Since Russia’s full-scale invasion of Ukraine in 2022, financial sanctions have become one of the most prominent tools used by Western governments to limit the Kremlin’s economic capacity and constrain its ability to fund the war. The emerging consensus on their effectiveness is nuanced. On one hand, sanctions have clearly disrupted Russia’s access to global financial networks, slashed trade with the West, and inflicted damage on key sectors like banking, investment, and energy. Major financial penalties, including exclusion from SWIFT and the freezing of central bank reserves, have led to reduced cross-border transactions, increased capital controls, and the collapse of e-commerce links with international partners.
At the same time, Russia has shown surprising adaptability. Through capital controls, currency manipulation, and trade diversion toward non-sanctioning countries, the Kremlin has managed to mitigate some of the immediate economic shocks. It has also leveraged alternative payment systems and continued to build “shadow reserves” through oil revenues, pointing to the challenges of full financial isolation in an interconnected world.
What makes financial sanctions particularly significant is their foundational role in global commerce. All trade flows have financial counterparts—payments, clearing, and settlement—making financial restrictions a crucial complement to trade, export control, and energy sanctions. Blocking financial channels is not only a direct constraint but also a multiplier that enhances the enforcement of broader economic restrictions.
Moreover, there is an existing policy and technical infrastructure within the global financial system that can be mobilized for this purpose. The tools developed to combat terrorism financing, money laundering, and other illicit flows—such as Know Your Customer (KYC), transaction monitoring, and Suspicious Activity Reports (SARs)—provide a ready-made framework for detecting and preventing sanctions evasion. Enhanced collaboration between regulators, financial institutions, and intelligence agencies could dramatically improve monitoring, compliance, and enforcement.
Globally, these sanctions have also raised deeper questions about the future of the international financial system. Some studies show that the weaponization of finance is prompting countries to diversify reserves and explore alternative payment networks, potentially accelerating financial fragmentation. Others highlight the unintended spillovers on stock markets, exchange rates, and investor behavior.
Explore more studies and research papers on the financial restrictions in the “Evidence Base” section.
