Russia’s wartime production fuels its economy

“Russia’s economy shifted to war-economy mode,” said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security. “Nabiullina, her credentials, her experience, her understanding of conventional monetary and macro policy, have been very important to stabilizing Russia’s economy. Her policies align with Putin’s interests.”

Today, Russia’s key interest rate is high at 16%, but the country’s inflation rate remains manageable.

“The war and the war effort has really amplified the role of the state within Russia’s economy, the role of the military, and military procurement within that economy,” Ziemba said.

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Sanctions are only as powerful as the set of coalitions that impose them, Ziemba pointed out.

“There’s a whole bunch of countries that are quite willing to take Russia’s money and buy goods. I mean, the global economy is not united against Russia to say that invading the neighbor is not OK.”

Russia has pivoted away from Europe, significantly increasing trade with countries like India and China.

And, Ziemba said, Russia is still making billions selling oil and gas.

“Global leaders, including the United States, recognized that the global economy wasn’t ready to do without Russia’s commodity exports, and so they made a choice to try to keep Russian oil, Russian metals, Russian grain, Russian fertilizer on the market, but pay them less for it,” she said.

All of these factors demonstrate the limits of what sanctions can do to inflict damage on a large economy, Ziemba said.

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