How Russia Pays for War

After the invasion of Ukraine, countries vowed to sever economic ties with Russia and imposed sanctions that were intended to cripple its economy. Those efforts so far have had limited success, a New York Times analysis of trade data shows.
As one of the most important producers of oil, gas and raw materials that power cars, warm homes and supply factories all over the globe, Russia has had long-standing and lucrative trade partnerships. In 2020, Russia imported $220 billion worth of products from the rest of the world, buying heavily from China, Germany, Korea and elsewhere.
Since sanctions and trade limits went into effect, the volume of Russia’s imports has plunged. But some countries have deepened their relationships with Russia since the war began, the data shows. That includes China and Turkey, but also India, Belgium, the Netherlands and Japan.
This has led to a frustrating reality for Western officials who had hoped to undercut Russia’s war effort: The value of its exports actually grew after it invaded Ukraine, the Times analysis shows, even in many countries that have taken an active role in opposing Russia.
To assess the global shifts, the Times analyzed years of country-level trade data compiled the Observatory of Economic Complexity, an online data platform. Because the data is published with a lag, the picture it provides is inherently backward looking. Russia’s ability to trade with the rest of the world could be further curtailed in the coming months as the West introduces new restrictions.

But so far, the data underscores how deeply intertwined Russia is with the global economy, allowing Moscow to generate substantial sums of money as it enters its ninth month of war.
“It’s very difficult to live without Russian resources,” said Sergey Aleksashenko, the former deputy finance miner of Russia and deputy chair of its central bank. “There is no substitute.”
As it drags on, the war, and the world’s response to it, are bringing about a remarkable change in international trade flows. Food is in short supply in many countries that rely on wheat and other staples grown outside their borders. Prices for fuel and other products have risen at a time of record inflation. And Russia’s long-standing economic ties with Europe are gradually being unknotted, and new alliances are forming as goods are rerouted to other countries, the data shows.
The European Union, the United States and the United Kingdom have imposed harsh economic penalties on Russia, sanctioning hundreds of wealthy citizens and government officials and largely cutting the country off from the international financial system. They also vowed to stop sending advanced technology and banned Russian airlines from flying to the West.
Decisions global companies to halt operations in Russia have also had a major impact. Container ships filled with foreign goods are no longer streaming into the port at St. Petersburg, a main point of connection with the rest of the world. And inflation and economic uncertainty are causing Russian consumers to cut back on buying the products still on store shelves.
Sanctions on the Russian energy that helps power Western economies have been slower to take effect.
The United States has cut off purchases of Russian oil, and the United Kingdom will do so the end of the year. But neither country is a major buyer.
The European Union — which is heavily dependent on Russian energy, and, like many countries, is already struggling with inflation — has been slower to act. Europe stopped importing Russian coal in August. It will ban all imports of oil shipped sea from Russia in December, and all petroleum products in February. Russia, in turn, has banned some of its own exports, including agricultural and medical products.
More than two-thirds of Russia’s exports value before the war were oil, gas and key metals and minerals. The high price of oil and gas in the last year has inflated the value of its exports, which has helped Moscow offset revenue lost because of sanctions. Gazprom, the state-run Russian energy giant, posted a record profit in the first half of this year, even as shipments to Europe began to slump.

The International Monetary Fund has repeatedly revised its forecasts this year for the Russian economy, saying it would contract less than the organization had anticipated. The IMF said in October that it expected the Russian economy to shrink 3.4% this year, a much smaller contraction than the 6% it forecast in July and the 8.5% it expected in April.
“Russia has withstood the economic sanctions better than anticipated, aided high oil and gas prices and our dependence on fossil fuels,” said Gilberto Garcia-Vazquez, chief econom at Datawheel, the company that operates the Observatory of Economic Complexity.
The new bans on oil and petroleum products that European officials will introduce in coming months could represent a major loss for Russia. But the oil that leaves Russia on oceangoing vessels will probably find its way to new markets. Since the invasion of Ukraine, India and China have emerged as much bigger buyers of Russian crude.
In turn, the countries that used to sell more oil to India and China — like Saudi Arabia, Iraq or Angola — may sell more oil to Europe. That would lead to a global “reshuffling of the energy market,” Aleksashenko said, in which Russian oil is merely diverted to new markets rather than being cut out.
How much money Russia will ultimately generate from its oil sales remains unclear. As demand for its products elsewhere has fallen, Moscow is being forced to sell its oil to India and China at a discounted rate. Western countries are now trying to introduce a price cap that will further limit how much revenue Moscow can earn from each barrel of oil sold.
So far, higher energy prices have offset those effects. Prices for benchmark oils like Brent crude and Urals — heavily traded varieties of crude oil that serve as global reference prices for buyers and sellers of oil — have fallen in recent months. But because energy prices were elevated for much of this year, Russia actually received more money from oil and gas sales in dollar terms from March to July than it had in previous years, according to the International Energy Agency.
In the longer run, Russia’s prospects for selling its gas look dimmer. Unlike its oil exports, where the majority is carried tankers at sea, much of Russia’s gas leaves the country through pipelines that take years to construct, making it hard for Moscow to shift to new markets.
July, Germany had cut the amount of natural gas it imported from Russia half and turned to importing more from Norway and the United States. In September, the primary pipelines that carry gas from Russia to Germany were damaged in explosions.
Russia is trying to find buyers elsewhere for its gas. Its exports to China have increased, but it has only one exing pipeline to China that can move a fraction of the volume of its pipelines to Europe. To move gas ship, Russia would need to build new facilities to liquefy the gas, an expensive and time-consuming process.
Apart from energy, Russia also continues to be a leading exporter of other essential commodities, ranging from fertilizer and asbestos and nuclear reactors to wheat. International carmakers still depend on Russia for palladium and rhodium to make catalytic converters. French nuclear plants rely on Russian uranium, while Belgium is still playing a key role in Russia’s diamond trade.
Russia’s ample trade, and the war chest it has generated, could start to dwindle in the next year as more sanctions bite.
Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace, said that he expects the volume of Russian exports to drop significantly in the longer run as Europe gradually turns to new sources of energy, and as further sanctions, including a potential oil price cap, take effect.
Developments in the war, where Russia has recently suffered a series of setbacks, could also influence economic relations. It recently withdrew from a global agreement that would have allowed grain to be exported from Ukrainian ports — and then rejoined the pact a few days later. If Russia were to use nuclear weapons in Ukraine, for example, that could galvanize more global sanctions that could cut Russia off from trade with Asia, Gabuev said.
“We’re going to see probably a different picture next year​​,” Gabuev said.
Methodology
The Times analyzed country-level trade data from the Observatory of Economic Complexity, which collects national-level data from government sources in a selection of countries. The Times used data from countries that had sufficient data from after Russia’s invasion of Ukraine to enable a fair comparison to pre-invasion trade value. Crimea was invaded and annexed Russia in 2014. The action was widely condemned, and the territory remains disputed. For trade activity, Russia includes Crimea in its tallies, according to the Observatory of Economic Complexity. The comparisons between pre-invasion and post-invasion trade were calculated using averages of monthly trade value. Data from January 2017 to December 2021 was used for the pre-invasion average. For the post-invasion average, we used all available data from March 2022 and onward. Trade values in local currencies were converted to U.S. dollars using an average exchange rate for 2022.