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Leadership

Sanctions have hurt Russia and its capital markets. (Photo by Jakub Porzycki/NurPhoto via Getty Images)

By Hannah Bryan Leaders Staff

Hannah Bryan

Hannah Bryan

News Writer

Hannah Bryan is a news writer for Leaders Media. Most recently she was a reporter for the Sanilac County News...

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Jul 27, 2022

Four Signs Sanctions Against Russia Are Working

Sanctions against Russia are hurting that nation’s economy as planned.

Following the Russian invasion of Ukraine in February, the U.S., the U.K., Germany, and other nations from the European Union imposed economic sanctions against Russia to punish it for its aggression and to deter further military action. 

And to date, the sanctions are devastating the Russian economy as more than 1,000 companies have left Russia, a new study out of Yale Chief Executive Leadership Institute reveals. “From our analysis, it becomes clear: business retreats and sanctions are crippling the Russian economy,” the report authors state.

The Yale report counters claims that the sanctions are having little effect. It states that the Kremlin has “cherry-picked” economic releases to portray the Russian economy in a more positive light. 

Using data sources such as high frequency consumer data, cross-channel checks, and data mining of complex shipping data, the Yale researchers claim to have a more accurate report of Russia’s economic status and the effectiveness of the sanctions. Here are four key findings:

  1. Russia’s position as a commodities exporter has been significantly damaged. The report acknowledges that more sanctions are needed to fully stop Russia’s exports, but says that Russia exports are facing severe challenges.
  1. Imports to Russia have mostly stopped, leaving Russia with shortages of critical parts and technology for resources.
  1. Not only is Russia facing difficult importing goods, but its domestic production is suffering as well. “Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products, and talent,” the report claims. “The hollowing out of Russia’s domestic innovation and production base has led to soaring prices and consumer angst.”
  1. More than 1,000 companies representing approximately 40% of Russia’s GDP have left the country, severely injuring Russia’s economic base. 

The report further claims that the Kremlin’s finances are severely crippled and the government budget is in a deficit as Russian President Vladimir Putin attempts dramatic measures to correct the economy.

“Russian domestic financial markets, as an indicator of both present conditions and future outlook, are the worst performing markets in the entire world this year,” the report says.

If the sanctions remain in place, researchers believe that there is no way for Russia to course correct from its current economic path. 

The researchers acknowledge that there are conflicting conclusions—with some information suggesting that sanctions are not effective and are instead hurting Western countries. The Atlantic Council reported that Russia’s economy is “resilient” and “Russia has absorbed similar shocks before.” 

With higher prices and inflation worries in Europe, the Associated Press reported that sanctions are currently affecting Western countries as well.

The report’s authors include Jeffrey Sonnenfeld from the Yale School of Management and Steven Tian, Franek Sokolowski, Michal Wyrebkowski, and Mateusz Kasprowicz from the Yale Chief Executive Leadership Institute.

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