Putin will face disappointment if he expects swift sanctions relief from the current round of diplomacy to settle Russia’s war against Ukraine. Sanctions alleviation won’t come easily or quickly — and won’t restore Russia’s pre-war economic position.
The peace plan draft under discussion proposes lifting sanctions “in stages and on a case-by-case basis”, with snapback provisions if Russia reoffends. This would represent a significant Russian retreat from its long-held position that all sanctions are illegal and must be removed immediately. Moscow wants permanent relief, not provisional exceptions. It likely won’t get it.
Russia should remember the 1974 Jackson-Vanik amendment, which restricted US-Soviet trade over emigration policy. It wasn’t fully lifted until 2012 — a quarter-century after Moscow ended restrictions on Jewish emigration. Russia dreads a repeat of that conditional easing but may be forced to accept it.
Russia is not only the world’s most-sanctioned country, but its opponents continue to impose new measures. The US might conceivably lift its measures, but it is far from certain that others like the European Union and the UK would follow suit. It would anyway be impossible to lift the more than 28,000 measures currently in place across multiple jurisdictions unconditionally or all at once.
The Kremlin has clear goals. During failed Black Sea ceasefire talks in March, Russia demanded sanctions relief for Rosselkhozbank and other agricultural banks, SWIFT reconnection, and restored correspondent accounts. It also sought relief for agricultural exports, grain ships, and foreign farming technology. Though framed as supporting the so-called Global South’s food needs, the template reveals Russia’s strategy — relief for its giant grain and foods sector.
Other key Russian targets are banking sanctions (which restrict international trade), oil export restrictions, and technology import bans that hurt military production and civilian infrastructure repair and improvement.
Russia still smuggles and procures machinery and parts, but it’s cumbersome and very expensive. Civil aviation desperately needs spare parts, and manufacturing needs precision machines. Russian industry remains dependent on sanctioned electronics, microchips, and chemicalsthat it cannot fully replicate or source from China.
Technology restrictions could be eased quickly through general licenses. To facilitate trade and payments, Russia needs at least one or two de-sanctioned banks — likely state-owned — to enable US correspondent accounts. With international payments flowing, Western airlines might return if Russia reopens its airspace for Asia flights.
If Russia accepts whatever decision is made on frozen sovereign assets (that are, frankly, unlikely to ever return to Russia), the West might lift Central Bank sanctions. Combined with exchange and securities relief, this could reopen Russia to international capital — particularly valuable given high domestic borrowing costs.
None of this happens overnight, and it brings new problems because if money can once again flow into Russia, it can also flow out. Russian financial authorities will fear capital flight through any newly reopened channels.
Western companies face enormous obstacles in returning to Russia. Putin has warned they won’t repurchase assets at fire-sale prices or receive preferential treatment. Russia has seized Western assets through presidential decrees and court orders, placing some under “temporary management.” Only companies that haven’t supported Ukraine’s military and met all its “employee obligations” would be welcome; those who pulled out will find a return “very expensive,” he said. This, of course, assumes that Western investors whose fingers were so badly burned in Russia will be willing to repeat the experiment.
Markets have moved on. Chinese competitors now hold over 50% of Russia’s car market, up from less than 10% four years ago. Russian imitations have replaced Starbucks and McDonald’s. Companies like Carlsberg and Unilever that condemned Russian aggression also risk reputational damage by returning after a deal rewarding Russia with Ukrainian territory. (though this has proved no disincentive to those that have remained and profited, like Austria’s Raiffeisen Bank).
Dual-use goods suppliers will most probably remain bound by Western restrictions for years. Western companies’ return means navigating hostile business conditions where former market positions have been filled by local players who borrowed heavily to replace Westerners and will lobby hard to keep markets restricted.
Full, fast relief of energy sanctions is unlikely, though the most draconian restrictions may ease. Even targeted relief in international finance, metals, liquefied natural gas (LNG), or the shadow tanker fleet would offer Moscow breathing room without solving fundamental problems.
Putin’s Russia will probably remain fundamentally unattractive for investment due to structural challenges: a weak economy, unpredictable regulations, limited property rights, and a judiciary in hock to government whims. Sanctions amplify Russia’s primarily homegrown problems — high inflation, worker shortages, costly credit, economic slowdown, and massive defense spending. Easing the measures won’t resolve any of these issues.
Even in the most favorable scenario for Russia, sanctions relief will be gradual, conditional, and insufficient to restore its pre-war economic position. Nothing will be like it was before.
Alexander Kolyandr is a Non-Resident Senior Fellow at the Center for European Policy Analysis (CEPA), specializing in the Russian economy and politics. Previously, he was a journalist for the Wall Street Journal and a banker for Credit Suisse. He was born in Kharkiv, Ukraine, and lives in London.
More on this and other aspects of the Russian economy in a weekly summary produced by the independent publication, The Bell.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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