WASHINGTON D.C. — The U.S. Senate has recently approved further sanctions on Russia for its cyber-attack during the 2016 U.S. elections. These sanctions require Congress to review any decisions made to end them. They also penalize foreign entities involved in Russia’s energy industry or any entity engaged in malicious cyber-activity.
If passed by the House, these sanctions would add onto what the Obama administration ordered in 2016 (in response to the cyber-attack) as well as sanctions imposed by the U.S. and EU for Russia’s annexation of Crimea.
There is speculation as to whether sanctions are a successful geopolitical tool. Russian president Vladimir Putin argues that the sanctions on Russia have only made his country stronger, by forcing it to reduce economic dependence on the energy sector.
Regardless, Putin is not denying that poverty is an issue for Russians. According to the World Bank, between 2014 (when sanctions were first issued for Crimea) and 2016, the Russian GDP fell from $2.064 trillion to $1.283 trillion, respectively. The Gross National Income (GNI) per capita fell from $14,420 to $9,720 in that same time. Poverty increased from 11.2 percent to 13.3 percent.
Experts debate whether this economic downturn is a result of the sanctions on Russia or if there are confounding factors. Beginning in 2012, oil prices fell. While Russia anticipated selling oil for over $100 per barrel in 2016, the actual price was below $30 per barrel. Many private and public businesses are based in the energy sector. In addition, Russia utilized much of its resources in the endeavor to annex Crimea and was still recovering from the 2008 global recession.
The poorest Russians are likely feeling the strain of sanctions the most, while the wealthy have maintained prosperity. It is estimated that the top 10 percent of Russians own 85 percent of the country’s wealth, while the poorest 10 percent have a wealth of less than $10,000 each. Despite the sanctions on Russia, the energy sector still accounts for the newest wealth.
Sanctions likely have a greater impact than Putin admits, as he does consistently work toward having them lifted. If nothing else, sanctions on Russia slowed the economic recovery.
Yet, Russia’s economy is in recovery. The World Bank predicts that the Russian economy will grow 1.3 percent in 2017 and 1.4 percent between 2018 and 2019. Inflation is levying off, poverty is in slight decline and crude oil prices are expected to rise.
It may be hard to predict the impact of potential U.S. sanctions on Russia. The citizens will likely feel the pressure, but Russia is learning how to maintain a more stable and independent global economy.
– Mary Katherine Crowley