Fact-check: Sanctions on Russia are working, but no imminent collapse expected
Despite Kremlin claims, Western sanctions have significantly reduced trade between Europe and Russia, but the Russian economy is heading toward stagnation rather than a sudden crash, according to a fact-check by the TVNET Group.
The TVNET Group's fact-checking project “Faktomāts” has analyzed the frequently used Kremlin narrative that sanctions do not work. Based on insights from Matīss Mirošņikovs, an economist at the Bank of Latvia, and other experts, the analysis concludes that sanctions are having an effect, but their impact is not immediate, and the Russian economy is likely to experience stagnation rather than a rapid collapse by the end of 2026.
Impact on trade
Before Russia's full-scale invasion of Ukraine, EU countries exported goods worth over €7 billion to Russia each month. Three years later, that figure has dropped to €2.4 billion. The decline in Russian imports to Europe is even steeper—from over €20 billion per month to roughly €2 billion, a reduction of about 90%. However, a significant portion of the remaining imports still consists of oil and gas.
Russia is attempting to circumvent sanctions through third countries such as Belarus and Central Asian states. After car exports were banned, deliveries to Belarus surged, but when that loophole was closed, Russia began sourcing goods via Central Asia. Expert Jan Dunin-Vasovič notes that Russia's persistent efforts to obtain certain goods and technologies are evidence that sanctions are working.
Economic challenges for Russia
Although official statistics show economic growth after 2022, it is driven by consumption and government spending, fueling inflation. Official inflation in Russia stands at around 10%. Labor shortages are becoming acute, with unemployment at a record low of 2.5%, compared to 6–7% in Latvia. Russia needs more workers for both the military and industry, especially due to the need for domestic production to bypass sanctions.
China has capitalized on the situation, increasing exports to Russia to over $11 billion by the end of 2024, mainly in vehicles, machinery, and electronics. However, Russia's export earnings have fallen; for example, gas supplies to China are less profitable than the European market.
Future outlook
Economist Dmitry Nekrasov of the CASE think tank predicts stagnation or a very mild decline for the Russian economy by the end of 2026, rather than a sudden collapse. The Bank of Latvia's Mirošņikovs emphasizes that the pressure of sanctions is palpable, but Russia still earns from energy resources and actively trades with China and India. He warns that “beautiful GDP figures hide labor shortages and high inflation—this is a war economy.” To intensify pressure, the EU should focus on phasing out Russian oil and gas, tightening sanctions evasion controls, and further restricting goods shipments to Russia.
