Western Sanctions and Russian Economy

351
DOI: 10.20542/0131-2227-2015-59-11-67-77

V. Zagashvili, Primakov Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation (zagashvili@imemo.ru)

Acknowledgements. The article has been supported by a grant of the Russian Science Foundation (project 14-28-00097 “The optimization of Russian foreign investment ties in the context of deteriorating relations with the EU”).


Abstract. The article considers in details the economic sanctions imposed in 2014-2015 against Russian Federation by the governments of USA, EU and some other nations. First of all, the author gives a theoretical and historic background of the problem, in particular, classification of the main types of economic sanctions applied in the world, the issues of their legitimacy and effectiveness, as well as the concrete experiences of the recent decades. On this basis an in-depth analysis of their immediate impact on the Russian economy and its future development is elaborated. Particular attention is paid to the influence of sanctions on the investment situation in the Russian economy. It is concluded that the current sanctions contributed to an increase of the inflation rate, deteriorated the investment prospects and stimulated capital outflow. They promoted depreciation of Ruble and reduction of the Russian international reserves, worsened the conditions for servicing the external debt. Along with sanctions, a strong effect on the state of the Russian economy was produced by the drop in international oil prices. These two factors accelerated the onset of economic recession in this country. However, it is stated that the fundamental factors of ongoing recession lie not in the cooling of political relations with Western governments or in the volatility of market prices but in an unsatisfactory institutional structure of the domestic economy. Respectively, the economic prospects of Russia for the nearest year are evaluated by the author as unfavorable. Further extension of sanctions will lead to further worsening of Russia’s investment attractiveness, braking down of the structural adjustments and technological development. It will also narrow opportunities for the Russian companies in their efforts to establish cooperative relations with the leading foreign counterparts and to integrate into the global value-added chains (VACs). Since the role of transnational production in the world economy is on the increase, the extent of participation in VACs will define the position of the country in the world market. Continuing difficulties in this area will deteriorate long-term prospects of the economic development of Russia. Generally, it is stated that even though the recent sanctions have not played a decisive role in the current recession their influence is quite notable. Most importantly, they brought to surface the fundamental structural problems that hold back a steady economic development of Russia.

Keywords: economic sanctions, types of sanctions, efficiency of sanctions, economy, external debt, foreign investments, capital, Russia


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For citation:
Zagashvili V. Western Sanctions and Russian Economy. World Eonomy and International Relations, 2015, vol. 59, No 11, pp. 67-77. https://doi.org/10.20542/0131-2227-2015-59-11-67-77



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