Russia Under Non-Military Pressures: Expectations, Realities,
and Lessons of Sanctions.
October 20-21, 2023
Eighteen months have transpired since Russia initiated a full-fledged invasion of Ukraine. The human toll has been staggering — military casualties numbering in the hundreds of thousands on both sides, civilian deaths likely reaching similar numbers, and countless others enduring emotional and property losses, displacement, and unemployment. The strategic deadlock resulting from Ukraine's counter-offensive, along with the likelihood of the conflict settling into a protracted phase, necessitates a more dispassionate, analytical evaluation of interim outcomes and the mistakes made not only in the theater of war but also in the arenas of economic and political confrontation between Putin's regime and the West.

Unquestionably, the sole axiom that enjoys universal assent among the Western coalition, key international organizations, and even the Russian democratic opposition is the 21st-century norm that no state initiating an unprovoked military incursion into a neighbor should succeed. Putin's objectives remain nebulous and subject to change, yet it's clear that any reversion to the pre-1991 internationally recognized borders would signify a Russian defeat. This perspective forms the basis for evaluating the efficacy of both military and non-military strategies employed against Putin's regime.

Ukraine's resilience and the extent of military and financial support it has garnered are unparalleled. However, the strategies of non-military pressure executed to compel Russia's withdrawal appear inadequately conceptualized and ineffective. This inefficacy has been the principal subject of debate over the past year, causing divisions not just among nations and corporations, but within Russia's anti-war factions, the opposition, and even among Ukrainian political figures.

Sanctions have been the epicenter of these debates. Encompassing not just punitive actions against Russian corporations and officials but also affecting ordinary Russian citizens post-February 24, 2022, these measures impinge on civil liberties. Yet sanctions, inherently non-judicial, cannot be deemed punitive actions in their essence. Their stated objective is to exert multifaceted pressure on Russia to expedite the cessation of hostilities, either by compelling it to make concessions or by undermining its economy to the point of military defeat. Consequently, the rationale and effectiveness of the sanctions regime should be critically assessed, devoid of ideological and ethical embellishments, but taking into account fundamental human rights and humanitarian considerations, which are factored in when analyzing the necessity and proportionality of sanctions in each specific case.

To clarify, this analysis neither contests the notion of sanctions per se nor urges an immediate reassessment of existing specific measures, despite citing instances of their questionable compatibility with stated objectives. Instead, as proponents of non-military countermeasures against Putin's regime, we advocate for a more logical and pragmatic recalibration of sanctions. We believe such a shift could yield more tangible outcomes, expedite the cessation of Russian occupation in Ukraine, and ultimately contribute to the dismantling of Russia's dictatorial regime.

The authors of this report wish to unambiguously condemn the war in Ukraine, instigated by Russia without any form of valid justification. We are united in our desire for the prompt and complete liberation of Ukrainian territories currently under Russian occupation. Moreover, we fully endorse the notion that Russia must eventually provide appropriate reparations to Ukraine for the extensive damage caused.

However, it's crucial to understand that the war is more a symptom than the disease itself. We believe that the true origin and underlying cause of this war can be traced back to Russia's internal problems. Specifically, the conflict in Ukraine is an outcome of the current Russian government's attempt to entrench a totalitarian and unbridled form of governance. In essence, Ukraine is yet another victim of what we see as Russia's internal occupation by a self-serving cohort of security service functionaries.

From this standpoint, our support for Ukraine's sovereignty and territorial integrity is intrinsically linked with our broader discussion about the internal dynamics of Russia and how international diplomatic and economic pressures can play a role in it.

It should be noted that the authors of this report do not affiliate themselves with any singular political faction, nor do we subscribe to a single ideological platform. We retain the right to divergent opinions on a host of issues, including the various topics discussed in this report. Despite these differences, we are united in our belief that the necessity for open dialogue on the effectiveness of various measures aimed at countering the Putin regime has never been more critical than it is today.
part 1
General context
There's a complex array of terminology used when referring to measures applied to states, corporations, and individuals, complicating a comprehensive assessment. The term "sanctions" is commonly used in public discourse but is rarely found in official documents. In political parlance, "sanctions" often refer to actions against a state aimed at forcing compliance with or penalizing breaches of international law. This term is notably employed in the context of measures against Russia.

Conventionally, "sanctions" have been associated with actions taken by the UN Security Council under Chapter VII of the UN Charter. These sanctions carry the weight of international law, are binding on all UN member states, and differ from unilateral measures taken by individual states or entities like the European Union. However, the UN's approach to sanctions has evolved over time, extending to measures against specific individuals and organizations.

While UN sanctions offer a degree of uniformity and legal certainty, unilateral sanctions are frequently employed by states and international organizations. These sanctions, based on alleged violations of international law, are not extraterritorial in nature and are binding only on the states that impose them. Nonetheless, third countries sometimes align with these unilateral measures, often due to the threat of secondary sanctions.

It should be noted that these unilateral sanctions have generated considerable opposition. Many UN member states, for instance, have voted against the imposi-tion of unilateral economic measures that have not been approved by relevant UN bodies. Russia, supported by nations like China, argues against the legitimacy of unilateral sanctions, even though Russia itself employs such measures, not always in retaliation and often without clear justification.

Within the realm of international law, sanctions and restrictive measures are often understood as forms of respon-sibility for internationally wrongful acts. These measures are not punitive but aim to cease and prevent the recurrence of a specific breach, and they must be rever-sible and proportionate to the offense. Moreover, while states can bear respon-sibility for actions by individuals, the re-verse is not automatically true. This dicho-tomy creates a complex landscape for the imposition of sanctions against individuals.

Sanctions against Russia are not arbitrary actions by individual states but are grounded in the condemnation by the UN General Assembly and the majority of states for Russia's aggressive actions against Ukraine. Despite potential questions regarding human rights compliance and proportionality, there is little doubt that these measures generally align with international law, given Russia’s actions in contravention of international humanitarian norms.
Use of sanctions during and after the Cold War
Back in 2015, analyzing the results of the "post-Crimea" sanctions, Andrei Kolesnikov, head of the Russian Domestic Policy and Political Institutions Program at the Carnegie Moscow Center, wrote: "Western approach to Russia is based on the assumption that continued pressure on the country will force the government of President Vladimir Putin to make concessions or even scrap. But nothing could be further from the truth1.”

There is nothing unique about this description of the Russian situation. Since the middle of the 20th century, there has not been a single example where country sanctions per se have been able to stop a war or lead to political regime change.

Sanctions pressure on Russia has not collapsed its economy, just as it did not collapse the economies of other authoritarian regimes and did not lead to the dismantling of these regimes themselves — Saddam Hussein in Iraq, Muammar Gaddafi in Libya, Kim Jong-un in North Korea, Fidel Castro in Cuba, Chavez and then Maduro in Venezuela, the ayatollahs in Iran. The sanctions against Belarus are almost entirely compensated by economic assistance from and cooperation with Russia, in fact only strengthening the regime of Alexander Lukashenko.
The effectiveness of sanctions cannot be judged solely by their primary purpose. Moreover, the actual goals pursued sometimes differ from the declared ones: in the case of the sanctions against Iran, in addition to the stated goal of the United States to prevent Iran from becoming a nuclear power, there is in fact also the goal of regime change, which has existed since 19792. As we can see, both the overt and covert goals have not been achieved, despite the Iranian regime's geographic location and ideological framing, which makes Iran much more vulnerable to economic blockade than Russia.
Céline Antonin
a scholar from the Center
for Economic Research at Sciences Po
The effectiveness of sanctions cannot be judged solely by their primary purpose. Moreover, the actual goals pursued sometimes differ from the declared ones: in the case of the sanctions against Iran, in addition to the stated goal of the United States to prevent Iran from becoming a nuclear power, there is in fact also the goal of regime change, which has existed since 19792. As we can see, both the overt and covert goals have not been achieved, despite the Iranian regime's geographic location and ideological framing, which makes Iran much more vulnerable to economic blockade than Russia.
Céline Antonin
a scholar from the Center
for Economic Research at Sciences Po
The long history of sanctions confrontation in Soviet-American relations culminated in the 1980s, when both the USSR was sanctioned for its invasion of Afghanistan and its largest satellite, the Polish People's Republic. The U.S. imposed sanctions against Poland in response to General Wojciech Jaruzelski's imposition of martial law in December 1981. The U.S. denied most-favored nation status in trade and blocked Warsaw's admission to the IMF, which prevented Poland from either restructuring old foreign debts or borrowing funds. In the 1970s, borrowing from the West, together with subsidies from the USSR, helped the PPR authorities muffle popular discontent after the mass protests and riots of 1970-71 over falling living standards. The depletion of the source of borrowing coincided with the worsening economic problems in the USSR, the main donor to Poland.

According to estimates by the Polish leadership itself3, U.S. sanctions cost PPR $15 billion over four years, roughly equivalent to 2.5% of the country's GDP per year. This was probably a slight exaggeration by the PPR leadership, which sought to shift to the sanctions regime the effect of internal factors, particularly mass emigration and reduced aid from the USSR.

The Soviet Union also found itself under U.S. sanctions in the early 1980s in response to the invasion of Afghanistan. The most significant short-term move in terms of its effect was expected to have been the ban by President Carter's administration on supplying 17 million tons of grain to the USSR. However, the USSR bought grain from countries that did not adhere to this restriction. Moscow circumvented the ban on supplies of high-tech and oil and gas equipment with the help of European countries. Notwithstanding this resistance of the Soviet leadership to economic sanctions, even their small effect led, inter alia, to more serious economic problems and internal political changes in the socialist bloc as a whole.

The experience of Libya can be considered as an example of successful application of sanctions in terms of their stated purpose and result. However, it should be taken into account that the sanctions against Libya were global (imposed by the UN) and at the same time very precise in terms of objectives. They did not imply the deposition of dictator Gaddafi but only required him to admit responsibility for the 1988 bombing of an American passenger plane over Lockerbie, extradite the suspects, and pay $2.7 billion to the families of the victims. When Gaddafi agreed to all these demands in 2003, the UN Security Council lifted the sanctions4. It was not until much later, in 2011, that the Arab Spring, civil war, and NATO military intervention on the side of Gaddafi's opponents brought his regime to ruin. (Let us remind ourselves that there are no UN sanctions against Russia today and under the current UN charter they cannot be imposed.) The fall of Saddam Hussein's regime in Iraq was also caused not by years of sanctions but by direct international intervention, and moreover by repeated intervention.
Looking back, the sanctions regime against Yugoslavia in early 1990s appears to have been the most effective. Serbia's estimated GDP per capita fell
from $3,000 in 1990
to $700 in 19945
Sanctions proved to be one of the causes of hyperinflation, industrial collapse, mass emigration, and the destruction of the economy. However, on the one hand, it is impossible to separate the effect of sanctions from the overall effect of the war, and on the other hand, the sanctions against Belgrade were comprehensive.
International pressure is believed to have meaningfully worsened the economic situation of the apartheid regime in South Africa but this process took almost 30 years since the first sanctions were imposed at the UN in 1962, and the regime was dismantled by the liberalization and reforms advanced by the country's own ruling party soon after an evolutionary changes in the strategy of its leadership. This kind of expectation was present in Russian politics during the era of Dmitry Medvedev's decorative rule but for many reasons it was not realized. To date, neither the promoters of the sanctions, nor independent analysts see the possibility of such a scenario developing in Russia.

The first partial bans on trade and financing imposed by the EEC in November 1991 not only failed to stop the war in Croatia but also failed to prevent the even bloodier Bosnian War. It was not until May 1992 that the UNSC passed Resolution 757, banning all trade with Yugoslavia, all scientific and technical contacts, flights into the country and even the entry of government officials to other countries. This was followed by a ban on maritime transportation and the US freezing of Yugoslavia’s assets6.

Sanctions against Yugoslavia were distinguished from the current sanctions against Russia by their global character (expressed in a UN Security
Some obvious conclusions:
Sanctions have almost nowhere achieved their stated goals, their role in the complex set of other instruments of pressure is difficult to distinguish but probably their practical significance is greatly overestimated, and media coverage allows them to be considered, among other things (and perhaps above all) as an element of psychological and, moreover, propagandistic, treatment.
Sanctions as a political tool are more effective the more liberal or multi-structured the state on which they were imposed is. The more authoritarian or even totalitarian a regime is, the less it can be changed under sanctions pressure, in some cases even vice versa - sanctions are used as a reason and a tool for internal conservation and galvanization of such regimes.
The more global in status and the more narrow and specific in requirements, the more clearly sanctions induce governments, public and corporate institutions to change behavior and eliminate the causes of the sanctions. Sanctions imposed without clearly delineated conditions for removal by a small group of (even powerful) countries are much less effective.

It should also be noted that сhannels and tools for circumventing sanctions have been improving over the years, which reinforces the contradictions of the mechanism as such and emphasizes the weaknesses mentioned above, which will be discussed further in the report later in the report.
Sanctions policy towards Russia
The current modus operandi of enacting sanctions against Russia is beset with a variety of challenges. These challenges are two-fold: they pertain both to the overarching issues intrinsic to sanctions as a tool of policy as well as to the particularities of the sanctions regime against Russia.
Russia is now the world’s most sanctioned country
Source: Castellum.AI based on sanctions lists
Arbitrariness in Application:
Sanctions often suffer from a pronounced level of arbitrariness. Many of these provisions allow states to unilaterally determine what constitutes a violation and assign appropriate legal qualifications. Disturbingly, this often circumvents established judicial mechanisms. For instance, the European Court of Human Rights has issued numerous judgments against Russia—especially concerning the Ukrainian conflict—which remain largely unenforced.
Lack of Predictability:
An absence of transparent criteria for the initiation or termination of sanctions engenders unpredictability for those who might be subjected to such measures, as well as uncertainty regarding the international community's expectations. Furthermore, piecemeal implementation of these sanctions often lacks proper coordination.
Vagueness of Criteria:
The rationale for implementing sanctions is frequently nebulous, particularly concerning the relationship bet-ween the sanctioned entities and Russian policies. This allows for arbitrary imposition, renewal, or revocation of sanctions, often unchec-ked by judicial or legislative oversight.
Proportional Concerns:
The scope and scale of these measures often raise ethical questions, especially in the realm of human rights and property ownership.
Unwarranted Benefits to Third Parties:
The sanctions landscape often unintentionally bestows benefits upon actors who are not even participants in the sanctions regime.
Unpredictable Consequences:
Over time, the effects of sanctions can morph unpredictably. For example, asset freezes intended as temporary measures can metamorphose into de facto expropriation.
Restricted Defense Rights:
As a countermeasure to the invasive character of sanctions, the defense rights can be substantially reduced in practice. Legal assistance for those under sanctions may be limited to the essentials. While there are exceptions, legal representatives often decline even exempted services to err on the side of caution. This misaligns the system, as one of its protective measures proves to be hollow.

Against the backdrop of a classical legal system, which predominantly operates through judicial proceedings, the political decision-making process associated with sanctions is notably more arbitrary. Sanctions effectively act as a form of quasi-criminal liability without due process ​​or the application of criminal-law guarantees, such as the presumption of innocence, and standards of proof and evidence. Moreover, within the European Union, the influence of individual states raises concerns about exceptions and priorities in sanctions policy.

Despite advocating for sanctions, many states are reticent to endorse initiatives targeting Russian and Belarusian officials for accountability measures, such as for crimes of aggression. This creates an ironic lacuna in accountability, exempting those most responsible while targeting secondary actors.

In the realm of international law, there exists a disparate logic: those in positions of significant influence within a state can be held liable for crimes of aggression. In the sphere of sanctions, however, senior officials often remain untouchable, leaving lesser actors vulnerable. This discrepancy manifests as a gap in accountability, further muddled by the inconsistent positions of states on international criminal justice.

Consequently, this complex landscape of challenges is easily exploited by propaganda, which portrays sanctions as an ineffectual tool of a geopolitical strategy aimed at containing Russia. This erodes trust in international institutions and norms, thereby diminishing the sanctions' effectiveness and credibility.
Sanctions and the Russian Economy: Unclear Goals and Almost Obvious Results
The largest import decline (%)
The Russian economy has long been critically dependent on imports for various industrial goods. In 2021, up to 98% of all smartphones7, 96% of personal computers8, 75% of medical equipment, and nearly 60% of pharmaceuticals10 came from outside the Russian Federation, with a significant portion originating from the EU or the U.S. That year, 30% of new passenger cars sold in Russia were of European and U.S. brands, manufactured either domestically or abroad. Approximately 75% of passenger jets used by Russian airlines were either Airbuses or Boeings11. Russian banks relied on European and American ATMs for 60-65% of all such devices used within the country12. Russian movie theaters generated around 75% of their revenue from foreign films13, and Russian breweries depended entirely on German and Czech hops14. Immediately following Russia's invasion of Ukraine, regulators in Europe, the UK, and the US aimed to disrupt key import flows to Russia. Initially, they prohibited the sale or lease of airplanes to Russian companies, as air traffic to, from, and over Russia was suspended.
Exports to Russia decreased after sanctions (€ mln)
All exports of weaponry, dual-use products, and military spare parts were banned, along with equipment used in oil and gas drilling, LNG production and distribution, and machine-building in the energy sector, among other areas. Subsequently, the EU banned several types of services previously offered to Russian clients. These included accounting, auditing (including statutory audits), book-keeping and tax consulting services as of June 202215; IT consultancy, legal advice, architecture, and engineering services as of October 202216; and advertising, market research, public opinion polling, product testing, and technical inspection services as of December 202217.

Additionally, all repair and servicing work for previously purchased machinery and equipment was prohibited, including warranty repairs. Almost every subsequent sanctions package included a chapter listing additional banned products. The most extensive list came in the 10th package, affecting goods under up to 200 customs codes with a 2021 import value of approximately €11.4 billion18, which constituted one-third of the value of goods sanctioned in all previous rounds.

One could argue that nearly all types of goods that could be used in industrial production, particularly in the military, heavy industries, and the oil and gas sector, are now prohibited from being sold to Russia. This includes computers, smartphones and their parts, navigation devices, all kinds of engines, drones, luxury goods, and "other goods which could enhance Russian industrial capacities19."

Conversely, no restrictions have been Conversely, no restrictions have been imposed on agricultural goods, food processing substances, seeds, incubator eggs, sweets, and liquor. The termination of the supply of some categories within these goods has been the result of self-imposed restrictions by some Western producers, and for some of these categories of goods exports from Russia have become impossible in practice due, among other things, to blockage of payments, even as the reason behind not prohibiting such goods was motivated by clear reasons of humanitarian nature and human rights (most vivid in the example of agricultural goods). The US and UK sanctions were formulated in close cooperation with European lawmakers; one could say that the lists of prohibited items vary only slightly from the list of sanctioned individuals and business or public entities.

The Russian government swiftly enacted the so-called "parallel import" legislation20 just one month after the onset of hostilities, in direct response to import sanctions. This legislative action permitted both Russian entities and individuals to import a wide range of goods from any global source without requiring manufacturer authorization21. This effectively dismantled the previously rigorous import control mechanisms overseen by agencies such as Rosstandart, Rospotrebnadzor, and Rostechregulirovanie, which mandated compliance with Russian technical standards and required Russian-language user manuals and consumer information. The initiative proved highly effective, catalyzing a surge of imports funneled through various intermediaries and shell companies in over 40 countries. Industrial equipment and large-scale goods predominantly arrived via Turkey, the UAE, and Hong Kong, while consumer goods were largely sourced through Kazakhstan, Armenia, Kyrgyzstan, and Georgia.

By the close of 2022, Russian officials calculated that this mechanism facilitated the importation of approximately 2.4 million tons of assorted goods, valued at $20 billion22. This sum accounted for roughly one-fifth of all imports to Russia between April 1 and December 31, 202223. Due to this regulation, new products from globally renowned IT companies, such as the iPhone 14 or MacBook Pro with M2 processor, arrived in the Russian market shortly after their U.S. launches24. However, the prices for most of these products increased by 20-60% compared to pre-conflict levels. It was recently announced that the iPhone 15 would debut in Moscow on the same day as its U.S. release.
$20 billion
Mechanism so-called "parallel import" facilitated the importation of approximately 2.4 million tons of assorted goods, valued at this amount
This modification in Russian import regulation has arguably enabled tens of thousands of companies to endure by ensuring a continuous supply of vital spare parts and components. The notorious yellow-and-gray office paper, which emerged as an initial consequence of sanctions due to a scarcity of whitening agents25, reappeared on shelves in its original white hue just a few months after the legalization of parallel imports.

The most glaring examples of circumventing import sanctions involve the surge in Russian microchip imports vital for its military production26. Initially listed as sanctioned items in the early days of the war, these microchips quickly became scarce, with imports dropping by over 60%.
$200 million – $1.2 billion
buying the spare parts used in the aviation industry after the start of the war
However, by August, the situation had reversed, and in early 2023, Russia was importing at least 1.5 times more of these devices than before the war27. Investigations revealed that Russian missiles and bombs used in Ukraine contained parts manufactured in the US, France, and Germany well after February 24, 202228. Some post-Soviet states were implicated in facilitating these trades, and there have been recent allegations against the Baltic states for violating sanctions29. Despite efforts by the FBI and other Western security agencies to identify those responsible, the results have been lackluster, with only a few individuals arrested and charged for evading the sanctions regime.

Almost the same can be said about the spare parts used in the aviation industry: according to recent investigations, the Russian airlines spent anywhere between more that $200 million30 and a staggering $1.2 billion buying these parts after the start of the war31. Shell companies registered in the UAE dominate among the suppliers making hundreds such shipments a month to Russia (many people linked to, or associated with, such companies had been identified32, but to our knowledge no one was arrested).

Another topic of extensive discussion was the matter of vehicles imported into Russia through the South Caucasian republics, particularly Armenia, which saw a nearly 220-fold increase in car supplies to Russia in 2022. In June 202333, the European Union introduced legislation allowing for the halt of sanctioned goods shipments not only to Russia but also to countries serving as conduits for these goods into Russia34.

However, such a decision requires unanimous approval35 from all 27 EU member states. As of now, no actions have been taken under this directive, which was initially described as an "exceptional, last resort measure36."

The surge in exports to Russia via Turkey, which emerged as a critical intermediary, was so significant that Turkish authorities sought to profit further from it. In March 2023, Turkey abruptly halted transit shipments to Russia37. However, after complaints from Russia, the scheme was reinstated38 just ten days later, with a new condition. All goods cleared through Turkish customs would now be subject to import VAT paid to the Turkish budget. Additionally, these goods would be labeled as imports from Turkey when entering Russia. It should be noted that some products originating from the U.S. or Canada remained exempt from this new arrangement, and their importation to Russia via Turkey was completely prohibited39.

The introduction of this scheme by Russian authorities suggests their doubt that local industries could fill the void created by sanctions. Their skepticism appears justified, especially in sectors most severely affected like automotive and aircraft manufacturing. The factories abandoned by Western automotive companies now largely stand empty, with the exception of the Renault-originated Moskvich facility where Chinese JAC cars are assembled from kits shipped from China40. As for aviation, attempts to produce a wholly Russian passenger jet have been unsuccessful. The supposedly "all-new" and "free of imported parts" SSJ-100 made its inaugural flight in August 2023, albeit with French engines. Meanwhile, the timelines for new MC-21 and IL-114 aircraft deliveries have been pushed back from 2023 to 2024/25 and from 2024 to 2026, respectively. Tu-214 shipments continue to be in disarray41.

In the current Russian economic landscape, the concept of "import substitution" has found its most visible manifestations within small and medium-sized enterprises. These businesses have shifted towards using domestically produced equipment or creating products that, although tailored for the domestic market, often fall short in terms of quality.

It's important to bring attention to the actions of the Russian government in this context. Almost immediately following the onset of the war, authorities revoked intellectual property rights held by Western companies across a broad spectrum of products42. This started with essential items like foodstuffs and medicines and has since extended further. Consequently, many Russian enterprises now produce near-identical items under the guise of 'generics', frequently without disclosing this fact to the end consumer.

However, this practice of import substitution raises serious questions about its integrity and efficacy. For one, there are instances where goods imported from China are simply relabeled with Russian branding and then showcased at various fairs and exhibitions as 'domestic products'43. This practice borders on deception and dilutes the genuine efforts of actual Russian producers.

Moreover, there's the issue of quality. In many cases, what is marketed as import substitution results in an inferior product that does not meet the quality standards of the original. Thus, import substitution in Russia can be described as either a façade or a hollow imitation, ultimately delivering products that are markedly subpar in quality to the consumer.

The conclusion must be that the Russian economy has weathered import sanctions relatively well, not so much due to parallel imports or successful import substitution, but largely because emerging industrial powers like China have not fully participated in sanction measures. Except for highly visible restrictions, such as the ban on supplying spare parts for and servicing Russian jet aircraft, China has capitalized on new market opportunities. By mid-2023, the market share of Chinese passenger cars in Russia surged to 52% from less than 4% in 202144. Similarly, the market share for smartphones soared to nearly 80% from just over 20%. Even ATMs, previously dependent on Western technology, are now predominantly sourced from China45.

Many Russian enterprises face challenges in utilizing both European and Chinese equipment, but it's evident that the absence of countries from the "global South" in enforcing sanctions reduces their effectiveness. Another point to consider is the EU and US regulators' willingness to maintain sanctions if they result in catastrophic outcomes, such as a series of fatal aircraft crashes. Aircraft failures in Russia have more than doubled in 2023 compared to pre-war times46, indicating that a crisis may be imminent.
Countries supporting Russia and refraining from sanctions
The absence of countries from the "global South" 
in enforcing sanctions reduces their effectiveness
The limited effectiveness of import sanctions stems mainly from two factors.
Manufacturers are keen on expanding their global sales, even if Russia accounts for only a small fraction of their total market. For instance, Russia represented just 0.9 percent of Apple Inc.'s global sales in 202147. Despite having the capability to track and block devices used in Russia or in occupied regions of Ukraine if sold after February 24, 2022, Apple has taken no such action.

This indifference extends to other sectors as well, such as luxury goods. Recent months have seen a surge in the importation of luxury items into the UAE and Turkey. European companies like LVMH and Gucci do nothing to halt this flow. Formally, these products are purchased by local consumers, but they are later bundled and shipped to Russia. Both EU and U.S. regulations prohibit the sale, supply, transfer, or export of luxury goods valued at over €300 each to any person or entity in Russia or for use in Russia. Yet, these rules have proven ineffective at curbing the flow of such goods to the Russian market48.

To our knowledge, not a single charge has been brought against any Western company for its products appearing in Russia in violation of the sanctions regime. Those at risk are merely the intermediaries and registered owners of shell companies, who generally attract little attention. Such goods have also been confiscated from individuals carrying Russian passports at EU border crossings. International coordination could change this situation: IT companies could remotely disable and block their devices; ATM manufacturers could deactivate their software, and so on. However, such steps appear to be a bridge too far for Western regulators, and time is running out for these measures to be implemented.
Circumventing sanctions is not typically orchestrated as a state-led initiative. Governments in Turkey, China, Singapore, and the UAE do not explicitly authorize businesses to re-export to Russia. Instead, companies in these countries construct operations that are both formally legal and profitable. Luxury goods, for example, may be sold to Qatar and subsequently appear in Russia. Manufacturers can thus maintain that they haven't directly sold their products to Russia or Russian nationals, while intermediaries enjoy high profits. The same holds true for a variety of other goods traded via shell companies.

If the EU imposes penalties on countries like Kazakhstan or Armenia for reselling goods to Russia, there's no guarantee that these governments would implement stricter controls. Substitutions can easily be found if one nation is barred from purchasing goods for resale to Russia. Targeting intermediary companies is also challenging, given their transient nature—they can appear and disappear overnight. Therefore, it's suggested that Western regulators should focus on penalizing the banks facilitating these deals, as they are easily identifiable and can be fined. All other methods to counteract the evasion of sanctions appear to be ineffective.
Energy exports
Russia's military actions in Ukraine prompted the imposition of Western sanctions against its energy sector, which is a crucial component of the country's foreign exchange reserves and government revenue. Although the full consequences of these sanctions, coupled with war-related factors and the Russian government's own initiatives, are difficult to quantify, they have undeniably had a short-term negative effect on state finances. The national oil and gas industry has been particularly affected.

Western sanctions against the Russian energy sector date back to 2014 following the annexation of Crimea. Initially, these sanctions restricted Russian oil producers from accessing international long-term capital and advanced Western technology, particularly for Arctic and deep-water exploration. Yet, despite frequent appeals to clamp down on Russian energy exports, no such measures have been implemented.

Confronted with a complex situation, Western nations had to weigh their intent to weaken Russia's energy sector against their own dependencies on Russian fossil fuels.
Russia's share in 2021 accounted for:
25% of EU crude oil imports, 33% of imports of petroleum products
for a total of €71billion
In response to this challenge, Western allies took a practical approach, striving to juggle two conflicting goals:
To maintain the flow of Russian oil into global markets to avoid accelerating an impending economic downturn.
To curtail Russia's revenue from oil sales, thereby either restricting its military endeavors or influencing public opinion within the country to reduce support for the Kremlin.
As an initial measure, some states and companies opted for a voluntary ban on purchasing Russian oil. BP, ENI, and Shell pulled out of their Russian projects in the first week of the conflict, and countries less reliant on Russian oil ceased their purchases. The United States imposed an embargo on Russian oil, as well as coal and liquefied natural gas, two weeks post-invasion. However, the U.S. was a minor market for Russia, accounting for only around 3% of its crude oil exports in 202149.

The European Union couldn't take the risk of severing ties with Russian oil suppliers, given that Russia accounted for 25% of the EU's crude oil imports and 33% of its refined product imports in 2021, totaling 71 billion euros.

It wasn't until June 2022 that the European Council adopted its sixth package of sanctions against Russia. Among other measures, these sanctions prohibited the purchase, import, or sea transfer of crude oil and specific petroleum products50 from Russia to the EU. These restrictions went into effect on December 5, 2022, for crude oil and on February 5, 2023, for other refined products. The sanctions impacted 90% of all Russian oil exports to the EU, although some exemptions were granted for pipeline exports and spot market trades.

The sanctions forced Russia to pivot away from its traditional European market, which had consumed about half of its crude oil and refined products. As of March 2023, Russia's share of EU crude oil imports had plummeted from 31% in January 2022 to just 3%. The United States took over as the EU's top oil supplier at the end of 2022, providing 11% of imports, up from 9% in 2021. Norway and Saudi Arabia closely followed, accounting for 10% and 9% of the EU's oil imports in 2022, respectively.
EU oil import composition (Volume - thousand barrels)
Concurrently, the G7 and EU introduced a price cap mechanism aimed at reducing Russia's profits from oil trade with nations not participating in the embargo. The price caps restrict companies in member countries from offering transport or insurance services for Russian oil priced above the cap. This was intended to hamper Russia's ability to export its oil globally, given the EU's key role in providing such services51.
Brent / Urals price ($ a barrel)
By the beginning of 2023, new regulations governing Russian oil exports had been established. These rules not only restricted exports but also imposed limitations on new investments in Russia's oil industry, exports of oil-related technologies and materials, and the utilization of Russian-owned tankers. The European Union's delay in fully closing its market to Russian oil, along with the adaptability of global markets, helped prevent an extended oil price shock. Any surge in oil prices following Russia's military actions, driven by concerns of severe market disruption, was relatively brief. The constraints placed on Russian oil exports did not lead to any considerable price imbalances. So, oil trading went on. Initially, the new sanctions resulted in a significant decline in Russia's seaborne oil exports, but volumes have since recovered. In the weeks following December 5, 2022 – the date when the ban was introduced – Russian seaborne crude oil exports dropped by 35% due to reduced flows to the EU. Even exports to countries like India, China, and Turkey witnessed declines despite not participating in the oil price cap mechanism.

Nonetheless, export levels have rebounded following this initial decrease. With Russia’s its oil-related data classified, precise analysis becomes challenging. Russian firms successfully shifted their focus away from hostile territories. By August 2023, India and China were responsible for 80% of Russia's crude oil exports. On average, the volume of Russia's seaborne crude oil exports has remained largely consistent with November 2022 levels since the sanctions took effect.
of Russia's crude oil exports for India and China (Аugust 2023)
Russia also persistently worked to evade the cap, either by amassing a shadow fleet of several hundred tankers, formally owned by unknown companies in exotic jurisdictions, or by providing insurance and reinsurance for the oil trade through state-backed entities.

The effect of the oil sales sanctions on the Russian oil sector and its economy was mixed. In moving away from the unfriendly countries, Russian oil exporters had to sell their products at a discount. However, this discount was much lower than Western countries expected in early 2023. A rise in global oil prices and Russia’s cunning tactics led to India and China paying above the cap of $60/barrel for Russian crude52.

The price ceiling, initially slated for reconsideration in line with global crude prices, remains unaltered despite a 15% increase in oil prices. At first, the redirection of export routes coupled with the price ceiling reduced the Russian budget's oil revenues. However, by mid-2023, Russia modified its taxation of oil companies' export revenue. It no longer bases these taxes on steeply discounted prices reported in the dwindling Urals trades to Western markets.
Oil, petroleum products, and gas exports from Russia ($ billions)
Source: Rosstat and the Federal Customs Service
Consequently, the notional discount of Urals crude –Russia's principal export grade – has narrowed relative to Brent. Importantly, Russia's ESPO oil grade, primarily sold to China via pipeline and a non-Western tanker fleet, has not been discounted.

Exports of refined products experienced a modest decline of 3%. Overall, oil revenue in Russia is rebounding. For the first eight months of 2023, it was 38% lower than during the same period in 2022, but the gap is closing; it was 52% lower in the initial four months.
Urals Crude Oil Price (USD per barrel) and Federal Budget Oil and Gas Revenues ($ million per day)
The price ceiling mechanism remains largely intact, albeit with diminished impact on Russia's oil revenues. However, it has led to the unintended consequence of increased opacity in Russian oil trading, propelling it into a "gray zone." The number of untraceable vessels and shadow traders is on the rise, often obscuring company ownership and the whereabouts of profits53.

Secondary sanctions have not been aggressively enforced in relation to the price ceiling. Countries not supporting sanctions continue to purchase Russian crude, sometimes refining it and re-exporting to the West. Russia has largely adapted to this new oil export environment. While the long-term health of its oil sector may be jeopardized by limited access to advanced technologies and affordable capital, for now, the sanctions have notably failed to derail it.
Financial sanctions
Financial sanctions against Russia had a significant impact on the nation's banking system, complicating both fiscal and monetary policies. Although these sanctions alone couldn't topple the Russian economy, they acted akin to an immune system deficiency—aggravating existing issues and hindering economic activities.

Western allies exercised caution in imposing widespread sanctions on Russia's financial institutions. Prior to the full-scale invasion of Ukraine in 2022, Russia's integration into the global financial infrastructure and its willingness to leverage its energy and trade sectors constrained many of the proposed sanctions. This hesitancy allowed Russia some preparation time for milder restrictions, although it was caught off guard by the more severe ones.

In July 2014, the U.S. transitioned from sanctions targeting individuals to those aimed at corporations. The initial wave of sanctions focused on state-controlled entities like Rosneft, Russia's largest oil producer; Novatek, the country's second-largest gas company; Gaz-prombank, a bank linked to Russia's gas-export monopoly; and Vneshekonom-bank (VEB), a state-owned development bank that had heavily funded projects like the Sochi Olympics.

For these four major Russian companies, the U.S. Treasury Department restricted access to equity financing and medium-to-long-term debt (exceeding 90 days) from investors and lenders connected to the U.S. However, these sanctions stopped short of freezing the companies' assets or barring U.S. citizens and entities from conducting routine business with them. Soon after, the EU joined in on these restrictions, extending them to include VTB, Rosselkhozbank, Sberbank, and others.

The action, although appearing temperate on the surface, subtly laid down the groundwork for intensified restrictive measures. On one hand, it amplified the borrowing expenses for these corporations, rendering the long-term global growth blueprints unviable for numerous entities54. On the other hand, it introduced an ambiance of unpredictability, leading to speculation about potential subsequent targets. This speculative atmosphere inadvertently curtailed the creditworthiness of even those enterprises untouched by the directive. Beyond the direct edicts of the US or EU officialdom, the internal risk and compliance units of global financiers recalibrated, elevating the risk assessment associated with Russian businesses.

Russia faced repercussions from the "Countering Russian Influence in Europe and Eurasia Act of 2017," a segment of the broader "Countering America's Adversaries Through Sanctions Act" (CAATSA). This was in response to Russia's alleged meddling in the 2016 US elections and its activities in Ukraine55. Though the act garnered significant bipartisan endorsement, the Trump administration hesitated, only submitting its list of Russian entities56 to face sanctions in October 2017, missing the set deadline by nearly a month. Although sanctions started being imposed on these entities in January 201857, the administration's subsequent approach was languid, lacking a holistic strategy. At one point, there were even suggestions that the sanctions might no longer be essential.
Between 2015 and 2022, the most stringent sanctions package was enacted, fundamentally altering the landscape of economic engagement with Russia. Not only did these measures intensify restrictions on exports and investments, but they also ushered in a new era of targeting Russian billionaires and, by extension, their substantial assets. This shift culminated in April 2018 when the U.S. Treasury Department issued sanctions against a cadre of Russian 'oligarchs,' including Oleg Deripaska58, the owner of the aluminum behemoth, Rusal.

The individuals targeted were added to the Specially Designated Nationals and Blocked Persons List (SDN), a move that automatically extended the sanctions to companies they owned or controlled. In the case of Rusal, this had cascading effects far beyond Russia's borders, throwing the global aluminum market into unprecedented turmoil. The repercussions were so disruptive that the U.S. government eventually found itself in a quandary, forced to negotiate a compromise to mitigate the unintended consequences of its own policy.
The main subjects of American sanctions
The 50 wealthiest Russians lost nearly $12 billion in half a day
Source: Forbes
Ultimately, the U.S. reached an agreement to delist Rusal on the condition that Deripaska would step back from direct management of the company. This concession highlighted the intricate interplay of geopolitical strategy and global markets, illustrating how the wide-reaching ramifications of sanctions often necessitate subsequent adjustments to attain the desired policy outcomes without causing collateral damage to other sectors or economies.

The Rusal embroglio showed the global markets and the Russian government how unpredictable the sanctions could be. Any sanctions-related legislative proposal by the US Congress jittered the Russian market. A bipartisan Defending American Security from Kremlin Aggression Act of 201859 envisaged a sweeping ban on US investment in Russian state-owned energy colonies and in its new sovereign debt (NB - no one proposed to hit the already issued debt, of which about a third at that time was owned by foreign funds). A mere publication of the proposal sent the Micex stock market index down by 2% in one day, while the ruble declined by some 5% over a week60.

Despite being approved by committees, being re-introduced a year later, and even included in a draft of a federal budget for 2021, the act has never been adopted, reportedly facing the opposition of the US administration. The only debt-related restriction was issued in 201961. It prohibited the US banks (and by extension, any other bank with operations in the US) from buying Russian newly issued FX-denominated debt, or Eurobond. Awashed with petrodollars and already on a course of reducing its exposure to foreign debt, the Russian government has hardly felt the impact.

In 2021, a new ban came into force, which banned US banks from participating in the primary market of both FX and ruble-denominated sovereign debt62. However, as investing in the said debt hasn’t been banned, foreign investors were able to buy it from the Russian market makers. The ruble-denominated debt market remained open for the foreigners.

Both the Trump and Biden administrations aspired to use what senators termed as 'sanctions from Hell' to deter Moscow. However, as became evident in the early hours of February 24, 2022, this approach was unsuccessful. The sanctions imposed prior to 2022 had a two-fold impact on the Russian economy. Firstly, they shaved off several percentage points from Russia's economic growth and exacerbated the 2015 recession, which was primarily induced by a significant downturn in oil prices.
Oil prices vs GDP quarterly change (y/y)
Secondly, these sanctions served as a wake-up call for the Russian government, offering time to adjust and prepare. Russian corporations downsized their foreign exchange debt, particularly those denominated in U.S. dollars, and minimized their asset holdings in the U.S. Similarly, the Bank of Russia shifted its reserves away from U.S. dollars, favoring assets in euros and Renminbi instead.

Consequently, both the Russian economy and its banking sector have become less vulnerable to foreign exchange fluctuations63.
Share of FX in Loans and Deposits
Simultaneously, the level of foreign involvement in Russia's sovereign and corporate debt, equities, and newly issued shares has been on a downward trajectory. In some respects, both parties approached the turbulence of 2022 with some level of preparedness. It's reasonable to posit that although the sanctions regime from 2014 to 2021 failed to dissuade Russia from initiating an aggressive conflict, it might have served to delay it.
Financial sanctions 2022
Both the United States and European powers had adequate time to harmonize their response to Russia's assault on Ukraine. As a result, the allies acted promptly and cohesively, imposing financial sanctions that surpassed any measures that either the Russian government or the Bank of Russia had anticipated. In contrast to the preceding round of sanctions, which, in the words of President Obama, served as a warning "that further provocations would only result in Russia's increased isolation and a diminishing of its global standing," the sanctions of 2022 aimed to inflict severe damage on Russia's economy, targeting its financial infrastructure as a key component64.
Sovereign debt ban
Even before the onset of the full-scale invasion, the United States had already taken financial measures in response to Putin's recognition of the 'people's republics' in Donbas. One significant step was the long-discussed prohibition on any new investments in Russia's newly issued ruble-denominated debt, commonly known as OFZ65. As a result, the market for new Russian sovereign debt became largely inaccessible to most foreign investors. Existing debt holdings remained legal; an outright ban would have primarily harmed the holders rather than the issuer, i.e., the Russian state. Nevertheless, Russia's capability to raise capital on international markets was effectively curtailed. Further repercussions for debt holders due to other actions will be discussed subsequently.
Banking sector sanctions
In the aftermath of the armed incursion, the United States, in concert with its global confederates, enacted punitive sanctions that enshrouded the preponderance of Russian financial institutions. Save for a meager collection of foreign-owned lenders and a smattering of Russian banks, these entities were expurgated from the SWIFT communicative matrix and subjected to an asset freeze in Western territories. This metamorphosed them into parochial entities, circumscribed in their capacity to partake in global financial exchanges, dispatch or receive fiscal currents from a broad swath of nations. A mere smattering of geopolitically amicable states acquiesced to the ingress of rubles from these fiscal institutions, an endeavor that has grown increasingly Sisyphean in the face of augmenting Western coercion.

A conspicuous exemption in this scenario is Gazprombank, the financial conduit through which Russia orchestrates its gas exports to the European continent. Despite clamorous appeals to encumber it likewise, the allies demur, ostensibly to safeguard the vested interests of certain Central European nations.

The sanctions levied upon the financial architecture hamstrung Russian corporations, attenuating their capacity to secure external loans and conduct customary commerce. Yet, these constraints were partially mitigated: the former by a repatriation of Russian capital, and the latter through an intricate network of intermediaries.

Extricating Russia's financial titans from the global payment nexus thwarted the Bank of Russia from honoring its Eurobond obligations in the annum 2022, notwithstanding its ample liquidity. This precipitated a technical default, though that proved to be a development rendered inconsequential in the grander tableau, given the wholesale disarray that pervaded its debt market.
Asset freeze
Subsequent to the United States' initiative, its global allies have effectuated the immobilization of Russian financial assets, valued in the hundreds of billions of dollars—a sum inclusive of the assets held by Russia's Central Bank. In a formal pronouncement disseminated in May of the year 2023, the nations comprising the G7, in addition to the European Union, articulated a collective resolve. They declared that the Russian assets, approximated at $300 billion or €275 billion, which have been consigned to a frozen state within the jurisdictions of these aforementioned nations, shall persist in this inert condition. This measure will endure "until such time as the Russian Federation renders appropriate financial redress for the harm it has inflicted upon the sovereign state of Ukraine66."
By the latter portion of July, a financial assessment approximated the cumulative sum of Russian assets, subjected to a frozen state within these respective nations, at an estimated $335 billion. The preponderance of these immobilized assets is geographically concentrated in Europe; the United States retains but a modest fraction, with Japan also holding a non-negligible portion.
CBR Assets by country (%)
In counterpoint to the assertions propagated by Russian state-controlled media, which proclaims these assets as unlawfully expropriated, the actuality is somewhat divergent. The allied nations have yet to formulate a pragmatic mechanism for the transference of even the interest accrued on these frozen assets to Ukraine, let alone the principal sum itself.

Furthermore, the legislative initiative introduced by U.S. senators in July does not advocate for an outright expropriation of these frozen assets in favor of Ukraine.

Instead, their proposal stipulates that these assets shall continue to be conserved in their frozen state until such time as the Russian Federation voluntarily accedes to allocate these resources for the restoration and reparation of the Ukrainian state. Accordingly, although the legislative text presupposes eventual transference, this would transpire solely with Russian acquiescence67.

Actions taken by Western nations vis-à-vis the freezing of assets are in consonance with historical precedents. Assets belonging to a nation deemed hostile have traditionally been subject to freezing only for the duration of military hostilities, to be subsequently released upon the normalization of bilateral relations.

The notion of expropriating Russian assets finds little favor among Western political leaders, central bank governors, and financial regulatory bodies. Such an action would necessitate sweeping legal amendments and could precipitate a substantial exodus of foreign-held capital from Western financial systems. This could have a cascading effect, escalating borrowing costs for developing nations for years to come. Furthermore, it would have far-reaching implications on regulations surrounding banking confidentiality. In the current framework, a financial institution holding frozen assets is not obliged to disclose details to legal authorities. However, the transfer of such assets would intrinsically violate both confidentiality norms and the sanctity of asset ownership. Though such a violation may be legitimized if underpinned by a judicial decree, as of now, no such legal endorsement exists.
$4-5 billion
a year the frozen Russian assets may generate
Currently, there is active deliberation on imposing a one-time levy on interest accrued from Russian assets. Belgium's government was the first to make a concrete step in this direction.

Euroclear, a Belgium-based financial services company, is in custody of €196.6 billion (approximately $209.09 billion) in Russian assets, which includes €180 billion belonging to the Russian Central Bank. According to Euroclear's own disclosure, revenues generated from Russian financial assets—both from the Central Bank and other entities such as banks under sanctions—in the first half of the current year amounted to €1.7 billion, and another €0.8 billion in 2022. While this figure might decline in the future due to more stable interest rates, the frozen assets may generate about $4 -$5 billion a year. Belgium Prime Minister Alexander De Croo said on 11 October 2023 that €1.7 billion would be transferred to a special fund aiming at financing Ukraine. The sum indicates a 100% levy on the immobilized assets’ revenue. The policy is more probable than not would be replicated by G7 nations. US Treasury Secretary Janet Yellen backed the introduction of a “windfall tax” on profits generated by the frozen assets. However, the move is yet to be formalized, and countries like Switzerland and Luxembourg are yet to join the initiative. There is little chance of the frozen assets being transferred to Ukraine or invested with higher risk, than that existed prior to the immobilization, to generate more profit.

New debt issuance prohibitions inflated the Russian govern-ment's borrowing costs by an estimated 0.5% points, as per our calculations. Coupled with curbs on the capital account, these sanctions decimated the once-profitable carry trade, where foreign investors capitalized on the higher rates and full convertibility of the ruble. Asset freeze concerns and the looming threat of personal sanctions spurred a massive repatriation of around $50 billion by affluent Russians in 2022.

In an environment fraught with risk—ranging from asset freezes and counterparty defaults to enhanced regulatory scrutiny—global banks opted for caution, eschewing Russian assets and transactions, even those not explicitly blacklisted. Compounding this, the withdrawal of international payment systems like Visa and MasterCard rendered all locally-issued cards inoperative abroad.
$50 billion
massive repatriation 
by affluent Russians 
in 2022
Ironically, such circumspect Western policies inadvertently aided the Bank of Russia in mitigating capital outflow, particularly as repatriated funds from the West bolstered the capital account. Russia reciprocated with stringent countermeasures, trapping any proceeds from securities owned by Western investors in specialized ruble accounts, effectively cordoning them off from external markets.

This labyrinthine regulatory framework, along with the ruble's constrained convertibility, not only blunted some of the sanctions adverse impacts but also contributed to modest inflationary relief. Additionally, it shielded the Russian economy and currency from global fluctuations, with oil prices reverting to their 1990s role as Russia's singular channel to global financial market volatility.

Initial assessments of the financial sanctions' impact, compounded by trade restrictions, appear to have been overly pessimistic. As per the IMF's report dated April 11, 2022, the Russian economy is projected to contract by 8.5% in real GDP terms for 2022, accompanied by an inflation rate of 21.3%68. This hasn’t happened mostly due to the swift reaction of the Bank of Russia and the Finance Ministry.

While the immediate ramifications of the financial sanctions haven't led to economic collapse, long-term effects on Russia's economy may well to be crippling. The asset freeze has placed a strain on several Russian corporations, VTB being the most significant among them. It has also hamstrung the ability of Russian exporters to acquire foreign currencies like dollars and euros, a critical component for trade in commodities such as oil. Additionally, the Bank of Russia has been forced into a monolithic reliance on the Chinese RMB as its primary reserve currency. As a result, by the end of 2022, the ruble transitioned from a convertible currency to one principally governed by the trade balance.

Preliminary calculations suggest that the prohibition on new debt issuance has elevated the government's borrowing costs by approximately 0.5%. When coupled with restrictions on the capital account, these measures obliterated the once lucrative carry trade. This strategy had previously enticed foreign investors with the allure of higher interest rates and full ruble convertibility.

By the conclusion of 2022, the ruble had metamorphosed from a freely convertible currency to one almost solely tethered to trade balance dynamics, which in Russia's case is synonymous with oil trade.

Fast-forward to 2023, and Russia's economy appears to be more insular and inward-looking than it has been in three decades. The budget for the year indicates that inflation—and consequently, the cost of borrowing—will persist at elevated levels. While financial sanctions haven't been cataclysmic, they've rendered the economy highly vulnerable to external shocks. A downward shift in oil prices, increased restrictions on Russia's oil commerce, or a faltering demand from key trading partners like China and India could amplify the sanctions' impacts in an unpredictable but certainly detrimental manner.
Path to improve
In the current sanctions landscape, Russia retains the ability to operate within the global financial system, albeit with certain limitations. Numerous Russian banks face targeted sanctions, and some are even excluded from the SWIFT network. Nonetheless, these institutions can still conduct transactions in "friendly currencies" within amicable jurisdictions. Additionally, Russia's insistence on routing European payments for its oil and gas through Gazprombank shields it further from the sanctions' impact.

While this setup hampers Russia's financial activities, it also engenders unintended side effects. First, the opacity of Russian transactions accumulates untraceable funds outside the country, potentially enabling the circumvention of export sanctions and fueling covert activities in the West. Second, the sanctions inadvertently fortify Russia's current account, leading to a robust ruble and reduced inflation.

To address these issues, Ukraine has suggested blacklisting Russia by the Financial Action Task Force (FATF), effectively severing its remaining financial connections globally. Bloomberg reports indicate that Russia is taking this proposal seriously, lobbying other FATF members and threatening to annul defense and energy agreements if such measures are implemented. While FATF has yet to act on this recommendation—primarily because Russia technically complies with the watchdog's guidelines—the dynamics could change under increased pressure.

An alternative strategy involves "whitelisting" select transactions through specific banks, thereby keeping payments for Russian exports both open and monitored. This approach could reinstate oversight while making 'whitelisted' transactions more efficient and economical compared to other options. Such a policy would put pressure on Russian financial authorities to take less popular measures—like capital account restrictions, import limitations, and high-interest rates—that could potentially slow down the economy.

If executed carefully, this "whitelisting" could delegate significant oversight responsibilities to bank compliance officers, tightening the net of financial monitoring without disrupting essential trade relationships. This nuanced approach invites further examination as a way to refine current sanctions and achieve the intended policy goals.
Investments and markets
The ramifications on investments from sanctions have been vast and two-sided, initiated by both Western nations and Russia itself. While on February 24, 2022, the US and the EU imposed prohibitions preventing Russia (on a sovereign level) and its various corporations and banks from seeking funds in their capital markets69, Putin categorized nations into "allies" and "adversaries." Subsequently, he instructed Russian businesses to halt loan repayments to entities based in the "adversarial" nations from March 1, 202270. Moreover, by July 202271, dividends from Russian companies to overseas stakeholders were restricted. By August 2022, any trade involving stocks that corporations from "adversarial" countries held in Russian energy and finance sectors was prohibited72. And, by the following year, pre-existing agreements to avoid "double taxation" with 38 of these "adversarial" countries were nullified73.

While the strategies employed by the Kremlin might seem comprehensible – as they aimed to halt the outflow of foreign currency – the West's actions appeared somewhat puzzling. For instance, the US Treasury granted a distinct permit allowing US banks to manage Russian external debt repayments until May 25, 202274. However, once this allowance concluded75, it effectively triggered Russia's default on both its foreign sovereign and corporate debt76. Under the current structure, Russian bondholders are somewhat shielded given that all transactions are executed in rubles. In contrast, holders of Eurobonds located in overseas territories appear to be struggling to reclaim their investments77.

Owing to these imposed limitations, investment and divestment activities have hit a standstill. Nevertheless, two significant concerns loom large: first, the spontaneous exit of Western businesses from the Russian marketplace; and second, the potential seizure and nationalization of their assets by the Russian state and its representatives.

The topic of Western businesses exiting Russia has been a focal point of discussion since the onset of the conflict. Numerous organizations, primarily based in the West and Ukraine, have been closely observing these exits, which have frequently been portrayed as driven by ethical imperatives. Prominent Western brands such as FedEx, PayPal, Zara, Nike, and many others78 swiftly withdrew from Russia. However, a notable number persisted, and as per findings by Russian investigative reporters, these businesses raked in an unprecedented 1.1 trillion rubles (equivalent to $13 billion based on the average exchange rate during that time) in profits within Russia in 2022.

This marked a staggering rise of almost 70% from the previous year79. These earnings inadvertently bolstered the Russian national treasury, indirectly underwriting Putin's military campaign against Ukraine.

The tally of corporations ceasing operations in Russia displays considerable variation. According to the data gathered by the Institute for Senior Executive Management at Yale University, over 1,000 foreign firms had withdrawn from Russia80 by the start of September 2023.
List of "unfriendly countries"
Source: Government of the Russian Federation
This count encompasses companies that officially declared discontinuation of their brand's presence but might still engage in supply operations. A case in point is Diageo: while the company formally exited Russia, their products, like Guinness beer, continue to flood the Russian market, with volumes reaching up to 1.5 million liters in the first half of 2023 alone81. Contrasting estimates present a different narrative. Joint research by the Re: Russia analytical platform and the iStories website indicates that merely 20% of the businesses active in Russia before the war's inception82 actually departed. Meanwhile, Swiss analysts Niccolo Pisani and Simon Evenett have estimated this figure to be just 120 companies (or a mere 8.5% of the total) that offloaded their Russian holdings or subsidiaries by December 2022.

Unsurprisingly, Ukrainian-based estimations present a more conservative picture. Out of the roughly 3,500 Western businesses that were active in Russia at the war's onset, a mere 276 companies, translating to around 6% of the total, fully retreated from the Russian market. Over 700 opted to put their operations on hold without formally announcing a departure, while an additional 500 appeared to be navigating their exit strategies83. Conversely, a significant portion, numbering over 1,900 companies, either curtailed certain operations (such as dealings with Russian governmental bodies), proclaimed a moratorium on fresh investments, or remained unresponsive to the unfolding conflict and subsequent sanction impositions84.
of the businesses active 
in Russia before the war's inception actually departed
To encapsulate the dynamics without enumerating every entity, here's a condensed overview:
Predominantly, the corporations that chose to exit Russia were those whose core operations were directly targeted by sanctions. This includes airlines, courier services, payment processors, tech giants, consultancies, and those involved in natural resources and geology. Service sector companies, sensing a potential detriment to their international reputations, also decided to withdraw. Notable names from the dining industry include McDonald's, Starbucks, KFC, and PizzaHut85. Virtually all globally recognized hotel brands - such as Marriott, Hilton, Hyatt, IHG, Accor, Rixos, and Mercure, among others - also departed86. Additionally, several major European and American banking institutions, including Deutsche Bank, Société Générale, Citi, and HSBC exited, as did the corporate banking arms of Mercedes-Benz and Volkswagen, which were initially established in Russia to facilitate vehicle sales financing87.

Among those who opted to stay in Russia, two primary categories emerge. The first encapsulates entities with significant strategic stakes in the country or those essentially "anchored" due to extensive preceding investments. BP serves as an illustrative example here, given its involvement with Rosneft. Despite multiple indications of its intent to divest, the British firm remains active in Russia88. Similarly, Total Energies, having channeled substantial funds into LNG ventures, illustrates this dynamic. Although the company officially withdrew its delegates from the managerial committees of collabo-rative projects and recognized losses on its Novatek89 investments, its on-ground operations in Russia persist. Another emblematic instance is Raiffeisenbank, which, as the preeminent Western bank left in Russia, sees its operations in the nation account for a whopping half of the entire Raiffeisen group's net earnings90.

The secondary cohort comprises firms recognizing that the exit, whether total or partial, of their rivals has paved the way for newfound opportunities. For instance, while IKEA made the choice to leave Russia, competitors like Germany's Metro and France's Auchan chose to remain. Additionally, a multitude of entities specializing in food production (such as BAT and Japan Tobacco, Hochland, Mondelez, Mars) and pharmaceuticals (like Procter & Gamble, Pfizer, Bayer) maintained their presence91. It seems the rationale behind such decisions stems from the fact that the distribution of these specific products remains largely unaffected by sanctions, allowing these corporations to sustain their operations in Russia. Moreover, there's substantial evidence suggesting that even globally recognized brands like McDonald’s, upon transferring their ventures to Russian businesspersons, incorporated a provision that reserved their right to repurchase their assets92. This clause would come into play should the conflict prove ephemeral and the imposed sanctions on Russia be subsequently revoked in the near future.
of actual worth corporations that opted to offload their Russian assets to domestic purchasers received
The second crucial aspect is the lack of investor rights protection in contemporary Russia, particularly for those from "unfriendly" nations. Companies choosing to pause operations in Russia risk asset confiscation by authorities through various means. These firms may face hefty fines for layoffs or exorbitant rent hikes, making it financially untenable to halt production while maintaining leases. Consequently, investors are compelled to sell their assets at a steep loss, or the government could place the company under the "temporary management" of the Federal Agency for State Property Management (Rosimuschestvo)93.

Generally, corporations that opted to offload their Russian assets to domestic purchasers received between nothing to a mere 20% of their actual worth. For instance, Renault and Nissan handed over their production facilities in Moscow and nearby St. Petersburg for a symbolic one ruble each94.

Similarly, Volkswagen settled for a mere €125 million for its Kaluga-based plant95, a facility that had originally cost €570 million to construct96. To add insult to injury, post-sale, these companies still found themselves liable to cough up between 5% to 10% of the assets’ “market value” in taxes97. Conversely, firms that publicly declared their intentions to cease operations in Russia were promptly nationalized. Initial examples of this approach were evident with Fortum and Uniper, followed shortly by Danone and Carlsberg98.
$34 billion
the total value of redistributed property 
as of April 2023. This figure could skyrocket to $240 billion once all incurred losses are aggregated.
In numerous instances, assets were seized to benefit their original proprietors before they were sold to Western interests. For instance, this was observed with Rosbank, once owned by Société Générale, reverting to Vladimir Potanin99 and with Carlsberg's assets returning to Teimuraz Bolloev100. However, when the anticipated new owners aim to sustain their global operations, the state might grant them the option to pay an equitable price for the acquired assets. A notable example is the transaction between Novatek and RoyalDutchShell, wherein the former purchased Shell's 27.5% stake in the “Sakhalin-2” joint venture for RUB 94.8 billion. This amount was then exchanged for dollars and remitted outside Russia, presumably post receiving special authorization from President Putin101.

The most conservative estimates place the total value of redistributed property at roughly $34 billion as of April 2023102. However, there are alternative projections suggesting this figure could skyrocket to an astounding $240 billion once all incurred losses are aggregated103. Given the current trajectory, it doesn't seem like there will be any policy adjustments on the horizon. Consequently, there isn't a foolproof strategy for enterprises aiming to exit the Russian market, barring bracing themselves for total or near-total asset losses.

Therefore, the withdrawal of Western companies from Russia may not be the most advisable strategy. Few companies would willingly relinquish their entire investment in a country where they have maintained a presence for many years. Additionally, the Kremlin has devised a strategy that essentially eliminates the possibility for Western companies to take legal action against the Russian government or to contest their exit. This is because Russia has not officially "nationalized" these assets. Instead, Western investors are coerced into selling them through transactions that are portrayed as voluntary and mutually agreed upon104.

Encouraging Western companies to withdraw from the Russian market appears feasible only if Western governments are prepared to offset the associated financial losses, a scenario that does not seem likely. Therefore, urging Western firms to leave Russia without compensatory measures from their governments is an insincere gesture. While it's understandable to ban exports to Russia of high-tech and dual-use goods, the call for companies to exit sectors not targeted by sanctions against Russian firms—such as retail, agriculture, communications, consumer goods manufacturing, and hospitality—appears to be excessive.
Personal sanctions
Individual (targeted) sanctions have recently appeared in the practice of States and international organizations. Traditional international sanctions were not aimed at individuals since the traditional subjects of international law and international relations and sanctions’ targets remained exclusively states. In this context, a mechanism of international security has been created that gives the United Nations Security Council a unique power to deal with threats to international peace and security. The Security Council can deal with such threats by imposing sanctions against the source of the threat. But it was never thought when the UN Charter was drafted that the UN Security Council would deal with individuals. Individual states were also reluctant to impose measures on individuals due to dubious efficiency and potentially high costs of retaliation.
The number of Russian Individuals under EU sanctions
1,344 individuals are under EU personal sanctions
Although, in parallel, the international criminal responsibility of individuals emerged, its application was limited to German and Japanese war criminals in the Nuremberg and Tokyo trials. The system of international criminal liability is not yet complete. Even now, with the permanent International Criminal Court, the international criminal justice system is still far from universal. The ICC jurisdiction is limited and self-restricted by the crimes committed on the territories of state parties. In the case of the crime of aggression105, the hands of the ICC are especially tied.

For example, in the case of the Russian Federation, the International Criminal Court does not have jurisdiction to prosecute the crime of aggression against Ukraine, which gave rise to a discussion related to the initiative of a special international tribunal for the crime of aggression. With regard to other international crimes (war crimes, crimes against humanity and genocide), the real capacity of the ICC, as well as the courts of national jurisdictions, to bring the perpetrators to justice is also limited, as demonstrated by the case of the ICC arrest warrants for Vladimir Putin and Maria Lvova-Belova106.

Thus, individual sanctions were intended to fill the accountability gap and address the obvious inefficiencies of “traditional sanctions.” The idea of targeting personal foreign assets and access to foreign financial markets of members of the Government, the ruling elite, or military members can be traced to discussions in the 90s, during the relative ease of international relations. In the wake of many sanctions regimes, problems became apparent. Sanctions with a very broad effect on whole populations came under scrutiny.

Sanctions against individuals and other non-state actors identified as a more direct threat to international peace and security than entire state populations were the logical consequence. Targeted sanctions are designed is to shift the costs of violation of international law from the general population of targeted countries to the persons responsible for those violations. Carefully targeted sanctions, it is argued, can also reduce the harm done to third-party States, thus removing incentives to defy the sanctions. Sanctions might impact state policy by affecting specific individuals who influence the states’ decisions.

Since the start of the “war on terrorism”, personal sanctions have been increasingly applied by the UN Security Council107 and, respectively, by various states and international organizations. The practice of imposing and applying personal sanctions has been constantly and consistently criticized in terms of its effectiveness and compliance with the norms of international law108, especially human rights. The main problems also manifested in the practice of sanctions against Russia, are their extrajudicial character and the fact that sanctions are the result of extremely politicized, arbitrary, and transparent processes, lacking effective legal remedies both at the international and national levels. As such, sanctions, unfairly and proportionately applied to the wrong targets, often discredit the idea of accountability for the grave violations of international law.

In the 2005 World Summit declaration, the General Assembly called on the Security Council, with the support of the Secretary-General, to ensure that fair and clear procedures are in place for imposing and lifting sanctions measures109. The policy of individual sanctions has become "contagious" for states. First, the very practice of the Security Council has become authoritative for States that are not afraid to resort to these measures. This has led to an almost uncontrolled increase in the number of persons subjected to these non-judicial measures of an exceptional nature. Sanctions have become the rule instead of an exception (in a situation where judicial action is impossible). In particular, they are imposed on persons not outside the jurisdiction of the States of which they are nationals and permanent residents. Personal sanctions are “cheap” and their introduction does not impose significant costs on states. The grounds for the imposition of sanctions are also often vague. Individuals are referred to in terms of the actions of States, which describe collective actions in an essentially generalized manner devoid of the specificity inherent in individual responsibility. Inclusion on sanctions lists is often justified by membership in a particular "amorphous" group or even by a simple association (e.g., a family connection with another sanctioned individual).

A typical example is the criteria for imposing sanctions by the European Union, which the eleventh sanctions package has amended. Among the objectives of the sanctions were the following: ”leading businesspersons or legal persons, entities or bodies involved in economic sectors providing a substantial source of revenue to the Government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilisation of Ukraine110”. Although the economic actors assisting the Russian regime are legitimate targets of sanctions, formulations like this blur the line between legal measures and political retaliation and are incompatible with the principles of legal certainty.

Such criteria do not require any proof of a connection between specific business persons' activity and international law violations.

This blurred the criteria of responsible individuals and gave Russian authorities and their propaganda the basis to claims that all sanctions imposed by the European Union are purely political deterrence and have nothing to do with the alleged grave violations of international law committed by Russia. As a rule, there is no formal and transparent procedure for making decisions on personal sanctions. Unlike the judiciary, the executive branch and international bureaucrats are not bound by the requirements of a formal fact-finding procedure. International organizations also rely excessively on data provided by Member States (this is how international legitimation of de facto national measures occurs) and domestic bodies.

The most critical problem for personal sanctions is the lack of a mechanism for restoring a lawful position as a condition for lifting sanctions; in other words, they are different from sanctions against states with a clear goal of stopping violations. In this regard, personal sanctions have a much more punitive character, which, at the same time, is imposed on individuals outside the criminal procedure. In particular, UN sanctions are characterized by a complex and almost impossible delisting procedure, carried out in rare cases – through the state of residence or citizenship.

While the EU sanctions system provides a clear delisting procedure, supported by a rich body of case law, and mandates a biannual re-assessment of sanctions, these safeguards often prove inadequate. The Council's frequent oversight of evident inefficacies in achieving its sanctions' objectives, along with its disregard for the factual basis presented by the sanctioned, results in a cycle where delisting and renewal procedures overlap. Consequently, delisting is often more time-consuming than renewal. As an individual challenges a designation decision before an EU court—a process that typically spans 1.5 years—the Council might have already issued multiple subsequent decisions, each of which could require a distinct delisting process.

Compounding this complexity, the pathway to liberation from sanctions, although clearly delineated through the right legal counsel, is not always transparent. While sanctions are primarily preventive, aiming to steer individuals away from undesirable activities, the required behavioral adjustments are not always evident. In cases where sanctions are tied to familial associations, individuals face insurmountable challenges, unable to sever these bonds. This raises questions about the legality of such sanctions and their alignment with fundamental human rights, including the right to an effective remedy against imposing states or even broader entities like international organizations.
General flaws of imposing personal sanctions
The issue of personal sanctions, often the most publicly visible and debated aspect of a sanctions regime, frequently becomes the focal point of legal disputes, journalistic scrutiny and lobbying efforts. These sanctions can be wielded by various parties for purposes other than their intended political or security objectives, such as settling internal economic disputes or combating political opposition.

It is in this context that the authors of this report wish to underscore that the observations regarding personal sanctions are consistent with the overarching thesis of this analysis: that a transparent, lawful, and logically coherent sanctions policy is likely to be more effective in countering aggressive behaviors than broad-brush approaches that lack clear rationale and are poorly understood by affected communities, including the Russian populace. Specific cases highlighted in this section are not intended to signal either endorsement or critique of any particular sanctions decision; rather, they serve to illustrate the complexities, inconsistencies, or anomalies often inherent in the implementation of personal sanctions.

In sum, while sanctions targeting specific activities with the potential for restricting or even damaging them may be effective, the application of personal sanctions raises a series of legal and ethical questions. Most notably, personal sanctions often violate the principle of non-retroactivity, a cornerstone of justice that prohibits punitive measures for actions undertaken prior to the establishment of the law which later made them as illegal.

For example, sanctions levied against Russian oligarchs for attending a meeting with President Putin on February 24, 2022 raise questions concerning fairness and legality of such punitive actions. These individuals were sanctioned because their mere attendance was interpreted as supporting actions that undermine the territorial integrity and sovereignty of Ukraine111. However, this interpretation retroactively criminalizes actions – such as meeting with the President or being a wealthy businessman—that were not identified as wrongdoings prior to the announcement of sanctions between March 9112 and April 8, 2022.

Thus, this approach undermines the legal principles that should ideally govern the application of sanctions and risks eroding the credibility and effectiveness of such policy measures.

The practice of implementing personal sanctions that target broad groups, such as the "Putin's list", by OFAC in 2018 that included all 97 Russian billionaires113 from the Forbes list challenges the principle of individual responsibility that is a cornerstone of Western legal systems. This wholesale categorization veers into collective punishment, a tactic that has questionable ethical and legal standing.

Comparing this tactic to historical examples like Nazi Germany's persecution of Jews or the Communist-era "class struggle" highlights severe ethical and ideological problems embedded in such approaches. While these are extreme examples, the point stands that casting wide nets of punishment based on group identity contradicts principles of individual justice and opens the door to abuses and miscarriages of justice114.

Imposing sanctions on family members of individuals already under sanctions magnifies existing ethical concerns. Such punitive actions risk being viewed as guilt by association—a principle diametrically opposed to the foundational concepts of individual accountability, due process, human rights, and the presumption of innocence. The EU Court, rooted in these principles, has established a well-defined jurisprudential stance on this issue, declaring that designations based solely on familial ties violate Articles 75 and 215 TFEU. This position began with the Tay Za v Council judgment in 2012 and has been reinforced in subsequent verdicts, including those related to Russia. Penalizing someone solely for their familial connections, something they cannot change or influence, contradicts the essence of human rights. Thus, any justification for sanctions based on family ties demands rigorous examination.

The current sanction regime's one-size-fits-all approach indeed appears to be flawed. Treating all individuals implicated by sanctions as if they were equally culpable undermines the nuanced nature of justice. The broad-brush approach, where the likes of military commanders directly involved in conflicts are subject to the same restrictions as businessmen who have no such involvement, fails to honor the principle that punishment should be proportional to the crime committed. A diversified approach to personal sanctions, aligned with the role and involvement of each individual, would not only be fairer but also potentially more effective in achieving the intended outcomes.

Additionally, the objectives behind the imposition of personal sanctions remain unclear, further muddying their efficacy and ethical standing. In traditional punitive law sanctions or punishments have a clearly defined purpose, whether deterrence, retribution, or rehabilitation. But personal sanctions seem to have a murky, unstated goal of perhaps influencing the behavior of an entire elite class, not just the individuals targeted. This strategy could be likened to hostage-taking, where the fate of one or a few individuals is used as leverage to influence a larger group.

Furthermore, the change in terminology from "oligarch" to "influential Russian businessman"115 suggests that the authorities recognize the impact these individuals have beyond their personal deeds. The idea seems to be to exert pressure on these influential figures in hopes of affecting broader political and economic policies. Yet, this strategy runs the risk of unintended consequences, including the hardening of attitudes against Western policies and institutions. In summary, current sanction practices raise multiple concerns related to proportionality, ethicality, and the ambiguity of objectives. For them to be a useful and just tool these issues must be carefully considered and addressed.

Analysis indicates that sanctions aimed at individuals, with the exception of state leaders from countries engaged in aggressive behavior, constitute extrajudicial actions initiated by the executive branches of certain states. These actions are often implemented with the objective of influencing the political course of a targeted nation. Notably, the criteria for selecting these individuals for sanctions may not always be linked to specific actions or deeds but rather to their perceived ability to affect their country's power structure, or their public recognizability, which may make sanctions more visible to the sanctioning government’s electorate, even as the individuals actually responsible for the targeted policies remain unscathed and in the shadows.

Such extrajudicial measures pose significant challenges to societies founded on the rule of law, as they may not be as effective as conventional punitive actions. In contrast, criminal proceedings aimed at persons involved in committing international crimes, including crime of aggression, are often more equitable and effective. Conducted even in absentia, these proceedings uphold principles of individual responsibility and proportionality in punishment.

It might be prudent to consider historical precedence set by international tribunals, ranging from the Nuremberg and Tokyo trials to contemporary cases in international courts. These precedents indicate that more nuanced approaches, such as legal proceedings, could result in the acquittal of individuals not directly implicated in crimes, while effectively penalizing those who are. Therefore, it could be advisable for policymakers to examine the efficacy and ethical implications of sanctions in comparison to established judicial procedures.

Our exploration of delisting procedures wouldn't be comprehensive without delving into the myriad complexities surrounding evidence that justifies individual sanctions. Ideally, there should be concrete evidence pointing to an individual's complicity in the targeted behavior. Yet, not all authorities imposing sanctions readily disclose such evidence—even in judicial settings—to the affected parties. In instances where they opt for transparency by sharing evidence files, these documents often fall short in credibility.

European case law reveals a recurring pattern: the “evidence packs” or “working papers” that the EU Council relies on, sourced from the European External Action Service, predominantly consist of publicly accessible online news articles. This approach offers the EU a twofold advantage: it avoids the need for classified documentation that might raise security concerns, but, more perturbingly, it often leads to reliance on questionable sources116. A hasty assemblage of outdated, unverified, or sensationalized content—sometimes hailing from dubious online tabloids or even anonymous blogs—finds its way into these crucial dossiers. The mass of individuals subject to sanctions is vast, leading to inevitable oversights in evidence collection. A stark testament to this flawed system is the Council's misguided decision to sanction Grigory Berezkin based on a piece co-authored by an artificial intelligence bot117.
Mixing of different groups into one list
The subject merits specific attention as it highlights a critical shortcoming in the policy of sanctions, with considerable practical implications. In 2014 Western nations imposed sanctions on approximately 150 Russian individuals for their roles in the annexation of Crimea and the conflict in Donbas118. Notably, these measures were highly selective, focusing primarily on officials and military personnel directly involved in the conflict, along with a limited number of business figures involved in projects within the occupied territories, such as Boris and Arkady Rotenberg119.

During this period the selective nature of the sanctions led members of the Russian elite to seek ways to circumvent these punitive measures, effectively causing the sanctions to function as a deterrent. This historical context could offer valuable insights for policymakers in refining the criteria and scope of sanctions to improve their efficacy and precision.

Beginning in 2022, sanctions imposed on Russian entities and individuals have broadened significantly in scope, encompassing diverse groups including approximately 40 military commanders, 180 bureaucrats, 700 elected officials such as deputies and senators, 420 business leaders, and 75 individuals involved in scientific, media, and propaganda activities120. These constituencies represent core pillars of the current Russian administration. When subjected to uniform sanctions, these disparate groups may find a strong incentive for consolidation behind the leadership, a phenomenon that had been anticipated prior to the implementation of these measures121.

Sanctions often escalate following significant events, such as newly documented military offenses or activities targeting Russian dissidents. This escalation tends to reverberate across all targeted groups, regardless of their recent actions or lack thereof. Recent developments have also seen sanctions extend to more nebulous entities, like the Valdai Club or the Higher School of Economics122, organizations with which thousands are affiliated in some capacity. A discussion of their connivance or inaction in allowing Putin to start the war in one way or another is certainly legitimate, but whether they should be subject to the same type of sanctions or restrictions as other categories of individuals is questionable.

This development raises questions about the efficacy and strategic implications of such broad-based sanctioning policies and suggests that a more nuanced approach may be warranted to avoid unintended consequences, such as the consolidation of political power.

The report "Moscow's Gold: Russian Corruption in the UK", prepared by the UK House of Commons, states directly “... You have to look at the Russian oligarchs as a class. No matter how different they seem to you—one owns a football club, another donated money to Oxford for a school of government, another sat in a Russian jail for six years under communism, another was a civil servant—they all have very particular things in common. They can all be measured with the same yardstick …”
40 military commanders, 180 bureaucrats, 700 elected officials such as deputies and senators, 420 business leaders, 75 individuals
beginning in 2022, sanctions imposed on Russian entities and individuals have broadened
Such a statement not only doesn't align with reality and contradicts the fundamental legal principle of individual accountability, but the absence of a nuanced approach to sanctions might unintentionally strengthen Russia's centralized governance system, further solidifying the leadership's control over various elite factions. This homogeneity in sanctioning strategy may pose a challenge for advocates who call for a more differentiated approach that aligns punitive actions with the scale and nature of the infractions committed. It is also noteworthy that European Union directives have expanded the purview of sanctions to encompass not only the primary subjects but also their familial connections and business associates. Such a broad scope is reminiscent of Russian legislation targeting "foreign agents," a policy that has elicited critical commentary from Western specialists.

The unintended outcome of such a broad-based sanctioning strategy might be the strengthening of social cohesion within the targeted country, rather than fostering internal fissures or promoting desired changes. In light of these factors, a reconsideration of the existing approach could be considered prudent to better align the sanctions with their ultimate objectives and to mitigate unintended ramifications.
Unexplainable selectiveness and multiple mistakes
One can observe instances of inexplicable selectivity in the imposition of sanctions against Russian policymakers, public figures, and business leaders. While a comprehensive analysis would necessitate a dedicated report, a few examples may serve to illustrate this phenomenon.

Mikhail Prokhorov, a businessman who was once the richest in Russia. Despite his long-time ownership of key Russian enterprises and his active role in legitimizing Vladimir Putin's return to the Kremlin—having run for President in 2012 with Kremlin backing and advisors from Sergey Kirienko's team—Prokhorov has not been included in any sanctions lists. Of course, Mr. Prokhorov drew conclusions from his complicity in 2012, and from 2014 he sold off his assets in Russia, left all public and official positions, and met 2022 abroad without supporting Russian aggression with a single action or word.

According to some of the authors of the report, this is already a sufficient minimum to avoid sanctions, which is what happened in Prokhorov's case but did not happen in dozens of other similar cases, like Farkhad Akhmedov, who divested from his main Russian assets approximately a decade prior and mostly resides in Azerbaijan, yet was included in both EU and UK sanctions lists. Akhmedov was only recently123 removed from these lists following a protracted legal battle with European authorities.

Additionally, entrepreneurs such as Oleg Tinkov was been included in the sanctions lists, despite public condemnations of the conflict and significant financial losses. Tinkov was forced to sell his bank, which was once the second-largest in Russia by market capitalization, for a fraction of its worth124.

These examples suggest a degree of variability and apparent inconsistency in the application of sanctions, which may well benefit from further scrutiny to ensure alignment with the intended objectives and equitable treatment of the individuals concerned.

The existing sanctions policy exhibits a range of shortcomings that manifest themselves in both over-inclusion and under-inclusion of targeted individuals. On the one hand, there are cases where individuals have been placed on sanctions lists despite having exhibited behavior that might be considered to be in opposition to contentious activities. For instance, already mentioned Oleg Tinkov and others have expressed critical positions or even resigned from their corporate roles following the onset of hostilities, yet they were still subjected to sanctions.

On the other hand, there are instances where individuals who might reasonably be considered as supportive of contentious activities have either not been sanctioned or have had sanctions lifted. An example of this is Grigory Berezkin who was recently cleared of EU sanctions despite his ownership of several major Russian media outlets known for disseminating propaganda, such as Komsomolskaya Pravda daily.

Alisher Usmanov, owner of the Kommersant Publishing House, may not enjoy complete editorial freedom, but even by American standards, his outlet stands apart from the likes of "Komsomolskaya Pravda". As noted, "Treasury officials were hesitant about impacting a newspaper, considering it one of Russia’s few remaining independent publishing entities.125" Despite this, Usmanov finds himself under sanctions. In contrast, Yuri Milner, who channelled Usmanov's investments into American tech enterprises, remains a venerated figure in Silicon Valley. He's also the founder of the Breakthrough Prize, an accolade that eminent Western scientists readily accept. Yuri Milner is also known as a co-founder of and Vkontakte, large Russian internet social networking and media companies, which gradually came under the state's unofficial control and censorship. Meanwhile, Arkady Volozh, the founder of its main competitor, Yandex, who moved from Russia to Israel years ago and condemned the military aggression, still remains under sanctions.

Another example is the sweeping and, in our view, inaccurate generalizations one finds in the House of Commons report (mentioned above). In fact, the actual situations of the individuals pointedly hinted at by the report's author or authors vary: Roman Abramovich is under sanctions and was forced to sell the football club his owned at a loss, while Leonard Blavatnik continues to see his name not just on an Oxford college, but also on the Tate Museum. He remains unaffected by sanctions.

Such inconsistencies indicate areas for potential improvement in the sanctions policy to ensure that it effectively serves its intended objectives while maintaining fairness and proportionality.

In conclusion, it is noteworthy to mention that the motivations behind some sanctions appear to be driven by commercial interests rather than principled policy considerations. Ukraine serves as a compelling example in this regard. In contrast to freezing assets, the Ukrainian government has opted to confiscate and transfer to the state the property of sanctioned Russian businessmen. Cases in point include the seizing of Sense Bank, previously owned by Luxembourg-based ABHH126, and the assets of Russia's LSR127 Group.

Moreover, the Ukrainian government's sanction lists include individuals who have served in Russian state institutions, regardless of their individual actions or declared positions on controversial issues. An illustrative example is Sergei Petrov, a former State Duma deputy. In 2014 Petrov was one of only three deputies to abstain from voting on the annexation of Crimea. Despite this, he has been subjected to sanctions solely by the Ukrainian government.

Unfortunately, the Ukrainian position on sanctions, due to the obvious sentiments in society, is populist, often tactical in nature, including instances, as in many developing post-Soviet countries, not free from biased, even corrupt, influence. Given these observations, it could be advisable for Western powers to exercise caution when considering Ukraine's recommendations in shaping the sanctions policy. A thorough and nuanced analysis is imperative to ensure that sanctions serve their intended objectives, are seen as just and fair, and do not generate unintended negative consequences.
Consolidation of the elites due to personal sanctions
One of the perhaps unintended (but yet predictable) consequences of personal sanctions has been the coalescence of various Russian elite groups around the Kremlin. Previously segmented into distinct categories—political, business, military, security, and artistic—these elites found a new commonality as their options for residence and business operations abroad became increasingly restricted. Subsequently, their alignment with the Kremlin's directives has become more pronounced. In light of the sanctions, many have relocated their secondary residences from European countries to Israel, the United Arab Emirates or Turkey.

An additional point warranting consideration is the altered economic calculus, colloquially referred to as the "relative price" of sanctions. Historically, Russian businessmen have shown a preference for Western jurisdictions as repositories for their wealth, viewing Russia as an environment fraught with financial risks and an unpredictable tax system128. However, this perception underwent a notable shift in 2022. Assets held by affluent Russians in Western countries were either frozen or rendered immobile. Concurrently, some proposals emerged suggesting that a considerable portion of these assets should be transferred to Ukraine as a condition for lifting of the sanctions129.

In contrast, within the Russian Federation, the government implemented what is considered to be a reasonable tax on "excessive profits," leaving substantial fortunes largely undisturbed130. This has led to a newfound sense of security among Russian businessmen who display loyalty to the state. For the first time Russia appears to serve as a relatively "safe haven" for significant capital. Preliminary data from 2023 indicates that this shift has been accompanied by an uptick in domestic business activity and tax revenue generated from local sources.

In summary, the landscape for Russian elites has been substantially altered by the imposition of personal sanctions, resulting in both political and economic realignments. These developments raise questions about the intended and actual outcomes of Western sanctions policy, suggesting a need for further review and possibly recalibration of existing measures.

Navigating the labyrinthine geopolitical landscape, one is compelled to recount the saga of Ukrainian-born magnates of the Alfa Group, Mikhail Fridman and German Khan. Their tale is emblematic of the nuanced dynamics that play out in the wake of grand political gestures.

Migrating to Britain in 2015, post the annexation of Crimea, their trajectory appears more as a denouncement of political actions than the pursuit of capitalist ventures. Alfa-Bank, under their stewardship, conspicuously abstained from expanding into Crimea. Instead, their overarching holding entity, the Luxembourg-domiciled ABHH, channeled resources into Ukraine. Their investment portfolio, both commercial and philanthropic, exceeded $400 million in the nation. Beyond the Ukrainian frontiers, their Western forays, either directly or via the LetterOne conglomerate, amassed investments surpassing the $2 billion mark during the same period.

Mikhail Fridman, as the group's helmsman, publicly condemned Russia's militaristic endeavors in Ukraine, showcasing a firm stance that belied his Russian origins. Whispers and more concrete evidence allude to their covert support for the Ukrainian military apparatus during these tumultuous times.

Yet, the international sanctioning machinery, in a sweeping act, ensnared the entirety of Alfa Group's shareholders. Engulfed by the maelstrom of European, British, and American sanctions, these magnates found themselves embroiled in prolonged legal battles. Their plea wasn't solely about economic salvages; it was a fight to retain their adopted homestead under pre-existing terms. And while sections of the Russian opposition and diaspora rallied behind them, the overpowering might of geopolitical machinations ultimately coerced their exodus from Europe.

Conversations with affluent Russian individuals in recent months indicate a pervasive sense of discontent and disillusionment with Western sanctions. Many of these individuals consider at least some sanctions unjustified and lacking substantive grounds. Notably, this sentiment appears to prevail even among those who privately oppose Russia's military actions. The emotional repercussions are such that a majority express a reluctance to re-engage with Europe, even under hypothetical conditions where sanctions might be lifted and assets unfrozen. The current trend suggests a pivot towards alternative jurisdictions such as the United Arab Emirates, Israel and Turkey for the placement of financial assets and real estate investments131.

This shift in sentiment and behavior among Russia's financial elite points to a longer-term erosion of trust and credibility in Western institutions. The time span for this reputational damage is not easily quantifiable but appears likely to extend over decades rather than years. Consequently, this could inadvertently bolster President Putin's earlier policy agenda of "nationalization of the elites," which was articulated upon his return to the Kremlin in 2012. The recent developments necessitate a thorough evaluation of the efficacy and unintended consequences of Western sanctions policy132.
Backward flow of capital and other unexpected consequences
The final aspect meriting attention is the repatriation of capital into Russia, a perhaps unintended outcome of personal sanctions. Based on certain estimates, upward of $50 billion has reportedly been funneled back into the Russian Federation since the onset of the conflict133. It should be noted that the actual figure could potentially be higher, given that not all financial flows are meticulously documented. Interestingly, this amount is on a par with the approximately 4 trillion rubles that Russian citizens have deposited in personal bank accounts in post-Soviet countries, Turkey and the United Arab Emirates134. These deposits are primarily aimed at obtaining functional payment cards and safeguarding financial assets. Thus, the restrictions imposed by Western etities appear to have inadvertently contributed to Russia's financial stability.

It is advisable to view this phenomenon as an indirect effect of the sanctions. The individuals repatriating these funds are generally not the subjects of the sanctions themselves; rather, they are motivated by concerns that their assets could be frozen or seized. It is a well-established fact that Russian nationals currently face significant challenges in operating bank accounts within European jurisdictions.

A broader implication of this trend raises questions about the efficacy of the sanctions strategy. What was initially conceived as a punitive measure targeted at specific individuals responsible for the conflict is at risk of transforming into a tool that fosters alienation among the entire Russian citizenry. Whether this outcome was an inadvertent miscalculation or a deliberate choice within the original sanctions design, it certainly merits further scrutiny. The effect dilutes the intended impact of sanctions, shifting focus from culpable individuals to the general population, thereby undermining the original objectives of these measures.
Path for change
In the context of the existing sanctions framework, it may be beneficial to explore various amendments aimed at enhancing its effectiveness and scope. First of all, people who do not meet the sanctions criteria, who have been included in the sanctions lists by mistake, by hearsay or for other reasons that do not correspond to the objectives of sanctions pressure, should be removed from the lists — sanctions pressure is too important an instrument to be discredited by its erroneous or indiscriminate use.

For individuals residing and working in Russia—regardless of their views on the war, financial status, or tax contributions—exemption from sanctions could be considered. To be eligible for such exemptions, particularly for activities like travel or business operations in European countries, a public denouncement of the war could be set as a prerequisite. Some experts suggest that this may not be the most effective approach. Such declarations could be difficult to harmonize and may subject signatories to persistent accusations of being "forced" or "insincere." A more pragmatic approach may lie in shifting the emphasis from symbolic gestures to concrete legal and financial actions, also confirming the break or leading the entrepreneur to break with the system.

For sanctions to be lifted, it might be more effective if businessmen and women — provided they are not criminally implicated in war crimes — align themselves with foreign companies operating in Russia. This could involve renouncing Russian citizenship, divesting from Russian business interests, and contributing to a specially established humanitarian fund. The parameters of such contributions could be determined by independent humanitarian organizations with a sterling reputation, thereby adding a layer of accountability and legitimacy to the process.

As mentioned, there may be merit in identifying a separate category of individuals, actively sought by Western governments for offenses that range from war crimes to evasion of sectoral sanctions or actions undermining Western security. Instead of imposing traditional sanctions, issuance of confidential arrest warrants could be contemplated as a strategic measure for facilitating their capture. It is worth noting that recent actions by Western governments have included public sanctions against Russian nationals for a broad spectrum of offenses such as identity theft, financial misconduct and cybercrimes. This strategy could be perceived as an expansive, as opposed to focused and detailed, and potentially counterproductive application of sanctions policy. Therefore, a more focused and discreet approach might yield better results in aligning with the goals of both sanctions and arrest warrants.

Moreover, personal sanctions could be reserved for those who, although not directly involved in war crimes or hostile activities against Ukraine and Western countries, nonetheless publicly endorse or profit from the war or the regime initiating it. It is advisable that these sanctions be applicable to actions committed after key milestones, such as annexation of Crimea or invasion of Donbas post-2014.

Lastly, the procedure for lifting sanctions requires a comprehensive and detailed framework. One might argue that the primary objective of personal sanctions is not necessarily regime change—given the current limitations of even affluent Russians to challenge the Kremlin—but rather the fragmentation of Russian elites to induce alignment with Western interests. Accordingly, a well-defined mechanism should be developed for individuals currently under sanctions to have these lifted or sanctions regime may be relaxed depending on compliance with a certain list of parameters. Such a policy could incentivize high-profile figures like oligarchs, wealthy individuals, artists and media personalities to distance themselves from the current Russian administration.

This could serve as a highly valued "exit option," especially within the context of authoritarian regimes. Therefore, the focus of Western policies might more pragmatically be on punishing war criminals, isolating regime sup-porters within Russia and facilitating the departure of those willing to sever ties with the current regime.
Pressure as a stimulus and catalyst for political and civil resistance in Russia
Civil Society Relations between Russia and the West: Expectations and Reality
One of the purported objectives of sanctions and other external pressures is believed to be the incitement of protest within Russian society. This is achieved both through causing its economic state to deteriorate, which is perceived not only as a means to weaken the Kremlin's military capabilities but also its domestic political strengths, and indirectly supporting the Russian opposition by publicly delegitimizing the current presidential and parliamentary authorities. In simple terms, the message is, "if you oppose the war and Putin, take to the streets."

To assess the sensibility of such an approach and its potential outcome, it seems pertinent in this context to recall the evolution of the relationship between the Russian opposition and the so-called Western world. Understanding the role and fate of various strata in these relations, especially activists and the business community, is key. It's also vital to gauge the possibility of protest movements in Russia at the current juncture.

The unwavering verbal support for Russian civil society in its confrontation with Vladimir Putin's authoritarian regime by democratic nations is evident135. This long-standing support has remained a consistent factor in the triangular relationship involving the Russian opposition, Putin's regime, and democratic governments. It's this history of support that may have fueled disappointment following Russia's invasion of Ukraine: having provided support for so many years, Putin initiated a full-scale war, but where was the mass protest that could have led to a regime change, cessation of the war, or at least clearly demonstrated that a significant number of Russian citizens did not support it?

At the heart of this disappointment is the accurate premise that the only way to stop the war against Ukraine and end the Russian dictatorship is in partnership with Russian civil society. However, the shock of current events, radical ideas from extreme political forces, which resonate especially during times of war due to their perceived clarity and simplicity, sometimes lead to misguided or dubious conclusions drawn from this accurate premise – that "to stop the war and change the Russian regime, Russians themselves are needed".

Some arguments, previously unheard during prior wars and not considered relevant for citizens of other aggressive dictatorships, have emerged: that there's no difference between opponents and supporters of the war, that opponents of the dictatorship are as culpable as its supporters since they "failed to stop it", that there should be a halt in allowing Russians, including opponents of the dictatorship, to leave the country, and that those who have left should, through various restrictions, be compelled to return and engage in political combat, and that the presence of Russians poses threats to European security or "upsets Ukrainians".

However, these arguments not only contradict the lessons Europe learned from World War II – since "never again" should clearly pertain not only to combat actions or attempts to appease an aggressor but also to the idea that potential victims should not be trapped within an aggressive dictatorship – but also conflict with the core values of democratic nations. Beyond their ideological mismatch, these positions lack practical sense, hindering the establishment of a proper interaction between Russian elites and democratic societies towards achieving a shared goal – to halt the war and transform Russia's regime.
The Evolution of Russian Protest
The gradual transformation of Putin's regime into an aggressive dictatorship disoriented Western politicians when seeking the right balance between the government and the opposition. This is hardly surprising, as this gradual shift perplexed the Russian society itself. In the relationship between the Russian civil society on one hand, and the Wes-tern public opinion and political class on the other, three phases can be distinguished, each characterized by its own successes and challenges.

The first phase can be termed as 'inertial'. During this phase, there was a prevailing belief that Russia, despite certain deviations, was on the path of democratic transition. Since Russia wasn't offered membership in unions, like the EU, which require high unified standards of civil liberties and political institutions, Russia's deviations from these standards were not deemed significant.

Western politicians believed that for Russia, the sought-after societal structure was a market democracy136. However, in relationships with countries beyond the tentative borders of the Western community, the market seemed more critical than democratic institutions. These institutions were, presumably, expected to catch up as the country's market economy, integrated into the world, strengthened. Putin, being popular and advocating for a market-driven economy, increasingly led Western politicians to expect the opposition to change the behavior of the Russian regime and 'make his life difficult' where he went astray, rather than lead the country themselves.

The liberal party representatives, who lost seats in the Duma, joined the leadership of opposition movements (e.g., "Solidarity")137, and former democratic parties in the Duma (Yabloko, SPS)138 transitioned to the opposition, retaining representation in local government bodies. Simultaneously, a new non-parliamentary opposition began to emerge, which, in addition to traditional democratic and liberal slogans, utilized nationalistic, populist, and anti-elitist messages broadly (after 2010, this movement was led by Navalny)139. Here, Western politicians faced a challenging choice between values close to them and familiar interlocutors on one side, and the second stream, which could provide a broader base for protest. These two protest movements diverged in foreign policies. The former could generally be termed representatives of the pro-Western party, while the latter argued that Russia had its national interests that might conflict with the West.

During this phase, the West's support for the opposition was relatively significant. However, the primary mistake lay in forgoing the task of standardizing institutions in exchange for integration perspectives or other appealing opportunities. Essentially, the requirement for a change of power, crucial for recognition and interaction with the Russian regime, was lifted.

In the fall of 2011, a new phase in relations between the West and Russian civil society began, predominantly lasting until Russia's invasion of Ukraine. The unfair campaign of Duma elections140 and blatant falsification of their results against the backdrop of Medvedev's liberal rhetoric, and more importantly, Putin's decision to return to the Kremlin and the cynical manner in which it was presented, spawned the mass Moscow protest of winter-spring 2011-2012141. Scenes of protest, reminiscent of anti-dictatorial revolutions from South Korea, Indonesia, and the Philippines to Eastern Europe of the late 80s, and even more recent events in Belgrade, Tbilisi, Kyiv, and the then-recent Arab Spring, added to the protest's immense popularity among Western public opinion. The prospect of dealing again with Vladimir Putin, with whom they had accumulated a heavy burden of toxic grievances, wasn't welcomed by the leaders of democratic countries. Meanwhile, the protest's weaknesses became apparent: its metropolitan nature, the absence of empowered leaders to converse with the outside world, and the fact that the protesters failed to incite a split within the ranks of the Russian regime.

The fading and eventual defeat of the protest pushed Western leaders to revert to their usual interactions with Russian authorities. Despite supporting the protest in official statements, Western leaders acknowledged Putin's new presidency and the government he appointed. They sent congratulatory telegrams, resumed regular contact with him and other Russian officials, and even maintained relations with the Duma, whose elections they had repeatedly criticized as unfair and unfree. This had long-term demotivating consequences for Russian civil society, undermining its faith in its strength. It's challenging to be more democratic than Western democratic leaders, who recognized the Russian government and Putin as Russia's head.

Thus, Vladimir Putin and his regime achieved what dictators, experiencing a legitimacy deficit domestically, strive for: legitimacy through international relations. There were scandalous instances when Western embassies denied visas to activists persecuted for participating in protests, based on the fact that criminal and administrative cases were initiated against them in Russia. At this stage, the Russian regime was excluded by the Western political class from countries in a state of democratic transition. Market autocracy was accepted as a permissible form of Russian governance, contrary to the opinions of the democratic sector of Russian civil society.

Of course, the relationship of democratic countries to the Russian government after Putin's return and the crushing of protests could not remain unchanged. Within Russian civil society, democratic countries began to seek potential allies for a regime transformation (the symbolic 2012 meeting of the new US ambassador, McFaul, with the opposition that took place before his credentials presentation)142. Meanwhile, Russian officials faced their first personal sanctions—the Magnitsky list143.

Predictably, Putin and the security wing of the Russian government saw the Moscow protest as a Western conspiracy, an attempt at a color revolution, which they had anticipated and feared for the previous decade144. Protest participants and civil society as a whole were excluded by the authorities from potential interlocutors. They were branded as conduits of foreign influence and simply as traitors145. Thus, the regime attributed to the protesters a closeness to Western politicians, which they genuinely did not possess.

Throughout these years leading up to the invasion of Ukraine, street protests largely remained legal and feasible. However, the cost of protesting grew: permit procedures became more complex, attempts to obtain permits were increasingly denied, detentions during protests became harsher, and penalties more severe. Criminal liability was introduced for "repeated violations of street action rules" with corresponding penalties146.

Following the Moscow protests of 2011-2012 were the anti-war protests of 2014 and 2015. Their climax can be considered March 15, 2014, when tens of thousands prote-sted in Moscow against the violation of Ukraine's territorial integrity and a potential war with it147. Over this and the next year, several street actions of varying scales took place against the war and interference in Ukraine's affairs.

In 2019, Alexei Navalny's FBK (Anti-Corruption Foundation) unexpectedly managed to turn the elections to the regional parliaments of Moscow and St. Petersburg into significant civil disobedience events, major electoral and protest activities148. Judging by the severity with which this typically-sized protest was pre-emptively suppressed, and Moscow essentially being handed over to security forces for a time, it's likely that by this point Vladimir Putin had already determined plans to remain in power after 2024 and the idea of a military operation against Ukraine.

In these local elections, Navalny first tested the controversial "smart voting149" technology, advocating to vote for any candidate except the ruling party's one. As a result, many United Russia candidates indeed lost, but they were often replaced by communist or nationalist candidates with even more anti-Western, aggressive, and revanchist programs. Not all Western allies of Russian civil society supported this protest voting method.

The smart voting technology became a vivid illustration of Western politicians' fears regarding Russian democracy, fears long shared with liberal representatives of Russian civil society: if Russian citizens were given full freedom, they might choose someone "worse than Putin". Therefore, the idea of full democratization of Russia was and still is approached with apprehensions by many. Clearly, for many, a non-aggressive, market-based "autocracy with institutions" remained a more secure and practically preferable version of the Russian regime for a long time.

Precisely because civil society had maintained the very possibility of protesting despite intensified pressure over many years, Russia's invasion of Ukraine was immediately followed by protests similar to those Russia had seen in previous years. However, within just a few days, it became evident that Russia itself was no longer the state civil society had known in recent years. A classic aggressive war, waged against a neighboring country, swept away all previous rules and assumptions in a matter of days, transforming the Russian regime from a hybrid, difficult-to-remove autocracy into a classic 20th-century dictatorship. The cost of protesting rose so much that participation became incompatible with regular life. Almost without exception, the price of protest meant an end to ordinary life; protesting became a life choice, a profession incompatible with any other.

Thus, hopes for a protest or even a forcible confrontation of anti-Putin forces with the regime are not only futile today but also somewhat harmful in a way, as they divert the conversation towards empty expectations and false assessments. The absence of street actions is taken as an increase in regime support, and the lack of anti-war forces in Russia implies a totality of blame on Russian citizens for supporting aggression. The pragmatism of long-term support for Putin by Western democracies and a policy of demonstrative non-interference has swung in another radical direction: non-recognition of all political forces of Russian origin, especially opposition ones, as suitable for dialogue, and accusing of marginality and weakness those who were previously overlooked and oppressed for years.
Russian business community as an internal political factor
The international community's stance towards the Russian class of major entrepreneurs, as generally expressed through sanctions lists, can be viewed as unequivocal. Yet, the preference for sanctions over criminal charges suggests a purported intent to pressure this elite group. Such actions can only be assessed in the context of the evolving relationship between Russian society and Western entities with significant Russian capital – a relationship that is far from simple and laden with grievances and murky episodes.

The cohort of Russia's major proprietors, encompassing both industrialists and financiers, is indeed subject to considerable scrutiny. Such scrutiny would hold particularly significant weight if presented by a state or another society stratum capable of cultivating, within a span of 30 years from an absolute beginning, an enlightened and strategically thinking class of major entrepreneurs. This class would ideally counterbalance the security bureaucracy's centralizing ambitions and refrain from leveraging state mechanisms for non-competitive growth and enrichment. Regrettably, no such state has manifested itself in global history. The Russian entrepreneurial class emerged from the impoverishment of the Soviet system, as there was no other matrix from which it could have evolved. Political literacy, experience, professional, and civic expertise were accumulated by Russian proprietors and managers at an unprecedented pace. However, their actions are now subject to evaluation by global public opinion and bureaucracy, which typically operate within the constraints of short electoral cycles.

In essence, over the past 30 years, two conflicting expectations have been projected onto major Russian business entities (though the boundaries of this group remain nebulous): involvement in the country's political life and abstention from it. Even the term "oligarch," revived from ancient Greek vernacular, implies influence and manipulation of political entities in the interests of major proprietors.

Interestingly, this rhetoric is shared by Russia's classical liberal opposition, a segment of the new "de-ideologized" opposition primarily championing an "anti-corruption" agenda150, and Western political and media elites who have consistently critiqued the practices of Russian capitalism. Given that the instruments of sanctions and other pressures are wielded predominantly by Western institutions, their interactions with both the Russian government and Russian capital warrant analytical approach.

This array of criticisms tends to paint the discourse in black-and-white terms, whereas the reality of the past 30 years indicates that the behavior of Russian business has evolved and was never monolithic. In its nascent stages, Russian capital couldn't be accused of lacking a political stance or demonstrating inert manifestations of such. The emerging Russian capital was the primary force resisting a Communist resurgence in 1996. Subsequent events may have tinted recollections of this resistance with ambivalence, but the fact of not just financial, but also intellectual and organizational efforts from large (though considerably smaller than today) Russian businesses in this regard remains uncontested.

Often overlooked is the fact that this mobilization was aimed at advocacy, not election rigging; it was conducted openly and even transparently and required significant courage. This is because it didn't stem from a position equal or superior to the existing authority. Instead, it originated from a profound crisis of the Yeltsin administration, immense unpopularity of the economic reforms of the Gaidar government, and the consequent administrations, coupled with the high risks of defeat. Such a loss would have led all entrepreneurs opposing the leader of the Communist Party Gennady Zyuganov to bankruptcy and, likely, to arrest.

It's pertinent to note that despite Gennady Zyuganov's high electoral rating and broad-based support across various societal strata and regions, the contention was not merely an ideological clash within a mature democracy where power transition might take precedence over the specific platforms of candidates. The core issue was the potential resurgence of anti-liberal forces, bolstered by lower-tier criminal clans, a reversal of all economic reforms, and a shift in foreign policy direction. Essentially, the Russian business sector ensured not only the continuation of Yeltsin's rule (which in hindsight may not be viewed entirely favorably) but primarily the preservation of the private property principle and the country's openness to Western technologies and capital. This openness had the potential to lead to systemic and enduring positive transformations in Russia if the West had been receptive and capitalized on them.

George Soros in 96 at the Davos forum (six months before the presidential election in Moscow) advised Russian business to "leave Russia because now they are finished ... the communists will win", and two years later wrote that Yeltsin won thanks to "political machinations151" and "dictatorship in Russia is unrealistic152".

However, over the subsequent few years, Western capital, media, and public institutions were primarily content with the mere elimination of risks associated with Soviet revival and did not endeavor to invest in the Russian economy or in developing a civilized market across the CIS. A similar scenario also manifested itself in Ukraine: cautiousness of Western partners compelled the nascent Ukrainian business sector to pivot more towards their familiar northeastern vicinity, reinforcing post-Soviet industrial-economic ties. The severing of such ties subsequently exacerbated tensions in Russia-Ukraine bilateral relations in the early 21st century.

Reflecting upon the low valuations of collateral auctions and the "dirt-cheap" sale of state property, it's essential to recognize that there were no substantial restrictions on foreign companies participating in this process at that time. Stakeholders from both the business sector and the state have often recollected that globally there were few entities willing to participate in these auctions directly, be part of consortiums, or even finance Russian privatization. Political and economic conditions in Europe and the commodity market, on the whole, did not appear conducive for American and European corporations to engage with Russian assets. Yet, it didn't deter widespread criticism of those who undertook these high risks. Fast-forwarding, it's worth noting that neither administrative barriers nor ethical considerations hindered Western businesses from investing heavily in Putin's Russia from five years post-auction until 2014 and occasionally up until 2022, turning a blind eye to the arrests and assassinations of political opposition, aggression in Georgia, election rigging, and more.

Of course, the widespread and timely entry of Western corporations into the market wouldn't have been a panacea against Putin's regression. However, it would have integrated the Russian market into the broader European production system earlier and more robustly, sending the right signal to Russian entrepreneurs during their pivotal formative period. Evidence can be observed in the markets of such countries like the Czech Republic, Poland, Hungary, and other former socialist block nations, which were subjected to an influx of Western capital and standards much earlier despite the high crime rates and various challenges of that period, including the dissolution of Czechoslovakia into two separate nations.

During that period, the attitude of European capital, in particular, contributed to the emergence in Russia of a somewhat detached or sovereign layer of major Russian capital. This layer owed its position neither to Putin nor to Western partners but solely to its own entrepreneurial spirit and the weakness of Russian institutions amid a rapidly changing economic landscape. This generation of businessmen could be faulted for either their inability or perhaps their unwillingness to expedite the establishment of such institutions. However, today's sanctions are not based on these accusations.

Here's how the report "Putinism after Putin: The Deep Structures of Russian Authoritarianism153," prepared by the Centre for Eastern Studies, defines the position of major Russian business:

"...big business, consisting of around one hundred U.S. dollar billionaires. … Their overriding goal is to maximise their assets (through financial operations and influencing the country’s laws). The authoritarian regime provides them with the opportunity to accumulate wealth on an unprecedented scale, which would be impossible in a democratic system. The main sources of their enrichment include: Russia’s opaque system of tax breaks; foreign trade preferences; and public procurement contracts awarded without competitive tendering procedures…"

Such an approach is symptomatic of the practice of generalizations and lack of attention to detail with which the Western expert community describes the situation in economic Russia. It remains utterly unclear how, under this definition, Oleg Tinkov, the creator from scratch of one of the most technologically advanced banks in Europe, or Sergey Galitsky, the creator of the most potent discount retail, or Anatoly Karachinsky, the developer of software for Boeing, or Tamara Bakalchuk, the owner of a clothing marketplace, fit. It's also unclear how, in such a regime of favoritism, foreign companies operated in almost every sector of the Russian economy, showing profits many times higher than domestic markets. Did they benefit from the opaque system of tax incentives and influence legislation? Of course not. Even in the 2016-2017 Global Competitiveness Report by the World Economic Forum, it is stated that the "Favoritism in decisions of government officials index for Russia is nearly identical to that of Cyprus, which is an EU member, and was considerably better than the index for some other EU countries, such as Slovenia or the Czech Republic154.

Upon Vladimir Putin's rise to power, the pragmatic duplicity of European capital became evident. This was not just reflected in their entry into the Russian market despite the almost immediate dismantling of democratic institutions in Russia but also in their willingness to cooperate with the immature Russian business abroad while disregarding its non-compliance with global anti-corruption standards. Business magnates, legislators, and regional leaders from Russia poured investments into Western businesses, utilizing funds that are now considered questionable in terms of their origins. They effortlessly acquired football clubs and mansions, breezing through necessary banking and regulatory checks. World leaders and celebrities welcomed Russian businessmen and officials, while global industry pioneers flocked to Moscow to meet with Vladimir Putin.

Strangely, during this era, if there was any entity attempting to resist the monopolization of power and the intensification of special services, it was the Russian business community itself. While the global community silently looked on, these business entities inevitably lost the battle. In the initial years of Putin's reign, all privately-owned national television channels were either eliminated or nationalized, and their proprietors were either incarcerated or forced to flee the country. Despite the contentious nature surrounding individuals like Vladimir Gusinsky, Boris Berezovsky, and Mikhail Khodorkovsky, the political motives behind their persecution are undeniable. Yet, their repeated warnings about the dangers of Putin's decisions and tactics — not just to Russia's democratic institutions and business but also to its neighboring countries — fell on deaf ears internationally. Some faced persecution at Russia's request, were under extradition threats, many were discredited, and a few were even assassinated. Yet, it took years before the officials of democratic nations began publicly linking these incidents to Russian authorities.

The aforementioned names are just the tip of the iceberg. Dozens of individuals from Russia's Forbes list over the years have been forced to relocate abroad. The Putin-era state control of the Russian economy primarily targeted free Russian businesses as potential partners and participants in an emerging opposition. Yet, the world, following President Bush's example of looking into Putin's eyes and seeing the man’s soul, turned a blind eye.

BP became a partner of Rosneft corporation which was created following the criminal nationalization of the private oil giant YUKOS. Shell, in partnership with Vladimir Putin's business allies, commenced the development of fields in Sakhalin. After Moscow's military aggression in Georgia, LVMH set up a giant showroom in Red Square. Global capital was ready to collaborate not only with the nouveau riche of the Yeltsin era but even more so with Putin's pseudo-proprietors.

Today, sanctions have enveloped both generations of Russian capitalists without distinguishing between those who succeeded thanks to Putin and those who emerged before or even despite him. Yet these sanctions spared Western corporations and politicians who for decades failed to recognize Russia's militaristic tendencies or even encouraged them. Neither Gerhard Schröder, who sat on the board of directors of Rosneft for many years155, nor Silvio Berlusconi's advisors who assisted in building the Russian National Media Group propaganda giant156, nor other Western companies that have been running profitable ventures in Russia and paying huge taxes to the federal budget, which now funds Russia's invasion of Ukraine, have been affected by these sanctions.

Informed by the bitter experiences of Putin's first decade, a significant portion of Russian business chose gradual emigration as its response. Recognizing the impossibility of operating under the oppressive hand of special services, without independent courts and media, major entrepreneurs began redirecting their efforts and capital from Russia to places where principles of individual, not collective national or class responsibility, seemed unshakeable.

Russian businesses have always had a penchant for spending warmer months on the French Riviera and in Italy, a favored destination of Russian capital even before the 1917 revolution. Mansions and apartments were bought in London, Paris, and Baden-Baden157. However, the first half of the 2010s marked a fundamental shift. The shocking power shift in 2012, closely followed by the annexation of Crimea, prompted Russian business to venture abroad not for leisure or entertainment, but for work and a genuine break from Putin's policies.

Billions of Russian investment dollars flowed into the West over the last decade. Open sources suggest that these weren't merely investments in real estate or deposits but "smart" investments into technology, industrial production, and petrochemical industry, where Russian businessmen had amassed significant expertise. Relocating investment hubs didn't necessarily mean the immediate sale of Russian assets, just as acquiring European citizenship didn't result in instant renunciation of Russian nationality. The situation in Russia is further complicated by the reality that under a totalitarian regime, it's much easier to lose assets than to move them. And although the devaluation of Russian companies since the onset of the war essentially represents a monumental loss for both the country and its current owners, one can't fault anyone for not selling Russian assets and not departing faster than Western companies.

It might be easier to criticize Russian business for collective cowardice, an unwillingness to politically unite or pool financial resources to counter the regime. But apart from jailed Russian opposition figures, who has the right to level such criticism? Even so, these rebukes would be moot. Businesses, as a class, always behave pragmatically in every country and situation. Moreover, even departing from pragmatic behaviors, an unbiased analysis indicates that by this point, little could be done from within the country. Practical resistance to the regime became unfeasible by the mid-2000s.

The Russian business sector ceased to be a political player with the endorsement of the majority of the Russian populace. Since the sentencing of Mikhail Khodorkovsky158, none of the major Russian businessmen could exert even indirect influence on Vladimir Putin's most important domestic policy or any foreign economic decisions (with the exception of some of his old colleagues who became businessmen "on the side" during his years in power). In essence, this came with the tacit agreement and encouragement of Western nations, more interested in appeasing Putin and witnessing growing profits than in confronting authoritarianism. By 2014, Putin's enforcement machine was tuned to the point where even fleeing from it was akin to a non-public, internal protest. By 2022, this strategy became the chosen path for millions of small entrepreneurs and employees.

The second reason is less obvious but even more significant. In reality, the Russian civil resistance, in one form or another persisting throughout Putin's tenure, couldn't have existed without the major business established in the country pre-Putin, or at the very least, not thanks to of him. Enlightening the population, civic and political initiatives by activists, from the Anti-Corruption Foundation to "The Last Address" NGO and others, was both difficult and important.

Today, names like Sergey Petrov, Dmitry Zimin, Mikhail Khodorkovsky and Yevgeny Chichvarkin, who made their antiwar positions public, are well-known. However, this hasn't exempted them from regulatory and sanction-related issues, as with almost any Russian citizen or ex-citizen. Still, dozens of top-tier businessmen consistently support independent Russian media abroad, refugee centers, families of political prisoners, all without publicizing their names. And it's not just out of fear, although spotlight-ing such assistance would certainly create problems for these men and women. It would draw the attention of both the regime, with its vast informant network, and international financial regulators most probably unwilling to delve into the intricacies of cross-border charitable activities in a totalitarian state.

The report's authors are aware of dozens of Russian capitalists who, on the eve of the war or during its first month, aided the Ukrainian government. Lately this assistance was eventually declined, which, in our view, was due to Ukrainian political shortsightedness. Still, a detailed analysis and criticism of its decisions aren't our primary focus. The crux of the matter is that a significant portion of the Russian entrepreneurial class is ready to oppose Putin within existing external frameworks, which the fleeing entrepreneurs themselves aren't yet able or willing to create. Such institutions might be, if not the Ukrainian state, definitely European or American organizations and intergovernmental initiatives. By not distinguishing the sheep from the goats, they deprive the anti-Putin coalition of potentially the most competent and experienced participants - the defectors. Because, in truth, there are no angels in the private Russian entrepreneurial class. But opposing Putin does not require angels. What's needed are conditions where significant capital and collective intellect can more productively work toward liberating both Russia and Ukraine, which is unquestionably in their best interest.
Anti-war and political protest in Russia — false hopes and necessary actions
Historically, anti-war protests have always been most effective in democratic states. Protests against wars in Indochina, Afghanistan, Iraq, and against the deployment of American missiles in Europe had, at times, influenced the policies of Western governments. However, once military operations commence in democratic countries, it's challenging to wind them down swiftly, even if they are deemed unjustified. In autocracies, the chances of ending a war due to protests are even slimmer, at least until the war leads to significant economic difficulties.

During the Cold War era, Western governments demonstrated a greater realism and understanding of the nature of dictatorships. During events like the Soviet invasion of Czechoslovakia or the Afghan war, no one expected Soviet citizens to protest; it was an individual decision for the brave few. While Europe witnessed massive protests against the deployment of American intermediate-range missiles, no one expected or demanded similar protests from Soviet citizens against the deployment of Soviet missiles. Instead, Western governments advocated for freedom of movement out of the USSR and welcomed dissidents. A significant difference between the Iron Curtain era and now is that Russia doesn't seal its borders from the inside. However, the purpose of the Western countries' policies was not merely to welcome emigrants and utilize their labor and intellectual capacities but to demonstrate that people wanted to leave the militant Soviet dictatorship. Similarly, today, people are eager to leave, and the exodus of human capital undermines its capabilities, delegitimizing it in the eyes of the external world and its own population.

Because modern authoritarian Russia is often seen as a reincarnation of the USSR, the absence of an iron curtain can be misleading. Modern Russia indeed isn't the USSR; it's a right-wing dictatorship with a market economy. However, there's vast experience in interacting with opposition from right-wing dictatorships and dictatorships that don't seal their borders from the inside, and there's no reason not to use this experience when dealing with Russians. In democratic countries, powerful, intellectually and financially significant diasporas have formed from non-democratic market countries. The argument that citizens of these dictatorships should return home and overthrow their regimes was not commonly held. Events like Ninoy Aquino's return to Manila and his assassination at the airport159 was a voluntary decision; it led to a wave of outraged protest in the Philippines. However, even this exceptionally massive protest did not lead to regime change; the "People Power Revolution" occurred later and was related to various other factors160.

Following World War II, the number of market dictatorships that waged aggressive wars was limited. Nevertheless, there's a considerable and unequivocal experience regarding their civil societies. While Portugal in the 1960s and early 1970s was engaged in colonial wars and under international sanctions, there were no restrictions on labor and political emigration from Portugal to democratic countries. On the contrary, anti-war and anti-dictatorship forces in exile, including defectors from the ruling elite (like General Delgado and his followers), were even forgiven for the dramatic hijacking of the major Portuguese liner Santa Maria, which had American citizens aboard161. The attempt by Greek colonels to annex Cyprus did not change the attitude towards Greek intellectuals, public figures, and entrepreneurs who were living in democratic countries. The Iran-Iraq war had no effect on the political and cultural emigrants of the two countries living in the West. Argentina's junta's attempt to annex the Falklands posed problems for Argentina's political emigration because a kind of "Falkland consensus" had formed in Argentina. Yet in democratic countries, it never occurred to worsen their position in exile.

In their relations with dictatorships, democratic countries believed that the effective participation of unarmed civilians in regime change is possible only under specific conditions. These conditions arise when an objective situation for such a regime change develops - a split of the elites, hesitation or departure of some security forces, the collapse of the consensus on which the regime relied, economic difficulties, a deep crisis of legitimacy. Effective influence on the regime using civil protest is possible during the consolidation of the dictatorship or its decomposition. During these periods, the protest potential accumulated by civil society effectively works to dismantle the regime and build new institutions. In contrast, mass pro-tests when the regime is solid are either impossible or represent a heroic but irrational expenditure of human potential necessary for a real regime change.

From March 2022, Russia has the strictest wartime laws regarding freedom of speech and protest activity, making protests acts of individual heroism162. Even economic hardships do not necessarily provoke a change in power, or else under their weight, the Soviet Union, North Korea, Cuba, or Francoist Spain of the 1940s to early 1950s would have immediately collapsed. Conversely, people who have left a dictatorship and successfully settled in democratic countries create a negative comparison for the regime, as was the case with a million Spanish workers in Western Europe during Franco's regime.

In this regard, the awarding of the Nobel Prizes to the chief editor of "Novaya Gazeta" Dmitry Muratov163 and representatives of the International Memorial (together with Ukrainian and Belarusian human rights defenders164), the Cannes award to director Kirill Serebrennikov165, the issuance of licenses to Russian media in EU countries, the issuance of humanitarian visas and talent visas, and the cooperation of Western think tanks with Russian intellectuals appear successful.

The delegitimization and stigmatization of the entire Russian population hinder opponents of war and dictatorship in Russia from becoming a successful counter-elite that could play a crucial role in regime change. For the same purpose — to cut off, to isolate those who left — Russian propaganda works. Meanwhile, if public figures who left Russia because of the war are cut off from society inside Russia, it might happen that changes will rely solely on those who stayed inside, who, with rare exceptions, lived under the inevitable burden of silence and compromises. Free interaction, mutual trust between parts of civil society inside and outside Russia is a vital factor in its genuine and irreversible transformation.
New emigration as protest and resource
According to various estimates, between 500,000 and 1.3 million people left Russia in 2022166. As the demographer Alexei Raksha notes, this exodus occurred in two waves: around 150,000 left after the start of the full-scale military invasion, and between 350,000 and 650,000 left following the mobilization announcement in September 2022. A third wave of departures was anticipated but never materialized, despite the media sounding alarms about electronic call-up notices; these rumors did not result in mass panic or departures167.

This emigration, especially the first wave but also significantly the second one, is primarily composed of those who disagree with Russia's current course of action. They are individuals who morally and politically cannot accept this aggression against Ukraine and, largely as a consequence, fear political persecution. Their active social and political stance is a defining characteristic of many, if not most, of those who left Russia post-war.
Political scientist Fyodor Krasheninnikov notes that many in political exile have significant experience in Russian public politics: successfully participating in elections, organizing mass protests, and engaging in human rights, educational, and environmental work168. These emigrants aren't just political activists but also their supporters; estimates put the number of such voters between 7 million and 9 million people over the past nine years.

The majority of those who left post-outbreak are better off and more educated than the average Russian citizen. Surveys indicate they are predominantly male (86% are younger than 45), highly educated (80% compared to the Russian average of 27%), and have savings in Russian banks. Most speak English, and there's a surge in demand for learning Armenian, Georgian, Kazakh, and Turkish, reflecting popular relocation destinations. These new emigres usually hail from large cities and can be classified as globalized upper-middle-class individuals with foreign travel experience and at ease with modern "digital culture."
The new Russian diaspora will not perish in a foreign land. Unlike the diaspora of the 1920s, this opposition in exile is the real Russia, just as "Free France" was once the real France. Moreover, it is destined to influence the fate of the Federation and, no doubt, even to govern it169.
Bernard Guetta
The new Russian diaspora will not perish in a foreign land. Unlike the diaspora of the 1920s, this opposition in exile is the real Russia, just as "Free France" was once the real France. Moreover, it is destined to influence the fate of the Federation and, no doubt, even to govern it169.
Bernard Guetta
0.5-1.3 million
people left Russia in 2022
It's crucial to note that this is not about labeling "good Russians170"—a concept ethically vulnerable, even racist, and organizationally weak. Rather, we are talking about the pragmatic need to attract the economic and potentially physical soldiers, or rather officers, from the opposing side. Understanding the size and characteristics of this group is essential for this purpose.

According to varying estimates, the middle class in Russia constitutes between 18% and 38% of the total population171. As of mid-2021 data, approximately 1.03 million families in Russia fall into the highest income bracket. This demographic represents about 3 million individuals, or roughly 1.9% of the Russian population172.

Beginning in 2021, a new personal income tax rate of 15% is applied to Russian citizens with annual incomes exceeding 5 million rubles, or monthly earnings over 417,000 rubles. According to data from Rosstat as of April 2021, this high-income bracket constitutes approximately 0.4% of the working population in Russia, translating to around 300,000 individuals out of a total workforce of 75 million. The threshold for categorizing an individual as wealthy is a net worth exceeding one million US dollars, approximately 71 million rubles as of July 2020. Expert assessments from Skolkovo Business School indicate over 100,000 such individuals residing in Moscow and its adjacent regions173.
86% male
are younger than 45 and highly educated (80% compared to the Russian average of 27%), who left post-outbreak
Should these high-net-worth individuals choose to leave Russia and liquidate their assets, even at reduced values, they are unlikely to strain the social welfare systems of host nations. These individuals would possess adequate resources to adapt, identify alternative revenue streams, and establish new social networks. The migratory trend, beyond the loss of human capital, would signify a substantial depletion of managerial, specialist, and entrepreneurial talent for Russia. Concurrently, it would result in the transfer of several hundred billion dollars into Western economies.

Regarding professional demographics, it is pertinent to note that as of mid-2022, the number of scientists in Russia has decreased to 340,000, reflecting a 10.5% reduction, equivalent to a loss of 76,000 individuals, since 2014174.

Roughly half of those who emigrated from Russia in the initial six months of the conflict were employed in the IT industry. A majority was open to remote work and was unafraid of a decline in living standards or career change. Maksut Shadaev, Russia's Minister for Digital, estimates that about 100,000 IT professionals will have exited Russia in 2022, representing 10% of the total number of IT specialists in the country175.
of those who left continued to work for Russian companies due 
to strict restrictions hampering access to 
the international labor market
Some argue that this figure is understated by 30-50%. Initially, 80% of those who left continued to work for Russian companies, not out of inertia but due to strict restrictions hampering access to the international labor market. Besides IT professionals, a significant portion of the emigrants include managers, journalists, and other creative professionals.

This group, often referred to as "European Russians," share Western values and were once hopeful that such values would gain traction in Russia. After relocating, they have actively participated in mutual aid initiatives, anti-war campaigns, assisting refugees from Ukraine, and solidarity movements for activists and political prisoners still in Russia. They continue to organize a wide array of events, from online and offline conferences to charity auctions.

These Russian immigrants tend to be self-reliant and entrepreneurial, rarely relying on state support even before their move. In their new countries, they are generally more self-sufficient and economically active than the local population. Few require welfare benefits, regardless of the type of visa they hold. Their economic impact has been swiftly noticed in several countries. For example, the economies of Kazakhstan, Georgia, and Armenia recorded growth rates of 3.2%, 10.1%, and 12.6% in 2022, respectively—figures that far exceed initial projections176.

The Russian government is cognizant of the risks associated with the loss of human capital and has enacted measures to mitigate it. On May 12, 2023, President Putin issued a decree aimed at stemming the migration177 of Russian citizens abroad, citing an increase in emigration in 2022 due to "altered socio-economic conditions." The decree outlines the need for additional strategies to "preserve human capital," including the development of financial, social, and other incentives to retain the population.

The outflow of personnel, especially in the IT sector, was so noticeable that the authorities made repeated attempts to curb migration. For example, Government Chairman Mikhail Mishustin promised programmers favorable mortgage deals and temporary draft exemption, while state-owned companies and banks almost doubled the number of vacancies178. In December 2022 Sergei Tsekov, a senator from annexed Crimea, suggested seizing property from citizens who had left Russia, while Dmitry Medvedev, who was President at the time of the war with Georgia in 2008, suggested not letting emigres come back to Russia, treating them as "enemies of society" and cutting them off from sources of income in Russia179; these initiatives, however, were not given traction. Later, Duma deputy Nikolai Brykin announced that he would start drafting a bill to classify as “foreign agents” those Russian citizens who left the country after the start of the war and to cease recognizing them as Russian citizens180.

More recently, the Kremlin introduced another package of measures that could be very disturbing, at least for some emigres. A new law passed by the State Duma and Federation Council in mid-April states that once a Russian citizen eligible for military service receives a call-up notice (this covers all healthy males between the ages of 18 and 55) either in hard copy or electronically on his personal page on the Gosuslugi (Government Services) website, he is automatically immediately banned from foreign travel and is given notice that in 20 days he would also be banned from traveling within Russia181. The next logical step, which looks very likely, would probably be blocking the person’s bank accounts and payment cards in order to limit his ability to receive funds from Russia. Therefore, it seems that the Russian leadership has decided to permanently exclude from Russian society all those who have decided to leave the country, temporarily or otherwise, because of the war.

At the same time it is important to note that most of these fugitives see emigration not as a search for a comfortable life but as a temporary phenomenon, and would like to return to Russia when and if the situation there changes, i.e. "after the war”. All the more so because these are people who, unlike emigres of previous decades, had not planned to leave Russia before the events of 2022. Characteristically, the popular self-designation among them is "relocants," not "refugees" or "migrants”.

However, visa and financial sanctions restrictions imposed on Russians make the costs of relocation/emigration prohibitively high. These restrictions are well known to anyone trying to leave the Russian Federation but perhaps the full picture of these impediments is not apparent to Western audiences because some of the bans are imposed by national governments, some by international corporations and still others by industry sectoral regulators.

The initial tranche of restrictions primarily focuses on visa regulations. Within Russia, acquiring visas for the vast majority of European nations has become an almost insurmountable challenge182. A few exceptions exist—namely, Italy, Greece, France, and Spain—where issuance of Schengen C visas, or provisional tourist visas, continues, albeit at a reduced scale and for truncated durations. Concurrently, all European Union members sharing a terrestrial boundary with the Russian Federation have ceased land entry for holders of such visas.

The avenues for procuring Category D work visas, particularly through consulates and visa centers of the European Union, the United States, and the United Kingdom within Russian territory, have likewise become arduous labyrinths of bureaucracy. In addition, the scope for Russians who have successfully entered Europe to obtain or extend residence permits has been dramatically curtailed, with some jurisdictions completely shutting down such possibilities183.

The second set of problems pertains to the issuance of work permits. Nations like Estonia, Latvia, Lithuania, Poland, and the Czech Republic have all but ceased granting such permits to Russian citizens—even when local enterprises explicitly endorse their applications. While exceptions exist, they are numerically insignificant, hardly exceeding the low hundreds. Meanwhile, the procedural landscape in other countries has undergone a perceptible metamorphosis, becoming exponentially more intricate.

In the Western hemisphere, initiatives designed to attract Russian students, scholars, IT specialists, creatives, managerial talent, and entrepreneurs have virtually evaporated. In stark contrast, some nations have explicitly prohibited both labor and academic migrations originating from Russia. Curiously, such restrictions target individuals who, far from being burdensome, are both competent and highly sought-after — qualities that would ostensibly relieve, rather than exacerbate, the social strains experienced due to the influx of Ukrainian refugees, a demographic predominantly composed of women, the elderly, and children.

The third echelon of regulatory stringency pertains to banking protocols. European, American, and British financial institutions have essentially ceased opening accounts for bearers of Russian passports. Compounding this inconvenience, electronic payment titans such as Visa and Mastercard have terminated their operations within Russian territory. In our digitally-driven financial landscape, these developments pose substantial hurdles for those who have ventured beyond Russia’s borders, hindering their ability to access and repatriate their own monetary reserves.

The fourth category involves stringent currency controls. Even if a Russian passport holder secures, let’s say, a European or American visa for permanent or some other form of residency, the simple act of obtaining a local bank account becomes an exercise in futility. Depositing Russian-accumulated capital—be it the fruits of enterprise divestitures, real estate transactions, or land sales—becomes a Sisyphean endeavor. Financial institutions, particularly in nations that have levied restrictions against Russian nationals, eschew such transactions, irrespective of the comprehensive documentation substantiating the legality of the capital in question. Intriguingly, these proscriptions hold true even in jurisdictions like Israel, where freshly naturalized citizens find themselves compelled to exit, owing to the stifling limitations on capital transfer. Yet, as the most recent FBC (Alexey Navalny’s Foundation for Fighting Corruption) investigations divulge, those possessed of colossal, albeit dubious, wealth ingeniously navigate these constraints; a luxury not afforded to the highly skilled professionals and mid-tier entrepreneurs who find themselves unceremoniously sidelined.
The US and some EU states do try to support Russian civil society in exile, such as those listed in the CNAS Transatlantic Forum's report on Russia:
Germany facilitated the issuance of long-term visas for critics of the Kremlin, including those involved in the area of human rights; employees of organizations categorized as “foreign agents”; representatives of democratic opposition, NGOs or civil society; journalists; and scientists.
The Czech Republic began granting asylum to Russians and Belarusians on the basis of so-called humanitarian visas and expanded the humanitarian reasons for family reunification. These visas are primarily issued to human rights advocates, independent journalists and activists.
Latvia has hosted Russian NGOs and at least several hundred Russian journalists who fled the country once Russia’s parliament passed a law making publication of “fake news” about the war in Ukraine punishable with up to 15 years in prison184. Radio Free Europe/Radio Liberty (RFE/RL), its 24/7 Russian-language network Current Time, the Moscow bureau of Deutsche Welle, and the independent Russian television station TV Rain were issued a permit allowing them to broadcast their content from Riga185.
In May the United States announced its plans to make it easier for Russians with a master’s degree or a PhD in science, technology, engineering or math to apply for a visa without first obtaining an American employer sponsor to move to the country186.
While these moves no doubt bear profound implications for individual Russian émigrés, their families or communities, they hardly epitomize a systemic trend. Approximately 16% to 20% of those who constituted the inaugural wave of emigration prior to September, 2022, have returned to Russia. As for the data corresponding to the "second wave" of emigrants, a verifiable census remains elusive. Nevertheless, it stands to reason that this cohort, in proportional terms, should harbor an even greater populace of returnees. This latter exodus chiefly comprised men eluding conscription—an endeavor less motivated by ideological convictions—and predominantly affected those of modest financial means. Furthermore, a contingent of Russian corporate operatives, banned from working from remote locations and unsuccessful in securing alternative employment abroad, have retraced their steps to Russia, primarily compelled by the insurmountable bureaucratic barriers abroad.
of those who constituted the inaugural wave 
of emigration prior 
to September, 2022, 
have returned to Russia
Kadri Liik, a senior policy fellow at the European Council on Foreign Relations, posits that the European Union and its constituent nations lack a cohesive policy framework addressing the exile community. She asserts, "The vicissitudes governing the quotidian existence of Russian émigrés—ranging from visa issuance, border transgressions, residency legitimization, to asylum adjudications—remain predominantly under the jurisdiction of interior ministries, thereby evading the regulatory ambit of the European Union." Liik elaborates that the Russian question percolates with varying degrees of sensitivity across disparate European landscapes, and as such, individual statecraft will inevitably reflect these nuances. "Acknowledging this heterogeneity will facilitate the collective European experience. Although the television network TV Rain may have initially migrated to Latvia, lured by its geographic position close to Russia and a dense Russian émigré populace, its ultimate domicile in the Netherlands—a society less innately skeptical of Russian entities—may prove more conducive."

Simultaneously, Kadri Liik elucidates that a segment within the European stratum perceives these émigrés as vital conduits to Russian civil society—a collective imbued with the potential to catalyze democratic transformations within their homeland. The prevailing sentiment among this faction advocates not merely a hospitable reception but an active collaboration and material support for these displaced individuals. Yet, lurking in the bureaucratic penumbra, a cadre of European functionaries—particularly those entrusted with matters of security—harbor reservations. Uttered in hushed corridors, their skepticism emerges: "The authentic identities of these individuals remain opaque. Their political stance might be antithetical to Putin, or they could well be clandestine operatives of the FSB. Furthermore, should their efforts to undermine Putin's regime prove effective, they might draw the ire of Kremlin-sanctioned assassins, thereby imperiling our own security infrastructure187."
To me, the real fascism is to write off all Russians as fascists188.
Oleksiy Arestovych
a politician, former advisor
to the Ukrainian president
To me, the real fascism is to write off all Russians as fascists188.
Oleksiy Arestovych
a politician, former advisor
to the Ukrainian president
Yet, in the interlude that has unfurled since the commencement of hostilities, the intelligence apparatuses of the West have abstained from issuing public indictments, targeting neither luminary figures within the Russian expatriate populace nor the quotidian émigrés devoid of public stature. Regrettably, this restraint has not stymied the propagation of anti-Putin rhetoric that indiscriminately blankets the entire diaspora.

As domestic suppression of the anti-war faction within Russian borders escalates—manifesting itself in unlawful detentions and adjudications, even by Russian legal standards, alongside the tacit ostracizing of intellectual and cultural luminaries, athletes et al—corresponding pressure increases against the Russian émigré enclaves abroad. The abrupt refusals of entry into Transcaucasian and Central Asian states, targeted at Russian nationals, have proliferated. Increasingly frequent are European denials of asylum to those individuals who face overt persecution for their convictions, or are imperiled for various rationales, including conscientious objection to military conscription. Pronouncements by the Czech President and the Estonian Prime Minister advocating a "special" protocol for Russians legally residing in Europe have gained notoriety. This effectively amounts to a formalization of discrimination predicated not on citizenship per se, but rather on one’s national origin, affecting hundreds of thousands of European denizens.

Simultaneously, it behooves us to recognize that even among the burgeoning cohort of newcomers, those who are most vociferously at odds with Putin's regime grapple with complications arising purely from the conspicuousness of their dissent. The closure by the Latvian government of the opposition-affiliated TV Rain channel—a network proscribed within Russian confines—serves as an archetypal incident. The illicit electronic eavesdropping on the founders of the Russian digital media outlet Meduza, domiciled in Latvia189, has become public and was exposed as a surveillance operation that ostensibly leverages technologies elusive to Russian intelligence agencies.

Presently, Europe finds itself ensnared in a novel predicament. Here, prospective allies against the Kremlin—possessing expansive social and professional networks, and poised to engage in efforts undermining Russian disinformation campaigns, technological advances, and digital infrastructure—are paradoxically relegated to the status of “enemies of the free world,” constrained both organizationally and legislatively. This untenable situation is perpetuated by the very governments that simultaneously maintain clandestine commercial and diplomatic interactions with Russia. Such a course of action is not merely iniquitous and counterproductive; it directly impairs collective endeavors to counter Russian bellicosity.
Concluding remarks
Analyzing the array of pressures, especially the sanctions set against the Russian Federation and its citizens post-Kremlin's actions in Ukraine, one can contend that the Western community's response was foreseeable.
At their core, these sanctions were more symbolic, underlining the West's allegiance with Ukraine at a time when NATO's comprehensive military and political support for Kyiv was yet to be determined. This hurried enactment unfortunately bore signs of legal and bureaucratic miscalculations. At various points, these non-military interventions were designed to persuade the Russian government's direction. However, as the futility of this shift became evident, the aim transitioned towards destabilizing Russia's economy.
Our analysis underlines the following:
Firstly, sanctions truly hold weight when they are nearly universal, having the backing of the global majority. Sanctions by isolated nations or blocs seldom achieve their goals. There's even an argument that such sanctions might inadvertently harm the instigator more than the recipient, creating opportunities for neutral countries to profit.
Secondly, the current sanction strategy displays clear inconsistencies. Various loopholes have been maintained for both "humanitarian" and trade-based motives. The enactment of energy sanctions on Russia were procrastinated and seem porous at best. Meanwhile, little effort was made to disrupt Russian enterprises and officialdom's global interactions.
Thirdly, the sanctions have inherent weak spots, allowing Russia to easily navigate around them. A significant issue is the inconsistent approach towards third-party countries that provide Russia with avenues to sidestep these restrictions. Through strategic acquisitions from the West via third-party nations and shell entities, Russia has showcased the deficiencies of the existing trade order in dealing with nations that dismiss global norms.
Fourthly, a distinction between sectoral and individual sanctions has come to light. While sectoral sanctions aim to deter, personal sanctions appear punitive, targeting individuals due to pro-longed association with the regime. This approach, while flouting several legal principles, also blurs the differentiation between varied offender groups, inadvertently fostering a united front.
Prominently, the most strategic move against Russia would have been to allure defectors with their resources, skills, and insider information. Yet, the sanctions, further aggravated by overzealous regulations, have had the paradoxical effect of fortifying internal loyalty.
Lastly, the war has shifted global perceptions towards Russians, eerily reminiscent of the views held for Germans during the World Wars. This renewed application of collective liability has led to discrimi-nation against Russians in various parts of Europe. Drawing a parallel, it's implausible to believe that Europeans would strip rights from the significant Palestinian diaspora within the EU, or deny them access to banking and other services, following a harsh assault on Israeli civilians sanctioned by the Hamas leadership. This, despite the evidence sug-gesting a much stronger support for Hamas among Palestinian migrants compared to the support for Putin's actions among Russian expatriates.

In conclusion, for sanctions to be fruitful, they need to be broad-based for economic measures, specific for individual ones, and have compelling mechanisms to ensure third-party nations side with Western objectives. Overlooking these aspects can inadvertently bolster camaraderie between the targeted populace and its leadership, rendering sanctions ineffective or even counterproductive.

It's our hope that Western democracies, in contrast to their authoritarian adversaries, have the aptitude for reflection and adjustment. Pressures on Putin's regime need finesse to align with the objectives of both the global community and Ukraine. Transparent, expert dialogues engaging all stakeholders should supplant the outdated bureaucratic measures of yesteryears. We believe our study can play a role in this recalibration.
Authors of the report
The authors express their gratitude to their colleagues in Russia and Ukraine, who cannot be named for security reasons, as well as to Kirill Rogov, Alexander Baunov, Ilya Ber, Elena Lukyanova, and other colleagues for their assistance in discussion, data collection, and the writing of this work.

Dr. Vladislav
Inozemtsev, 55
Dr. Inozemtsev, a Russian economist and political scientist, focuses on global economic issues and modernizing Third World nations, particularly in Russia. He founded Moscow's Center for Post-Industrial Studies in 1996 and still directs it. He teaches at Moscow State University and the Higher School of Economics, with fellowships at institutions like Johns Hopkins University and DGAP in Berlin. He advised the Commission on Modernization of the Russian Economy (2009-2011), supported Prokhorov’s presidential bid (2012), and was part of Russia’s ‘Open Government’ (2013-2014). Since 2014, he lives in Washington due to the Ukraine war. He's authored 20+ books and is a columnist for major publications.

Dmitry Gudkov, 43
Independent member of the State Duma (2011-2016), who opposed many legislative initiatives of symbolic importance to the Kremlin such as annexation of Crimea and the Anti-Magnitsky act, which prohibited the adoption of Russian children by U.S. citizens. In 2021 after the Russian authorities have intensified their pressure on opposition leaders Dmitrii Gudkov was forced to leave Russia. Co-founder of the Anti-War Committee of Russia, created by a group of exiled Russian figures for the purpose of opposing Vladimir Putin’s regime and the 2022 Russian invasion of Ukraine.

Gleb Bogush, 45
Dr. Gleb Bogush, a Postdoctoral Research Fellow at the University of Copenhagen's Center of Excellence for International Courts and a member of the Cologne-Bonn Academy in Exile, previously an Associate Professor at HSE University in Moscow. He specializes in international criminal law, use of force, human rights, and international humanitarian law, currently focusing on the crime of aggression against Ukraine. He earned his PhD from Moscow State University and was an Alexander von Humboldt Fellow at the Max Planck Institute for Foreign and International Criminal Law (2012-2015). Dr. Bogush also serves on the International Law Association Committee on the Use of Force and editorial boards of Criminal Law Forum and La Revue Internationale de Droit Pénal.

Damian Kudryavtsev, 51
Israeli media manager and political consultant who has worked for the last 25 years in Russia, Israel and the post-Soviet space. He has managed election campaigns in Kyrgyzstan, Latvia and Russia. Over the years he has been publisher, owner, and manager of leading business publications in Russia, including Kommersant and Vedomosti, as well as a partner in a number of international publications, including National Geographic. He was co-owner of TV-6, a television channel closed by the Russian authorities. Twice (in 2000 and 2022) was declared persona non grata and expelled from Russia. In 2017, he was deprived of Russian citizenship, which he had held since 2009.

Alexander Kolyandr, 52
Economic Analyst, former strategist and specialist in geopolitical risks of financial markets at Credit Suisse. Served as a senior correspondent for economics at The Wall Street Journal's Moscow bureau, business correspondent for Dow Jones and BBC. Grew up in Ukraine, resides in the United Kingdom.