise oversight of executive branch sanctions policy toward Russia and/or directly set U.S. sanctions policy toward Russia through legislation. Impact on Russia's Economy Early in the war, the broad consensus was that the new sanctions would devastate the Russian economy. By some metrics, though, Russia's economy has proved resilient to date. For example, the global financial crisis of 2008-2009 was far more disruptive to Russia's economic growth (Figure 1). Additionally, its rate of inflation, unemployment levels, and flow of imports have outperformed forecasts made early in the war (Figure 1). There are at least three reasons why Russia's economy has beaten expectations: * First is Russia's transition to a wartime economy, including increased military production and increased military personnel payments. Russia's military expenditures have roughly doubled as a percentage of Russia's gross domestic product (GDP) from 3%-4% of GDP in 2019-2021 to a projected 6.2% of GDP in 2025, boosting Russia's economy, at least in the short-term. * Second is Russia's pivot to alternative economic partners. The coalition of countries sanctioning Russia is broad but not universal. Brazil, China, India, Saudi Arabia, and Turkey are among the major emerging-market economies that have not sanctioned Russia. Russia has deepened economic ties with these and other emerging-market economies. Updated February 20, 2025 * Third is Russia's energy exports. The United States and allies have imposed sanctions to limit Russia's ability to profit from energy exports. Due to concerns about stability in global energy markets, the U.S. and partner governments generally stopped short of seeking to restrict Russian energy trade worldwide and related financial transactions. However, over the course of the war, these countries have gradually tightened energy sanctions on Russia and Europe's imports of Russian energy-previously a significant source of Russian revenue-have fallen. Figure I. Economic Trends in Russia Economic Growth in Russia, % change in GDP Globl tinancial Cka 10 0 -10 2000 2005 2010 2015 2020 - Realized data Forecast made in April 2022 Forecast made in October 2024 Growth, % change in Inflation (yr-end), % change 10 30 20 0 to -10 0 2019 2021 Zo3 2025 2019 2 3 225 Unemployment, % Imports, % change volume 01 10 30 2019 2021 202. 25 2019 2021 20B 2025 Source: Created by CRS from International Monetary Fund (IMF) World Economic Outlook Database. Are Economic Challenges in Russia Mounting? Even though Russia's economy has exceeded expectations, sanctions have created challenges for Russia. Sanctions have complicated Russia's cross-border payments, Russia's military has difficulty procuring key components, and hundreds of U.S. and other multinational companies have left Russia. More recently, some trends suggest economic pressure on Russia may be building. Russian President Vladimir Putin acknowledged in December 2024 that inflation and economic overheating are issues facing the Russian economy. To combat inflation, the central bank raised

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