Russian Sanctions: The Blowback Effect

Four years of sanctions that have missed their target. In February 2022, the stated objective was to strangle Russia’s war machine: empty its coffers, cut off the fuel feeding its tanks, and force Moscow to choose between the battlefield and bankruptcy. Yet Russia’s coffers are still not empty. The budget deficit may have reached roughly $50 billion since the beginning of 2026, but military spending still increased by 3 percent in 2025, reaching 7 percent of national GDP. The war continues to finance itself. Repeated season after season, the Western narrative of Russia’s imminent collapse has crashed against an economy that is not collapsing—but mutating.

Sanctions have not starved the regime; they have changed the hand that feeds it. Deprived of abundant and inexpensive Western capital, the Russian state has turned toward the only pocket still full: the savings of its own citizens. The National Wealth Fund has shrunk by $64 billion over four years, its liquid reserves falling to roughly $48 billion by June 2026; the fund’s gold holdings have declined from around 400 tonnes before the war to roughly 140 today. As the sovereign cushion thins, household deposits—amounting to tens of trillions of rubles—have become, in the words of Central Bank Governor Elvira Nabiullina herself, “the only source of financing, practically the only one” available to the country.

This is where the real effect of sanctions emerges, far removed from their stated purpose. To channel those savings into the banks that finance the war effort, the authorities have deployed an unprecedented apparatus of surveillance and extraction: account freezes, investigations into “suspicious” transactions, and tighter control over financial flows. Rather than weakening the Kremlin’s grip on society, we have compelled it to deepen that grip. Every ruble prevented from leaving Russia is a ruble captured by the state. In effect, the sanctions architecture built by the West turns mechanically against the Russian citizen. We sought to cut the regime off from the world; instead, we have bound it more tightly to its people—or at least to their money.

This is where two symmetrical temptations must be resisted.

The first, common in the West and tinged with resignation, concludes that sanctions are useless.

The second, more appealing, sees in them a hidden hope. Since the regime now depends on its citizens, who finally possess a lever of influence, change will come from within, where no external pressure has ever managed to achieve much.

The truth lies somewhere between the two.

The Creditor Without Power

To be sure, sanctions have created a new—and valuable—condition. For the first time in twenty years, Putin’s system depends on the voluntary cooperation of millions of savers. The implicit bargain of the regime—political silence in exchange for material stability—has been reversed. It is now the regime that needs something only its citizens can provide.

No bomb, no diplomatic initiative had ever placed Moscow in such a position of dependence. In theory, the Russian citizen has become a creditor, and a creditor possesses power.

Yet this is precisely where the trap closes. The same movement that created this dependency simultaneously created the tools needed to suppress it. The regime does not merely need savings. Thanks to sanctions, the authorities have meticulously perfected the machinery that monitors, freezes, and confiscates those savings. Today, the Russian creditor is deprived of every meaningful lever. Capital is locked in place, money cannot freely leave the country, and savers remain atomized and incapable of coordinating their actions.

Iran, Cuba, and North Korea have illustrated this reality for decades. Far from mobilizing populations against their rulers, external pressure often binds them more tightly to their jailers and exhausts opposition movements into irrelevance. Hope and the mechanism that suffocates it were born from the same act of sanction.

A Weapon of Transformation

If change comes one day, it will indeed come from within—not because sanctions have unlocked a door, but because they have closed every other one. They have not armed the opposition; they have created the conditions for an internal fragility that the regime will henceforth have to manage on its own, unable to blame an external enemy on the day its own population ceases to believe.

Confidence that is prevented from withdrawing does not collapse in plain sight. It slips away underneath, invisibly, until the ground suddenly gives way. The process is slow, uncertain, and no one knows whether the critical threshold will ever be reached.

What remains for the West is a lesson harsher than the admission of failure. We believed we were wielding a weapon of destruction; in reality, we have been playing with a weapon of transformation whose direction and ultimate outcome we do not control. Sanctions will not bring down the Russian regime from the outside—they never could. Against our intentions, and perhaps against our wishes, they have made the regime dependent on the very thing it has spent a quarter century trying to destroy among its own people: faith in the future.

Not the victory we promised.