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The impact of financial sanctions on the Russian economy


  • Gurvich, Evsey
  • Prilepskiy, Ilya


This paper examines the impact of the current Western financial sanctions on the Russian economy. Modeling the capital flow components (accounting for the influence of other factors, including falling oil prices) reveals that sanctions have directly affected sanctioned state-controlled banks, oil, gas and arms companies by severely constraining foreign funding and have indirectly affected non-sanctioned companies by reducing inflows of foreign direct investment and causing funding conditions to deteriorate. The overall negative effect on gross capital inflow over 2014–2017 is estimated at approximately $280bn. However, the effect on net capital inflow is significantly lower ($160–170bn) due to Russian companies’ self-adjustment, which is evidenced by their utilization of foreign assets accumulated earlier for debt repayment and an overall decrease in gross capital outflow. The sanctions’ estimated effect on GDP is significant (–2.4 p.p. by 2017, compared with a hypothetical scenario with no sanctions) but 3.3 times lower than the estimated effects of the oil price shock.

Suggested Citation

  • Gurvich, Evsey & Prilepskiy, Ilya, 2015. "The impact of financial sanctions on the Russian economy," Russian Journal of Economics, Elsevier, vol. 1(4), pages 359-385.
  • Handle: RePEc:eee:rujoec:v:1:y:2015:i:4:p:359-385
    DOI: 10.1016/j.ruje.2016.02.002

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    References listed on IDEAS

    1. A. Ulyukaev & V. Mau., 2015. "From Economic Crisis to Economic Growth, or How to Prevent the Crisis from Turning into Stagnation," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
    2. Fratzscher, Marcel, 2012. "Capital flows, push versus pull factors and the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 341-356.
    3. N. Orlova., 2014. "Financial Sanctions: Consequences for Russia’s Economy and Economic Policy," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 12.
    4. A. Blank & E. Gurvich & A. Ulyukaev., 2006. "Exchange Rate and Competitiveness of Russia’s Industries," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
    5. E. Gurvich & I. Prilepskiy., 2013. "How to Secure External Sustainability of the Russian Economy," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 9.
    6. Erlend Nier & Tahsin Saadi Sedik & Tomas Mondino, 2014. "Gross Private Capital Flows to Emerging Markets; Can the Global Financial Cycle Be Tamed?," IMF Working Papers 14/196, International Monetary Fund.
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    Cited by:

    1. Gurvich, E., 2016. "Evolution of Russian Macroeconomic Policy in Three Crises," Journal of the New Economic Association, New Economic Association, vol. 29(1), pages 174-181.
    2. repec:gam:jecomi:v:7:y:2019:i:2:p:42-:d:229739 is not listed on IDEAS
    3. repec:ris:apltrx:0376 is not listed on IDEAS
    4. Stephan Barisitz & Andreas Breitenfellner, 2017. "How do resource-driven economies cope with the oil price slump? A comparative survey of ten major oil-exporting countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 33-53.
    5. repec:onb:oenbfi:y:2018:i:q3-18:b:6 is not listed on IDEAS
    6. repec:nea:journl:y:2019:i:43:p:184-190 is not listed on IDEAS
    7. repec:ris:apltrx:0353 is not listed on IDEAS
    8. repec:ura:ecregj:v:1:y:2018:i:4:p:1450-1462 is not listed on IDEAS
    9. Buklemishev, O., 2016. "Overcoming Investment Pause in the Russian Economy," Journal of the New Economic Association, New Economic Association, vol. 29(1), pages 160-167.
    10. repec:arh:jrujec:v:5:y:2019:i:4:p:328-353 is not listed on IDEAS
    11. repec:scn:financ:y:2018:i:3:p:83-99 is not listed on IDEAS
    12. Ankudinov, Andrei & Ibragimov, Rustam & Lebedev, Oleg, 2017. "Sanctions and the Russian stock market," Research in International Business and Finance, Elsevier, vol. 40(C), pages 150-162.
    13. repec:nea:journl:y:2019:i:43:p:163-172 is not listed on IDEAS
    14. repec:urb:journl:v:7:y:2017:p:1-16 is not listed on IDEAS
    15. repec:wfo:wstudy:60669 is not listed on IDEAS
    16. Andrea Flori & Simone Giansante & Fabio Pammolli, 2016. "Peer-Group Detection of Banks and Resilience to Distress," Working Papers 06/2016, IMT Institute for Advanced Studies Lucca, revised Dec 2016.
    17. Rogov Mikhail I., 2016. "International Economic Sanctions:Analyses Of The Case With Russia In 2014," Annals of marketing-mba, Department of Marketing, Marketing MBA (RSconsult), vol. 2, August.

    More about this item


    financial sanctions; balance of payments adjustment; external debt; capital flows;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications


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