The Russian economy is showing remarkable resilience, despite Western sanctions. In its latest economic outlook, published on January 30, the International Monetary Fund raised its growth forecast for Russia to 2.6% in 2024, more than double the 1.1% figure published in October 2023. This upward revision raises questions about the effectiveness of sanctions, at a time when the United States and the European Union (EU) are preparing to announce new measures.

The Russian economy is benefiting from the massive fiscal stimulus represented by the war effort. The Moscow regime increased its spending by $30 billion (€27.74 billion) in 2023, without dangerously widening its budget deficit thanks to oil revenues, despite being under Western sanctions. However, the effect of the latter is limited in a global economy that is no longer dominated by Western powers alone.

Russia has redirected its gas and oil exports to China and especially India, whose purchases have increased thirteen-fold since the start of the invasion of Ukraine, according to the latest figures from the Finnish think tank Centre for Research on Energy and Clean Air.

The Western cap on Russian oil prices at $60 a barrel is being bypassed through the use of "ghost" fleets and mid-ocean transfers that obscure the oil's origin, or by routing invoices through intermediary companies. Similar evasion tactics are used for electronic chips and other dual-use items, which, despite export bans, are smuggled into Russia via indirect paths through Central Asia or China, ultimately finding their way into Russian missiles.

Several thousand entities and individuals are also targeted by the sanctions. "But these are difficult to comply with", says Joydeep Sengupta, compliance and investigations lawyer at Mayer Brown, "because there is very little transparency about who controls certain companies in Russia."

Added to this is the ambiguity of the legal definition. "In the United States, it is sufficient for a company to be at least 50% owned by an entity under sanction for it to also be deemed as under sanction," noted Sengupta, "whereas in Europe, the notion of control implies a finer, case-by-case analysis, requiring information that is sometimes difficult to obtain, especially from Russia."

In early September 2023, the European Commission published a guide to help companies identify the risks of sanctions violations, listing all possible warning signals. "There are still very few investigations launched in the European Union compared with the United States," noted Sengupta. "The different Member States do not have the same resources or the same policies." Sanctions violations are subject only to administrative proceedings, not criminal ones, and fines in some European countries are no more than a few thousand euros.
Launching an investigation also depends on the will of individual countries; for example, only Budapest can initiate one if a Hungarian company is involved.

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