How Russia is Surviving Western Sanctions? Martin Gilman Professor of Economics Higher School of Economics University, Moscow How Russia is Surviving Western Sanctions? March 11, 2019

A caveat: views of an American economist observing the Russian economy A caveat: views of an American economist observing the Russian economy from within the Moscow Ring Road In considering the economic effects of the multiple rounds of general and targeted sanctions against Russia since March 2014, there are 3 general themes: The macroeconomic data are ambiguous. It’s logical to assume that sanctions negatively affect Russian economic performance as various studies have shown, but we don’t have a valid counter-factual. Nevertheless, the Russian economy seems to be gradually recovering since the trough of 2015.

Most Russians now assume that sanctions have become a permanent feature of US foreign policy. Moves are underway to reorient the Russian economy to become more autonomous and resilient. No doubt at considerable cost in terms of economic efficiency, it should be able to cope with further sanctions. The consequences of this re-orientation can be counter-productive over time to Western interests as well as unfortunate within Russia itself – but not in the way that the sponsors of the sanctions probably anticipated.

Russian nominal GDP in US$ terms Source: Rosstat, Gavrilenkov & Kudrin

Russia: Real interest rates

Russia: Real exchange rates

Russia: Trade data and current account annual data, $ billion

Russia: Retail sales and disposable income quarterly data

Russia: Labor and wage trends quarterly data

Russia: Federal budget, % of GDP

Russia: Monetary aggregates, % of GDp, Annual data

MOEX Russia index

RUSSIA: Importance of investment as GDP growth driver RUSSIA: Importance of investment as GDP growth driver will increase substantially in coming years

Current account balances in selected countries, $ billion

Countries that have introduced sanctions against Russia, its citizens or Enterprises, 2017

Central Bank of Russia Currency composition of reserves

Main goals of the Russian Federation May 2018

Acknowledgement I am grateful to Evgeny Gavrilenkov and Alexander Kudrin for data, as well as the Research staff of Sberbank CIB.