WASHINGTON — Four months into the war in Ukraine, the countries aligned against Russia face growing economic pain even as sanctions and energy embargoes are showing little impact on Russian President Vladimir V. Putin’s military campaign or his political standing at home.
U.S. officials vowed that Russia’s financial system would be battered if it attacked Ukraine, and President Biden boasted in March that sanctions were “crushing the Russian economy” and that “the ruble is reduced to rubble.” But Russian oil revenues have set records as crude prices surge. And after plunging in February, the ruble hit a seven-year high against the dollar this week.
Biden officials say Russia’s economy is nevertheless incurring damage that will compound over time, especially as restrictions on technology exports to Russia gradually stunt the growth of its industries from aerospace to computing. And on Thursday, a White House spokesman said that leaders of the Group of 7 industrial nations, set to begin meetings in Madrid on Sunday, will discuss new plans to further “tighten the screws” on Russia’s economy.
But it is unclear which side has more time to spare. The Ukrainian government says as many as 200 of its soldiers are being killed daily, and thousands of civilians have died as Russia seizes territory in eastern Ukraine. Mr. Putin continues to enjoy near-dictatorial power, and he is unlikely to enter serious peace talks with Ukraine while his military makes gains.
“Russia’s financial system is back to business as usual after a few weeks of severe bank runs,” Elina Ribakova, deputy chief economist at the Institute of International Finance, wrote on Twitter last week, adding that those who thought “that cutting Russia from financing for a few weeks at the beginning of the war would stop the war have proven naïve.”
Few if any Biden officials expected sanctions to halt the war immediately. But the administration and its European counterparts also did not expect the economic pressure they now are experiencing. Despite initial assurances that sanctions would not touch Russian energy exports, America has since banned imported Russian oil, and the European Union has announced plans to reduce its imports by 90 percent this year. Partly as a result of those actions, energy prices have surged in the U.S. and Europe, with regular gasoline averaging well above $5 per gallon in some states.
Now Mr. Biden is bracing for midterm elections this fall in which Republicans are likely to capitalize on the rising cost of living. Summer’s end will also bring cooler temperatures to Europe amid rising alarms that Moscow is choking off natural gas supplies.
And in a stinging twist, the sanctions and related embargoes are allowing America’s top strategic competitor, China, to buy massive amounts of oil at heavily discounted prices, as Russia seeks willing customers to replace lost revenue.