Russia’s economy continues to defy predictions of collapse, showing resilience over two years after sweeping sanctions were imposed in response to its invasion of Ukraine. Despite thousands of sanctions targeting Russian oil, goods, and institutions, the International Monetary Fund (IMF) projects Russia’s economy will grow by over 3% this year—outpacing the growth rates of the U.S. and much of Europe.
One major factor behind this surprising economic strength is Russia’s ability to work around sanctions and maintain strong revenue from oil. Despite a $60-per-barrel price cap imposed by the G7 countries to curb Russia’s energy profits, Russian oil and gas revenues are projected to increase by 2.6% this year, bringing in an estimated $240 billion. Moscow has managed to circumvent the cap through the “dark fleet,” a shadowy network of aging oil tankers with opaque ownership that transport over a million barrels of oil daily, mostly to China and India. These shipments not only sustain revenue but also keep the global oil supply stable, preventing price shocks that could disrupt energy markets.
The complex logistics of this workaround include oil transfers between vessels off the coast of Greece and India. This refined Russian oil eventually reaches international markets in indirect ways, including, on occasion, U.S. shores. According to Samir Madani, founder of a Stockholm-based company that tracks oil tankers, oil refined in India from Russian crude has even made its way to New York, making Russian-origin oil challenging to trace once processed.
Alongside its energy sector, Russia’s economy is also bolstered by a swift pivot to domestic production, particularly in response to Western companies pulling out. With Starbucks, Zara, and Coca-Cola leaving Russia, domestic brands like Stars Coffee, Maag, and Dobry Cola quickly filled the gaps, serving products similar to their Western counterparts. This pivot has not only maintained consumer availability but also fueled growth in small- and medium-sized enterprises, which are at an all-time high.
“Evading sanctions has become a business sector of its own,” explains Richard Connolly, an associate fellow specializing in the Russian economy at the Royal United Services Institute in London. This workaround has allowed Russian consumers access to previously banned Western goods through neighboring countries like Kazakhstan and Georgia. These goods come at a premium but are readily available for Russia’s wealthier citizens willing to pay for the higher-priced imports.
Domestic production has been further stimulated by government spending on military needs, with Russia’s industrial output surging as it focuses on supplying materials and equipment for the ongoing war in Ukraine. Military production now accounts for a significant share of the country’s manufacturing sector, creating employment and driving growth, even as inflation remains high at nearly 9% and interest rates peak at 19%.
Additionally, Russia’s exports of enriched uranium are still in demand, particularly by the U.S., where Russian-enriched uranium supplies fuel for around 20% of the country’s nuclear energy needs. Despite recent legislative moves to ban Russian uranium imports, a waiver allows these purchases to continue until 2028, funneling nearly $1 billion annually into Russia’s economy.
However, economists caution that Russia’s economic growth may not be as stable as it seems. Daleep Singh, deputy national security adviser for international economics at the White House, describes Russia’s apparent stability as deceptive. “On the surface, Russia’s economy may appear to be a fortress, but underneath the foundations are fragile,” Singh says, noting that this economic path relies heavily on temporary workarounds and could buckle under continued sanctions pressure.
While Russia’s economy is bolstered in the short term by oil workarounds, domestic production, and military spending, inflation, labor shortages, and high interest rates hint at vulnerabilities that could challenge long-term resilience. For now, though, Russia’s adaptation to sanctions has allowed it to maintain growth and keep its economy stable, defying initial expectations and raising questions about the effectiveness of ongoing sanctions.
