Why has Russia been able to endure the West's harsh sanctions despite running out of money?

Since the outbreak of the Russia-Ukraine war, the Western world generally believed that Russia's economy would collapse quickly.

After all, Russia's economy has suffered an unprecedented blow from prolonged military conflict and severe Western sanctions.

However, despite facing enormous pressure, Russia has not collapsed as quickly as the West had expected.

On the contrary, although its economic growth has slowed, Russia has still managed to function to a certain extent.

So, why has Russia been able to hang on through these difficult times?

One of the focal points of attention has been Russia's fiscal situation.

As the war continues, Russia's fiscal deficit has been expanding year by year.

According to statistics, in 2023, Russia's fiscal deficit reached 3.3 trillion rubles, and it is expected to increase to 3.5 trillion rubles in 2024, accounting for 1.7% of GDP.

This is Russia's largest fiscal deficit since the collapse of the Soviet Union.

To support the ever-increasing military spending, the Russian government has had to cut expenditures in other sectors.

In 2024, Russia's military expenditure increased by 29%, expected to account for 35% of total fiscal expenditure, with about one-third of fiscal revenue directly invested in military operations.

Despite this, Russia still faces enormous fiscal pressure and is unable to meet the necessary updates for military equipment, even failing to replace weapon systems that were originally supposed to be upgraded.

As one of the largest energy exporters in the world, Russia's economy has long relied on the export of oil and natural gas.

However, with the sanctions imposed by the West, especially the blockade in the energy sector, Russia's oil and gas revenue has significantly decreased.

According to data, in 2023, Russia's oil and gas revenue dropped by 23.9% compared to the previous year.

In the past, oil and gas revenue accounted for 41% of Russia's total fiscal income, but now this proportion has decreased to 30.3%.

Although Western countries have reduced their imports of energy from Russia, countries like China and India have become Russia's new major energy buyers.

This has allowed Russia to fill the gap left by the Western market by increasing energy exports to these countries.

However, even so, the volatility of the global energy market still makes Russia's fiscal situation worrisome.

The further decline in oil and gas revenue makes it impossible for Russia to rely on traditional energy exports to support its economy.

War and sanctions have not only worsened Russia's fiscal situation but have also directly impacted the standard of living of its citizens.

Due to the depreciation of the ruble and inflation, Russia's inflation rate in 2024 reached 8.5%, far exceeding the government's target.

Food prices have surged drastically, with butter rising by 30%, potatoes by 65%, and oranges by more than 50%.

These sharp price fluctuations have put immense pressure on ordinary citizens, with many facing unemployment and poverty.

In addition, Western sanctions have caused Russia to lose many important imported goods, especially high-tech products and machinery.

In recent years, Russia's car production has seen a significant decline, producing only 620,000 cars in 2022, a 60% decrease from the previous year.

The aircraft manufacturing industry has also almost completely stagnated due to the lack of necessary equipment and materials.

These impacts have not only directly undermined Russia's industrial base but also put it at risk of long-term de-industrialization.

Despite facing economic recession and military pressure, Western sanctions have not been able to destroy Russia's economy as quickly as expected.

Although Western countries imposed an energy blockade and set a price cap on Russian oil, this strategy has not fully succeeded.

Due to the increased demand from countries like China and India, Russia's oil exports have remained at a relatively high level, even exceeding the expected growth rate.

Western countries themselves also face pressure from rising energy prices, so there is division within the EU over completely severing energy ties with Russia.

In particular, countries like Hungary are heavily dependent on Russian energy and strongly oppose completely cutting energy relations with Russia.

Although Western countries have taken some measures, the complexity and volatility of the global energy market mean that these sanctions have not achieved the desired results.

When facing multiple domestic and foreign pressures, Russia has not completely fallen into distress.

Instead, Russia has shifted toward military industry and gradually allocated more resources to wartime production.

This shift has helped Russia alleviate its economic difficulties to some extent, especially as, with a relatively small population, the country can concentrate most of its resources on military production, thereby ensuring the operation of its wartime economy.

However, despite this, prolonged war and economic pressure will still severely affect Russia's future development.

In the short term, Russia's economy may be able to sustain itself, but in the long run, continuous fiscal deficits, declining energy revenues, and livelihood issues may lead to a deeper economic crisis.

In conclusion, although Russia's economy faces severe fiscal deficits, declining energy revenues, and inflation, it has not collapsed as quickly as the West had anticipated.

Russia's energy export diversification, wartime economic adjustments, and the limitations of Western sanctions have allowed Russia to hold on in the short term.

However, prolonged war and economic pressure will undoubtedly have a far-reaching impact on Russia's future development.

For the West, sanctions are not a panacea, and Russia has enough space to make strategic adjustments, although this process will be painful.

As for how long Russia can hold on, there is no clear answer, but one thing is certain: the West will not wait idly for Russia's total collapse but will continue to apply pressure, hoping for more changes and compromises from Russia in the future.