Assessing Russia’s Post-Sanction Strategy: Avenues for Economic and Geopolitical Resilience

BACKGROUND 

Russia’s post-sanctions economic and political trajectory profoundly impacts global stability, energy security, and international trade. After the 2022 full-scale invasion of Ukraine, the United States, European Union, and their allies formed the “Western bloc,” imposing economic sanctions on Russian financial institutions, key industries, and the oligarchic elite (Council on Foreign Relations, 2024). These measures aimed to economically and politically isolate Russia, disrupt invasion financing, and weaken its geopolitical influence.

According to the World Bank, sanctions significantly restricted Russia's global capital market access, hindered international transactions, and limited key imports, foreign exchange, and fiscal reserves. Major Russian financial institutions were directly targeted. Consequently, banks faced heightened risks to asset quality, solvency, liquidity, and funding stability, while the Central Bank of Russia (CBR) encountered constraints in mitigating financial shocks. These sanctions triggered a sharp decline in Russian asset values and a steep ruble depreciation, losing 30 percent of its value against major currencies (World Bank).

Beyond economic considerations, Russia’s post-sanctions strategy carries significant geopolitical implications. Deepening economic and political alliances with China, Iran, North Korea, and other non-Western actors signals a broader shift in global power dynamics. Russia, along with other authoritarian powers, aims to counter the U.S.-led international system. Another challenge posed is the creation of an alternative global economic and financial system, accelerated by sanctions. The emergence of alternative financial systems, including increased use of national currencies for trade settlements and the exploration of blockchain-based payment systems, challenges Western-led financial institutions' dominance. These developments indicate a potential restructuring of economic alliances, reducing future sanctions' effectiveness and reshaping international economic governance.

Given the persistence of sanctions and the ongoing war in Ukraine, Russia’s ability to sustain its economy and political system warrants close examination. The long-term effectiveness of its economic adaptations, the sustainability of its alternative trade partnerships and the geopolitical consequences of its shifting alliances are critical areas of analysis. Understanding Russia’s evolving strategy is essential for shaping future economic policies, adjusting global trade frameworks and assessing the broader implications of economic warfare in an increasingly multipolar world. 

ASSESSMENT AND CRITIQUE OF RUSSIA’S POLICY OPTIONS 

Russia’s strategy takes account of the negative impact of Western sanctions. However, rather than collapsing under mounting economic pressure and diplomatic isolation, Russia has undertaken various measures to mitigate the effects of sanctions.

Economic and Financial Diversification

This measure has remained one of the primary pillars of Russia’s response. It involves the reorientation of trade towards non-Western partners, particularly China and India. This approach has enabled Russia to circumvent Western restrictions, ensuring a continued flow of revenue from energy exports (The Moscow Times, 2023). However, while this strategy has provided short-term relief, its long-term feasibility remains uncertain given the geopolitical and economic risks involved. Expansion into Asian markets has partially compensated for the loss of European revenues, maintaining oil and gas sales despite Western price caps (The Moscow Times, 2023). Increased trade with China and India has allowed Russia to sustain its export sector, preventing an immediate economic collapse. Furthermore, the increase of national currencies in trade settlements has reduced Russia’s dependency on Western financial systems (Aris, 2024). However, over-reliance on China creates a significant vulnerability, as Beijing can leverage its dominant position to negotiate lower prices for Russian commodities, reducing profit margins. Furthermore, many of these new trade partnerships are transactional rather than strategic, offering little guarantee of long-term stability. 

Moreover, Russia’s continued dependence on energy exports makes it susceptible to global market fluctuations. Diversification beyond energy remains limited, making Russia’s economic recovery highly sector-dependent and fragile. Furthermore, the creation of an alternative financial system, such as the one Russia seeks to create through the BRICS, is a long-term objective that requires time and strategic planning. At the same time, it also presents various problems. These financial arrangements lack the scale and trust enjoyed by Western institutions. Moreover, Russia’s international position remains weakened and its economic relationships with non-Western countries are driven more by necessity than by strategic advantage. While short-term relief is provided, it doesn’t fundamentally alter Russia’s position in the global financial hierarchy. The lack of a reliable long-term financial architecture outside of Western systems means Russia remains at risk of financial instability, particularly if its current partners shift their strategic priorities.

State Intervention

Russia’s autocratic fast decision-making process and increased state involvement are an imperative measure after the sanctions, leaving less space for free market options. Since 2022, Russia has pursued greater economic self-sufficiency by increasing state intervention in key industries, implementing capital controls and boosting military-industrial investment. For instance, to tackle the ruble’s depreciation, Russian authorities implemented a series of emergency measures such as doubling interest rates, introducing a 1 trillion ruble fiscal stimulus package, imposing strict capital controls and enacting financial regulations to curb capital outflows and stabilize the financial system (World Bank). This reflects an expansion of Russia’s “state capitalism” model, with the government taking a more interventionist role, particularly in directing investment towards the military sector (Carnegie, 2023). This measure remains valuable for Russia, since it has prevented financial collapse by stabilizing inflation and limiting capital flight. However, it can pose long-term inefficiencies. Excessive government intervention distorts market mechanisms, reducing innovation and private sector growth (IMF, 2024). Heavy reliance on military-industrial expansion limits investment in civilian sectors, potentially leading to stagnation in broader economic development (Reuters, 2025). Additionally, the absence of comprehensive structural reforms means that any short-term stability gained through interventionist policies may not translate into long-term economic resilience, leaving Russia vulnerable to further economic shocks. 

Natural Resources as Geopolitical Tool 

One of the main sources of Russian power comes from its natural resources. The Russian Federation is the third largest producer of fossil fuels in the world and the fourth largest consumer. Moreover, it is the third largest emitter of greenhouse gases in the world. The Federation has the largest reserves of natural gas in the world, while it is eighth in oil reserves and second in coal reserves. Fossil fuels comprise 65% of Russia's exports (Osservatorio Economico).

Given this position, Russia has to keep leveraging its vast energy resources as a geopolitical tool, adjusting export policies to exert pressure on European economies while securing long-term agreements with alternative buyers. Despite European efforts to reduce dependency on Russian production and pricing strategies, Russia has successfully used energy exports to maintain leverage over European economies, despite diversification efforts. Long-term contracts with China and India provide some stability for the energy sector (The Moscow Times, 2023). By adjusting production and pricing strategies, Russia can mitigate the effects of price caps and embargoes. However, alternative buyers, including China and India, have secured Russian energy at discounted rates, diminishing profitability. If Russia is unable to replace lost European technology and expertise, its ability to sustain output levels in the coming years could decline, further exacerbating economic vulnerabilities.

Geopolitical Alignments

The best measure Russia can pursue is deepening economic and political alliances with China and other non-Western actors. An alignment between authoritarian states is one of the main goals of Putin: creating an alternative system to the Western system. This approach is especially evident regarding Russia’s position with China. China has become one of Russia’s most important economic partners since sanctions were imposed, and as Western nations severed economic ties with Russia, China emerged as a key ally, both politically and economically. The two countries have deepened trade relations, particularly in the energy sector, with China increasing its imports of Russian oil and gas. Russia has also begun to use national currencies in trade with China, reducing its dependency on the U.S. dollar and circumventing Western financial controls (Firstpost, 2024). However, this relationship carries risks for Russia, as it may become overly reliant on China’s economic power, which could leverage a negotiation towards lower prices for Russian commodities. Furthermore, Russia’s dependence on China may complicate its geopolitical maneuvering, as China will likely increase its influence in future negotiations on issues like energy pricing and trade terms.

Beyond China, Moscow has also sought support from two other authoritarian powers: North Korea and Iran. If Russia aims to pursue its goal of aligning autocracies against the West, it will likely strengthen and keep strategic relations with these two actors. In the case of the Russian-North Korean alignment, reports have indicated that North Korean soldiers are involved in the conflict in Ukraine, providing Moscow with additional manpower. North Korea has long maintained a relationship with Russia, but the current situation has further deepened these ties, as North Korea seeks to benefit from Russia’s need for military assistance and arms supplies. North Korea has also been a supplier of artillery shells and other military material to Russia, highlighting a growing defense collaboration between the two nations (TIME, 2025). This is a reflection of broader geopolitical realignments where countries outside the Western sphere are increasingly supporting Russia to challenge the dominance of Western powers. While this alliance offers Russia military support, it also comes with significant risks, as it could invite further sanctions from the international community, particularly from the United States and its allies. On the other side, Iran has provided significant military assistance, including drones and missiles, to support Russia’s operations in Ukraine. Today, Iran is weaker than two years ago, especially due to the fall of the Assad regime in Syria, the current pressure it faces from the US and Israel, and the weakening of Hezbollah and Hamas militias. Russia has to maintain and sustain Iran, since this cooperation is driven by mutual interests in countering U.S. influence in the region and resisting Western-led sanctions. The military collaboration between Iran and Russia underscores the growing alliance between the two nations in both the Middle East and broader geopolitical contest.

Use of Ghost Fleet and Sanctions Evasion

In addition to deepening ties with Authoritarian allies, Russia's last relevant measure is its current use of the “ghost fleet”, a set of tankers used to bypass energy exports sanctions. These ships, often registered under third-party nations with opaque regulatory frameworks, allow Russia to continue selling oil and gas to restricted markets, avoiding Western embargoes (The Guardian 2024). Through this network, Russia can redirect energy exports to alternative buyers, particularly in Asia and the Middle East, mitigating the financial impact of sanctions. The ghost fleet plays a crucial role in sustaining Russia’s economy by maintaining revenues from oil sales. Many of these vessels operate with deactivated tracking systems to obscure their movements, making enforcement of sanctions more challenging. India and China have emerged as major buyers of Russian oil transported through these methods, often purchasing at discounted rates. Despite the benefits to Russia, relying on covert shipping operations might create vulnerabilities, as increased scrutiny from Western nations may eventually lead to more aggressive enforcement actions, such as vessel seizures or secondary sanctions targeting intermediaries. Therefore, this option cannot be considered as a long-term solution to Russian evasion of sanctions.

FUTURE POLICY

To enhance Russia’s resilience and ensure sustained growth, Russian policymakers are likely to consider these following policy options.

Diversification Beyond Energy Exports

While Russia has successfully redirected its energy exports toward China, India and Middle Eastern markets, over-reliance on commodity exports remains a vulnerability. Energy sales continue to dominate Russia’s economy, leaving it susceptible to price fluctuations and further restrictions. To address this, Russia will likely intensify efforts to diversify its industrial base and develop high-value manufacturing sectors, such as technology, agriculture and pharmaceuticals. This would reduce dependency on energy revenues and create new avenues for economic growth. Additionally, further investment in domestic infrastructure and innovation, particularly in semiconductor production and renewable energy, could reduce reliance on Western technologies while fostering long-term economic development.

Moreover, Moscow will likely strengthen economic ties with emerging economies in Latin America and Africa, providing it with alternative export markets beyond Asia and decreasing its vulnerability to shifts in Chinese and Indian energy demand. This would be especially relevant if Beijing continues leveraging its dominant position to negotiate lower prices for Russian commodities.

Balancing Alliances and Strategic Engagement with the U.S.

To strengthen its post-sanctions resilience, Russia will likely pursue a balanced foreign policy that maintains strong ties with China while preventing over dependence. China remains a vital economic partner, providing crucial financial and trade support. However, Beijing’s leverage over trade terms threatens Russia’s long-term economic autonomy. To mitigate this, Moscow could cultivate deeper ties with other authoritarian powers, including Iran and North Korea while also expanding trade with BRICS nations to diversify economic dependencies.

Simultaneously, Russia will likely explore diplomatic openings with the United States, particularly under the current Trump administration, which aims to improve relations with Putin. Washington’s focus on countering European influence offers Russia an opportunity to negotiate a favorable settlement on Ukraine while easing economic pressure. The 2025 Riyadh dialogues demonstrated the feasibility of U.S.-Russia negotiations on key issues including trade and security. By engaging pragmatically with the U.S., Russia can weaken transatlantic unity, especially between the U.S. and its European partners. A calculated mix of authoritarian alliances and selective U.S. engagement will enhance Russia’s geopolitical position and economic stability.

SOURCES CONSULTED

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