Four Years of Russia Sanctions: Busting Three Economic Myths

$588 billion. That's what it would cost to rebuild Ukraine if the war ended today—nearly three times the country's entire GDP. But while Ukraine bears the physical devastation, how much is Russia actually paying for Putin's war?

Four years after Russia's full-scale invasion, the economic battlefield has shifted more dramatically than the trenches in eastern Ukraine. Yet understanding the true state of this economic war is obscured by a thick fog of propaganda from both sides. To see where this conflict is really headed, we need to bust three persistent myths about Russia's economic resilience and Western capabilities.

Myth 1: Russia's Economic Pain is Manageable

The Kremlin may act like it can wage war regardless of cost, but the numbers tell a different story. Russia has lost what was once its golden goose: European gas sales.

Before the war, Russia sold roughly 150 billion cubic meters of gas to the EU annually. That's now down to just 38 billion cubic meters. At current European gas futures prices, every billion cubic meters is worth more than €300 million ($353 million). Do the math: Russia is losing out on roughly $40 billion annually in gas revenue alone. That figure will only grow when EU countries complete their phase-out of Russian gas imports next year.

Meanwhile, approximately $335 billion in Russian sovereign assets remain frozen worldwide. Despite the Kremlin's legal challenges designed to scare off Ukraine's backers, recent Russian negotiation offers suggest Moscow acknowledges much of this money is gone for good.

Russia's domestic piggy bank—the National Wealth Fund—is also running dry. With withdrawals at record pace early this year, it could be depleted by year's end unless oil prices surge sustainably.

The only bright spot in Russia's economy is military production, but even that comes with a price. High borrowing costs and declining employable population due to war losses and recruitment mean the Russian economy continues hemorrhaging money.

Myth 2: Trump Has Gone Soft on Russia

President Donald Trump may be dangling cooperation carrots for potential ceasefire deals, but he's maintaining sanctions—and his administration's latest moves are causing real pain to Russia's remaining major export: oil.

Since Washington imposed sweeping sanctions on Russia's two largest oil companies, Rosneft and Lukoil, in October, early signs suggest these measures are disrupting the Kremlin's ability to move barrels to market.

The restrictions blacklisted firms responsible for a massive share of Russian crude exports, deterring banks, traders, and refiners from participating in deals, particularly across Asia. While the Trump administration lags behind Europe in targeting Russia's shadow fleet, it's outpaced Europe in sanctioning Iran's tankers, creating more "black" barrels hunting for buyers.

The result? A growing pool of stranded oil. Tens of millions of barrels sit in storage or on tankers without firm destinations as refiners hesitate to risk sanctions exposure. Even as geopolitical risk premiums have pushed Brent crude above $70 per barrel, Russia has had to offer discounts of up to $30 per barrel to secure buyers.

This isn't just an American story. European sanctions have sharpened too, with Brussels targeting refineries in China and India. India's second-largest refinery, Vadinar—part-owned by Rosneft—has been blacklisted since mid-2023.

Myth 3: Europe Must Fund Ukraine from Its Own Coffers

The EU's €90 billion ($106 billion) loan package for Ukraine, agreed in December, was actually a last-minute scramble after the bloc failed to unite on a plan to harness Russia's frozen assets directly.

Here's the kicker: the lion's share of those frozen Russian assets sits firmly under EU jurisdiction. The negotiations failed last year, but that doesn't mean they can't be revisited. With Hungary currently blocking the EU's 20th sanctions package and the loan process, the pressure to find alternative funding sources is mounting.

Europe has a viable path that doesn't require digging deeper into taxpayer pockets—it just needs the political will to seize Russian assets outright.

The Economic War's Next Phase

With Russia-US-Ukraine diplomatic negotiations making no discernible progress and both sides preparing for a fifth year of fighting, the economic war shows no signs of slowing.

To threaten real collapse of the Russian economy and force Moscow into meaningful concessions, the West must take steps it's been unable to implement so far. The alternative is far worse: striking a deal on the Kremlin's terms that could embolden future aggression.