Adapting to sanctions has become a defining feature of Russia’s economic strategy over the past decade. Since the 2014 annexation of Crimea, and especially following the 2022 invasion of Ukraine, the Russian government has pursued a variety of “sanctions-proofing” tactics aimed at minimizing the impact of Western financial restrictions. This study examines the measures Russia has implemented to shield its economy, from creating domestic alternatives to Western financial systems to seeking new international partnerships.
The study identifies four key strategies in Russia’s response. First, protectionist policies have been used to insulate sanctioned entities, promote import substitution, and ensure that key industries remain functional despite restrictions. The government has encouraged the use of domestic payment systems like Mir to replace Visa and Mastercard and has introduced tax-free zones to attract capital back into the country. Second, Russia has actively sought economic partnerships outside the Western sphere, deepening ties with China and engaging with African and Middle Eastern nations to counterbalance lost trade with Europe. Third, Moscow has employed retaliatory measures, such as countersanctions on Western goods, aiming to deter further economic penalties. Finally, efforts to reduce reliance on the U.S. dollar have played a significant role in Russia’s strategy, with the country shifting its foreign reserves toward gold, the Chinese yuan, and the euro—although the effectiveness of this de-dollarization has been limited by multilateral sanctions.
Despite these adaptations, the study argues that sanctions have still inflicted significant constraints on Russia’s economy. The strength of the U.S. dollar and the dominance of Western financial institutions have made it difficult for Russia to bypass restrictions entirely. Many firms, even in non-sanctioning countries, have reduced their dealings with Russian businesses due to the risk of secondary sanctions. Moreover, the swift and coordinated response from the U.S., EU, and Japan in sanctioning Russian reserves has made it harder for Moscow to mitigate the effects of financial isolation.
The study concludes that while sanctions-proofing strategies can blunt the immediate impact of restrictions, they do not fundamentally alter the challenges faced by a sanctioned economy. Russia’s ability to continue funding its war effort suggests that financial sanctions alone may not be enough to compel policy changes. Instead, the study highlights the need for a aligned diplomatic and economic strategy that goes beyond punitive measures, recognizing that a well-prepared state can adapt to sanctions—but not without consequences.
