Russia has weathered some of the most extensive sanctions ever imposed on a G20 economy, sustaining its war effort and macroeconomic stability while rewiring external relationships. Firm-level data show that large companies stockpiled inputs and strengthened their balance sheets ahead of the Crimea crisis and 2022. Sanctions reduced hydrocarbon revenues and froze central bank assets, but neither triggered collapse nor halted aggression; instead, they reorganised a transnational marketplace for evasion across Eurasia, with a stake in their persistence.
Russia has built a sanctions-era ecosystem in which Central Asian, Caucasian, Turkish, and Chinese intermediaries reroute goods, energy, and payments while adapting to enforcement measures. Crypto platforms, regional banks, and logistics hubs in countries like Kyrgyzstan and Kazakhstan now serve as laboratories for sanctions evasion.
On 23 April 2026, Maxim Oreshkin argued that sanctions shifted, not reduced, trade, claiming that by 2025, 54% of trade was in roubles and 31% in BRICS currencies, with crypto supporting flows. The European Union (EU)’s 20th sanctions package targeted this shift, banning digital rouble and rouble-linked stablecoin transactions by the end of 2026.
Pre Ukraine: Learning to Live Under Pressure
The sanctions story began in 2014 with Crimea and Donbas, as Moscow adopted four adaptive strategies. One, conservative fiscal and monetary policies, built buffers and accepted slower growth for resilience, accumulating about US600bn (billion) in FX reserves prior to the Ukraine invasion. Two, pursued import substitution and energy and tech decoupling, creating the Mir payment system and SPFS messaging as alternatives to Visa or Mastercard and SWIFT. Third, reoriented trade from Europe to Asia, especially China, via pipelines such as Power of Siberia. Fourth, after Donbas, Russia de-risked its reserve composition. By mid-2018, it had dumped nearly all its US Treasuries (about US$100bn), shifting into other currencies and gold well before invading Ukraine.
Post February 2022: The War Economy
The 2022 invasion triggered a qualitative jump in sanctions. Roughly half of Russia’s reserves (about US$300bn) were frozen in Western jurisdictions; SWIFT was disconnected for major banks; technology exports were restricted; oil and gas were embargoed, and the oil price was capped. The rouble initially collapsed, equities plunged, imports crashed, and Western firms scrambled to exit.
Russia survived by raising rates, imposing capital controls, and stabilising the rouble at the expense of private credit and investment. Europe cut pipeline gas and phased out seaborne oil, but Russian crude found Asian buyers, mainly India and China, at steep discounts, using a shadow fleet of older tankers. Using unfrozen reserves and shadow energy sales, the State maintained wartime revenues.
However, consumption and non-war investment declined, but military procurement, construction, and import-substituting industries surged. GDP dropped 2-3% in 2022 but recovered in 2023. Defence production expanded using Soviet-era capacity, reallocating labour and capital from civilian sectors. CSIS sees this as a durable shift toward a militarised, lower-productivity economy that is unlikely to reverse soon.
China, India and Turkey
China has been central to sustaining this war-economy pivot, taking the lion’s share of Russian hydrocarbons, coal, and metals, and is likely to increase gas imports, thereby building redundancies in its raw material sourcing. Chinese firms export machinery, vehicles, electronics, and consumer goods, including dual-use items, some directly and others via Central Asian and Caucasian countries. Bilateral trade has de dollarised, settlements in yuan and roubles have grown significantly, Russian use of China’s CIPS has increased, and the yuan has become a de facto reserve asset, deepening dependence on China.
Western sanctions left little choice but to “permit” some of this redirection to China and India; otherwise, both countries would have entered the non-Russian oil market, which would have spiked prices well above US$150 per barrel. Turkey presented itself as neutral, but recent cases reveal that Turkish firms are facilitating large-scale re-exports.
The Sanctions Evading Caucasian Belt
Since 2022, Central Asia and the South Caucasus have evolved from ad hoc backdoors into a more coherent sanctions evasion system. Trade data and investigative work show that Kyrgyzstan, Kazakhstan, Uzbekistan, Georgia, and Armenia operate as a flexible network: firms hop jurisdictions, reflag, and reroute shipments as enforcement tightens, rather than relying on any single state.
Kazakhstan has emerged as a particularly important node - now described as a ‘critical sanctions buffer’. Its imports of computers, electronics, vehicles and drones, primarily from China, have jumped sharply, with a significant share re-exported to Russia under the rules of the Eurasian Economic Union. Kyrgyzstan, meanwhile, has gone beyond being a simple entrepôt to a combined logistics and financial hub, involving large flows of machinery, dual-use goods, and payments to Russian defence-linked entities.
Crypto Workarounds
Russia’s use of crypto is now significant. Blockchain forensics estimate that the rouble-pegged stablecoin A7A5 contributed to a 400% increase in sanctions-related crypto flows in 2025, amounting to tens of billions of dollars. Platforms such as Grinex and intermediaries in Kyrgyzstan, Tajikistan, and elsewhere processed large Russia-linked transactions, creating a shadow crypto economy parallel to the banking system. Four years later, the US and EU began naming specific banks, logistics firms, tokens (A7A5), exchanges (including Grinex), and regional banks as tools for sanctions evasion. Finally, the EU’s 20th sanctions package (23 April 2026) explicitly identified Russian crypto use as a systemic threat.
Germany’s Energy Lines Freezing Up
In response to the 20th Round of EU sanctions, Russia’s deputy prime minister Alexander Novak, noting that “the Germans have refused Russian oil”, announced that Kazakh crude currently supplied to Germany via the North Druzhba pipeline would be diverted to other routes, such as the CPC line to Novorossiysk or onward to China. This affects the PCK Schwedt refinery, which supplies one-sixth of Germany’s oil and fuels 90% of vehicles in Berlin and Brandenburg, as well as jet aviation.
These developments have pushed German pump prices to 2.43 euros per litre and forced Lufthansa to cancel 20,000 flights. Kazakhstan’s acquiescence surprised Germany, as it had recently agreed to raise oil exports. By 2025, Kazakhstan was the EU’s 3rd-largest oil supplier, more important than Saudi Arabia and Iraq.
The episode illustrates how sanctions are generating second-order effects: supply chains are being rerouted not just to sustain Russia, but in ways that impose costs on European consumers while increasing Moscow’s leverage over transit states like Kazakhstan.
Sanctions Diminish, but Alternatives Arise
Russia’s resilience is reinforced by external beneficiaries - Central Asian intermediaries, Turkish traders, Indian refiners, Chinese firms, and crypto platforms - creating an entrenched transnational ecosystem with vested interests in sanctions arbitrage. The net effect is not collapse but a more militarised, China-dependent economy and a deepening trend toward de-dollarisation.
Sanctions have degraded the technological quality of Russia’s military-industrial output without eliminating its capacity to sustain war. Defence and security spending has risen to roughly 7%-8% of GDP (around 30% of fiscal spending); it runs a shadow fleet of about 700 tankers via parallel insurance and brokerage networks; and the break-even oil price has climbed toward US$90 per barrel.
In effect, the dual Hormuz blockade is aiding Russia’s war on Ukraine, allowing it a cost-plus oil and war economy and critical leverage over Kazakhstan and Germany.
(Safi Ahsan Rizvi is a retired 1989-batch IPS officer with over three decades of experience in national security, counter-terror financing, and geo-strategy, including nearly 18 years at the ministry of home affairs and a UN peacekeeping posting in Kosovo. Most recently, he advised the national disaster management authority (NDMA) on disaster risk reduction and risk finance until January 2026.)
