One of the Kremlin’s recent actions is the signing of a decree by the Russian president, Vladimir Putin, according to which American property and assets in Russian territory will be confiscated. In fact, this countermeasure has been made in reaction to Western countries’ decision to seize Russian assets to help Ukraine. Russian officials have warned that if the European Union follows suit, it will face similar retaliatory measures from Moscow.
The extensive Western sanctions against Russia, which include freezing the country’s central bank assets, have compelled Moscow to explore ways to mitigate the impact of these sanctions and safeguard its economic interests. Because any threats and practical countermeasures will not be considered without risk. First, Russia’s future actions in response to Western punitive measures will likely be symbolic and have a limited impact on the US economy. Also, these actions can escalate tensions and increase the possibility of a broader economic war between Russia and the West. On the other hand, confiscating the properties of American companies and individuals in Russia can cause more distrust in Russia’s international business environment and discourage foreign investors from participating in this country’s market. This can even lead to further economic isolation of Russia in the medium term.
A multifaceted strategy to deal with Western sanctions
In response to the extensive sanctions imposed by the United States and its allies, Russia has adopted a multifaceted strategy to mitigate the impact of economic sanctions. This strategy includes a wide range of limited countermeasures to protect the economy and retaliate against the embargoing countries. Although Putin’s recent order to confiscate American property will partially help compensate for the damage caused by Western sanctions, this part of Russia’s strategy will be limited and mostly symbolic and deterrent.
Another aspect of Russia’s strategy is to use innovative and creative business and economic solutions to reduce the adverse effects of Western sanctions and restrictions. In this regard, Russia is seriously pursuing the idea of developing an alternative global financial system that bypasses the US dollar and Western-dominated institutions such as SWIFT. To achieve this goal, Russia is trying to reduce its dependence on the West, promote using national currencies in trade, and create new payment systems. The purpose of these measures is to stabilize the country’s financial and economic system, prevent capital flight, and implement currency regulations, which, if neglected, can lead to the weakening of Russia in its confrontation with the West. In this regard, Russian residents are prohibited from conducting certain financial transactions with individuals and entities of unfriendly countries without prior government approval. These transactions include providing loans, transferring ownership of securities, and transferring ownership of real estate. Money transfers from non-Russian resident accounts from unfriendly countries to their accounts outside Russia are also suspended for six months.
Russia is also looking to use non-dollar currencies in its international trade. This approach leads to the reduction of dependence on the US dollar and the financial system dominated by the West. Although the use of local currencies in trade with partner countries and the development of payment systems independent of SWIFT brings its own problems, it can be the basis for reducing the economic pressure caused by the restrictions of the dollar. Starting in 2020, Russia and China agreed that a significant part of trade between the two countries will be conducted in rubles and yuan. Such a case has been done in relation to Russia and the Islamic Republic of Iran. Russia is trying to push other regional countries, such as India, in this direction in the near future. In addition to these cases, the ambitious idea of Russia, which is derived from the recent and revolutionary developments in the field of digital currency, can be a way forward. Recently, Russia has been considering the development of a government digital currency called “Ruble Crypto” based on blockchain technology; A move that could allow Russia to conduct international transactions outside the traditional banking system dominated by the West.
Sending the burden of exports to the East and maintaining its weight in the global energy market is another policy of the Kremlin to reduce the shocks caused by sanctions and restrictions imposed by the West. One of Russia’s most important strategies has been to push more oil and gas exports to Asian markets instead of Western markets. Concerning this policy, China and India have been the two main destinations of Russia’s energy exports, as Russia’s oil exports to India have increased significantly in 2023 and reached more than 1 million barrels per day, according to official reports. Statistics show that between 2022 and 2023, Russia’s point exports to the European Union have decreased by 80% and to the United States and England by nearly 95%. Meanwhile, the country’s exports to India have increased by 111%, Turkey by 75%, Africa by 300%, and China by 21%. The situation is similar with gas. Russia has tried to change the direction of its gas exports to the East. China is also trying to increase its share of Russian gas exports steadily. China’s annual gas imports from Russia are expected to reach 38 billion cubic meters next year.
Russia is also looking to use non-dollar currencies in its international trade. This approach leads to the reduction of dependence on the US dollar and the financial system dominated by the West. Although the use of local currencies in trade with partner countries and the development of payment systems independent of SWIFT brings its own problems, it can be the basis for reducing the economic pressure caused by the restrictions of the dollar. Starting in 2020, Russia and China agreed that a significant part of trade between the two countries will be conducted in rubles and yuan. Such a case has been done in relation to Russia and the Islamic Republic of Iran. Russia is trying to push other regional countries, such as India, in this direction in the near future. In addition to these cases, the ambitious idea of Russia, which is derived from the recent and revolutionary developments in the field of digital currency, can be a way forward. Recently, Russia has been considering the development of a government digital currency called “Ruble Crypto” based on blockchain technology; A move that could allow Russia to conduct international transactions outside the traditional banking system dominated by the West. Sending the burden of exports to the East and maintaining its weight in the global energy market is another policy of the Kremlin to reduce the shocks caused by sanctions and restrictions imposed by the West. One of Russia’s most important strategies has been to push more oil and gas exports to Asian markets instead of Western markets. In relation to this policy, China and India have been the two main destinations of Russia’s energy exports, as Russia’s oil exports to India have increased significantly in 2023 and reached more than 1 million barrels per day, according to official reports. Statistics show that between 2022 and 2023, Russia’s point exports to the European Union have decreased by 80% and to the United States and England by nearly 95%. Meanwhile, the country’s exports to India have increased by 111%, Turkey by 75%, Africa by 300%, and China by 21%. The situation is similar with gas. Russia has tried to change the direction of its gas exports to the East. China is also trying to increase its share of Russian gas exports steadily. China’s gas imports from Russia are expected to reach 38 billion cubic meters per year next year.
Besides these cases, Russia is trying to maintain its share and weight in the energy market. This approach allows Moscow to use its share in the energy market and its ability to influence prices as a bargaining tool and leverage. Second, it can use its capacities to attract new customers and reduce the share of other players in the energy market. Russia has offered significant oil and gas price discounts in the last two years to attract new buyers, especially in Asia. It was sold for Brent oil. These attractive discounts have helped countries like China and India to meet their energy needs at lower prices.
Finally, there are other cases that can be considered as solutions for Russia to deal with Western restrictions and sanctions. Just as it is not easy for Russia to pressure the West, the West should also consider the dangers of putting too much pressure on Russia. In addition to military and nuclear capabilities, Russia can be a problem for the West in the field of cyber and the use of weapons in this area.
In addition, excessive pressure on Russia can direct the country’s countermeasures to the vital parts of the world — parts at which Russia is an expert and extremely powerful to the bad luck of the West. The global supply of grains, in which Russia has relatively the first say, can become Russia’s tool to retaliate or pressure the West and affect the global supply chain. Excessive lateral pressure in the form of punitive measures against Russia will make the complex situation of the Ukrainian battlefield more acute and the hopes for peace and the creation of a peaceful solution weaker than before.
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