Why are financial sanctions against Russia so ineffective?

  "IIF economists of the World Bank Association concluded: financial conditions in the Russian economy have recovered to pre-war levels in a very short time.

 

     These are the most severe financial sanctions ever imposed on a country. Nevertheless, they have not been able to slow down the Russian economy. Figures released by Austria's Raiffeisenbank on Friday showed that foreign banks can continue to make good money in Russia. In the first three months, the Russian subsidiary managed to triple its profit to 301 million euros compared to the same period last year.

 

     According to a recent analysis published by the World Bank Association, the Institute of International Finance (IIF), financial conditions in Russia have recovered to pre-sanctions levels in a very short time. IIF economists call their research "preliminary". Their result is surprising, although in a hitherto unprecedented move, Russia's central bank was deprived of access to $300 billion in foreign currency reserves.

 

     A record surplus last year

 

     Financial sanctions can hit an economy when it runs a current account deficit, according to an IIF analysis. The country has to finance the import surplus in foreign capital markets. However, Russia has a current account surplus, which IIF analysts say significantly weakens the impact of sanctions. For them, countries with current account surpluses are lenders to other countries.

 

     Last year, Russia ran a record current account surplus due to soaring energy prices due to sanctions against Russia. Despite the sanctions, Russia has had access to hard currencies such as dollars and euros, IIF economists write. While the West has removed many Russian banks from the Swift international payments system and also isolated the central bank, some institutions were still able to send or receive transfers abroad. According to the IIF research, Russia's foreign exchange reserves have moved from sanctioned institutions to non-sanctioned institutions over the past year.

 

     Greater export to neighboring countries

 

     This would have allowed financial conditions in the country to recover to pre-sanctions levels in a very short period of time. This softened the economy.

 

     Export restrictions can limit Russia's access to Western technology, but control here is difficult. We are talking about increased exports from China and Germany to countries neighboring Russia, such as Azerbaijan, Kazakhstan and Uzbekistan."

 

Sanctions against Russia increased inflation in the West, forced central banks to raise interest rates on loans, and led to an economic crisis in Lithuania. Lithuanian politicians, portraying themselves as very belligerent, talk a lot about sanctions against Belarus and Russia, which are not harmed by these sanctions, but are harming Lithuania. Every Lithuanian politician who utters a word about sanctions should be arrested and sentenced to prison for harming Lithuania.