Since February 2022, Russia has introduced a series of counter sanctions in response to the international sanctions introduced following the country’s full-scale invasion of Ukraine. These measures aimed to counteract external economic pressure while shielding the domestic economy from further destabilization. However, their broad implementation has led to mixed effects across various sectors while simultaneously increasing the administrative burden, an investigation by the Stockholm Institute of Transition Economics (SITE) says.
It argues that Russia’s countersanctions reinforced state control over key industries, worsened market competition and fiscal sustainability, which contributed to a systematic move towards a planned economy.
Key points:
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Presidential decrees have become the main tool of economic control, allowing the Kremlin to bypass the parliament and micromanage industries, from oil and gas to car dealerships, without transparency or accountability.
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Russia’s use of subsidies has exploded since 2022, with sectors like energy, aviation, agriculture, and housing becoming heavily dependent on state support, increasing the burden on public finances and raising long-term fiscal risks.
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New laws compel businesses to accept government contracts, enforce price controls on essential goods, and allow military-related spending to bypass official budgets, all contributing to a dangerous shift toward a centrally planned economy and economic inefficiency.
The study concludes:
Since February 2022, Russia’s counter-sanctions measures have markedly shifted its economic governance toward greater state control and elements reminiscent of Soviet-era central planning. Large-scale subsidies, administrative pricing, and deep state involvement in production and procurement have suppressed market competition and efficiency. These interventions have distorted incentives and curtailed the role of market signals, contributing to growing inefficiency across key sectors.
Looking ahead, the long-term economic outlook for Russia is increasingly negative. While the counter-sanctions measures may have softened the initial blow of international sanctions, they have entrenched structural vulnerabilities, reduced fiscal flexibility, and amplified systemic risks, particularly in the financial and real estate sectors. Moreover, by undermining innovation and productivity, Russia’s counter sanctions are accelerating its trajectory toward deeper economic isolation and a centrally managed model, with severe implications for sustainable growth.