The Russian economy has begun to adjust to Western sanctions

It is now more than three months since Russia invaded Ukraine. About the same amount of time has passed since much tougher economic sanctions were imposed against Russia than in 2014. It is now possible to assess dispassionately the impact of sanctions on the Russian economy over three months. The legitimate aim of the sanctions was to deny Russia the technology and financial resources to sustain its war effort.

To create the conditions for the majority of the Russian public to begin to want a change of power (the hope is that as the quality of life of Russian society deteriorates, the conditions for a change of power will develop). This is theoretically. In addition to these objectives, there was a demand from the Western public for governments to act to support Ukraine and punish the aggressor. Decisions were taken.

There is no definitive answer to the question of whether any sanctions in themselves can change Russia's geopolitical course. The debate on the effectiveness of sanctions was absent in the first weeks of the war because, at that time, the general sympathy and support for Ukraine was so great that, if in an economic analysis the author deviated from repeating the slogan "Glory to Ukraine!" three times, it was seen as almost an endorsement of Putin and a betrayal of common democratic values. But now is the time when we can rationally assess the consequences of the sanctions and predict their further impact.

It is impossible to assess the impact of sanctions on the production of modern weapons because of the secrecy that Russia practices, but it is probably considerably more difficult now. As regards the impact of sanctions on the overall economic process, the current results differ from the stated objectives at the time the sanctions were adopted.

First of all, it should be noted that economic sanctions and economic blockades, even if maintained for decades, do not always guarantee the expected results. The US has maintained economic sanctions and an economic blockade against Cuba for more than 50 years. However, the sanctions did not bring about a change in Cuban domestic politics. It was only after the authoritarian Cuban leader Fidel Castro (1926-2016) was no longer able to rule due to old age that changes in Cuban domestic politics began and they are still underway, gradually leading to the beginning of a transformation of Cuban society.

No economic sanctions have changed the aggressive nature of the North Korean regime.

Iran has been cut off from the interbank payment system (SWIFT) for many years, it is heavily sanctioned for oil exports, but the people still have not staged an anti-Islamic revolution.

After the Gulf War (1990-1991), an oil export ban was imposed on Iraq, but this did not lead to regime change. Iraqi dictator Saddam Hussein (1937-2006) was only replaced after Iraq was defeated by US and allied troops in 2003.

I am therefore very skeptical whether the sanctions already in place, or even tougher sanctions, will lead to regime change in Russia. The debate on sanctions, the mentions of a tough sanctions policy, should be seen more as a domestic policy aimed at the public and the electorate of several EU Member States.

Of course, the block of sanctions relating to Russia's exclusion from the highest technologies and products of these industries, which are used in the production of modern armaments, is very important. In the long term, this will certainly reduce Russia's ability to mass-produce the most advanced weapons.

But economic sanctions - restrictions on imports and exports (especially oil and gas), restrictions on payments - all sanctioned authoritarian countries have learned to live with it over time. This is what is happening to Russia at the moment. For those who were used to consuming imported products, yes, their standard of living has fallen. But for the vast majority of Russians outside St Petersburg and Moscow, there has not been, and cannot be, much change in consumption. From 2014, when the first wave of sanctions began, Russia supported programs to achieve self-sufficiency in staple foods. In pig farming, poultry farming and other sectors, this level has already been reached. Of course, the additional sanctions of 2022 (which have paralyzed interbank payments) are already causing shortages of various components in Russian domestic production.

Russia has its own sparkling wine, but not its own corks for bottles (these were bought in Portugal - 100% import), and not its own wire to secure the corks on the bottle. Ukraine is a big producer of bottles, so there is a shortage of containers etc. The way out is that the cheapest end product will be bottled in beer cans. Elsewhere in Germany (and not only there) this has been done for a long time, even without any sanctions.

The raw materials for juice tetra packs are there, but there are no dyes (100% import). The juice packs will be produced in white, but the product name and labelling will be printed on paper and glued to the juice pack, etc.

Therefore, one should not exaggerate and call their wishful thinking a reality. The current and even more stringent level of sanctions will not lead to a revolution in authoritarian Russia with a possible change of power. On the contrary, Russia is using Western sanctions to whip up xenophobia, declaring the US, NATO and the EU to be the cause of all Russia's economic problems, both current and long-standing. Moreover, the Russian leadership hopes that the economic consequences of anti-Russian sanctions will be so unpleasant in many EU Member States that they may eventually lead to domestic political problems, above all in the largest EU Member State, Germany.

However, irrespective of rational arguments, most EU Member State people are calling on their governments to punish Russia and support Ukraine, so it is expected that the sanctions will not be eased, but that additional restrictions will be discussed.

Although sanctions are unlikely to change Russia's geopolitical ambitions, they will set in motion an important reform process in the EU.

The greatest benefit of the current policy for EU Member States will be the reduction of Russian influence both in the EU and in Eastern Europe. Energy supplies will be diversified and the changes underway will lead to closer EU integration, a move away from excesses and the creation of a more rational economic development model.

More on the impact of sanctions on the ruble exchange rate and Russia's financial stability next time.