Permanent Crisis Mode: Why Russia's Economy Has Been So Resilient against Sanctions

PERMANENT CRISIS MODE:
WHY RUSSIA’S ECONOMY
HAS BEEN SO RESILIENT
AGAINST SANCTIONS
Alexand a P okopenko
ZOiS REPORT
No. 4 / 2023 · No embe 2023
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
2
Con en
02 ___ Summa y
04 ___ C isis and managemen
06 ___ The global inancial c isis
08 ___ The end o he commodi ies supe cycle and he i s sanc ions
13 ___ The co ona i us c isis
15 ___ The wa agains Uk aine
17 ___ Conclusion
19 ___ Imp in
Summa y
In he a e ma h o Russia’s ull-scale in asion o Uk aine in Feb ua y 2022, a
coali ion o Wes e n na ions imposed a comp ehensi e se o sanc ions on Rus-
sia, encompassing o e 13,000 indi idual es ic ions — su passing he cumula-
i e cons ain s applied o Cuba, I an, and No h Ko ea. Rema kably, Russia’s
economy has exhibi ed no able esilience in he ace o hese puni i e meas-
u es. In 2022, he coun y’s g oss domes ic p oduc (GDP) expe ienced a me e
2.1 pe cen con ac ion, and in 2023 GDP g ow h is expec ed o exceed 2 pe
cen .
This epo seeks o con ibu e o unde s anding his pa adoxical esul by ana-
lysing he key ac o s o Russia’s economic esilience. The e is a misconcep-
ion in public deba es ha his esilience is due mainly o oil e enues. Ye , an
explana ion based on his eason alone would be an o e simpli ica ion. The
Russian au ho i ies ha e gene ally seemed p epa ed o la ge-scale sanc ions.
Howe e , his p epa edness de i es mos ly om a mix o he la ge p o i s ha
he Russian go e nmen ecei ed in he i s hal o 2022 and a special ype o
economic managemen .
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
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This epo ocuses on he pe iod om 2008 o 2023 and is based on an anal-
ysis o Russia’s inancial managemen policies, d awing on da a p o ided by
he Russian Fede al S a e S a is ics Se ice (Ross a ), he Bank o Russia, media
sou ces, and in e iews wi h inancial sec o leade s.
O e he pas 15 yea s, Russia has aced a se ies o signi ican c ises, including
he 2008 global inancial c isis, he 2014 – 2015 decline in commodi y p ices,
he 2020 – 2023 COVID-19 pandemic, and he epe cussions o he ongoing wa
agains Uk aine. These equen shocks wi hin a ela i ely sho ime ame
ha e placed he Russian economy unde sus ained s ess. No ably, he same
leade ship in Russia’s cen al bank and inance minis y has been a he helm
o he coun y’s economic policies h oughou his pe iod.
Russian op bu eauc a s ha e d awn aluable lessons om managing hese
c ises. They ha e adop ed an ul a-conse a i e mac oeconomic policy ma ked
by cau ious ese e spending, an accele a ed accumula ion o ese es be ween
c ises, inc eased ese e equi emen s wi hin he inancial sys em, educed
compe i ion in he banking sec o o easie managemen , and s ic mone a y
and iscal policies. These impac o hese policies on he Russian economy has
been a e age GDP g ow h du ing his pe iod o close o 1 pe cen .
The succession o c ises has ins illed a pa icula mindse in Russian o icials.
The pe pe ual need o add ess challenges ha a ise om ac o s beyond hei
con ol, o en un ela ed o mone a y and iscal ma e s, has kep hem in a s a e
o cons an eadiness o unexpec ed c ises. This mindse , coupled wi h sub-
s an ial oil e enues, has enabled he Russian economy as a whole o wi hs and
he impac o sanc ions and swi ly adap o new eali ies. The ole o c isis
managemen by he cen al bank and he inance minis y in esponding o
sanc ions should no be unde es ima ed.
While conse a i e app oaches and ad hoc managemen p ac ices can be e ec-
i e in dealing wi h c ises, hey may limi long- e m de elopmen . Addi ionally,
dependence on high oil e enues can impede economic di e si ica ion. In he
pe iods be ween c ises, he Russian economic au ho i ies ailed o s eng hen
es ablished ins i u ions. Mo eo e , some aspec s o Russia’s inancial a chi ec-
u e, such as a p edic able ax sys em and he budge ule, which seeks o en-
cou age economic s abili y, became ic ims o c isis managemen .
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
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C isis and managemen
In he ealm o long- e m economic de elopmen s, ins i u ions o en eme ge
in esponse o c ises. The e olu ion o ins i u ions in mode n Russia e lec s
his pa e n, wi h signi ican ins i u ional changes ha ing occu ed as eac-
ions o a ious c ises. No able examples include he e o m o he Russian
ax sys em because o non-paymen s in he 1990s, he in oduc ion o de-
posi insu ance and budge policy amewo ks in he wake o he 1998 Asian
inancial c isis, and he shi owa ds in la ion a ge ing a e he 2008 i-
nancial c isis.1
Du ing c ises, ad hoc managemen p ac ices o en come in o play, which
may empo a ily de ia e om es ablished ins i u ional p ocedu es. Usually,
hese ad hoc p ac ices a e implemen ed wi h he goal o minimising he im-
pac s o he shock, bu hey may some imes un coun e o exis ing ins i u-
ions. Howe e , o e he medium and long e m, ins i u ions and he ac o s
behind hem end o adap and s eng hen hemsel es o be e handle u-
u e c ises. I is wo h no ing ha c ucial ins i u ions o he Russian econo-
my, such as a s able ax sys em, budge a y ules, and budge a y ede alism
(Russia’s sys em o inancially au onomous egional budge s), eme ged a e
he 1998 inancial c isis, despi e he absence o excessi e expo e enues a
he ime. Pa adoxically, in he pas 15 yea s, which ha e been cha ac e ised
by signi ican g ow h in expo e enues, some o he ins i u ions ha we e
es ablished in esponse o ea lie c ises ha e aced challenges.
This s udy in en ionally ocuses on he pe iod om 2008 o 2023 and is
based on an analysis o Russia’s inancial managemen policies, d awing on
da a p o ided by Ross a , he Bank o Russia, media sou ces, and in e iews
wi h inancial sec o leade s. This pe iod was chosen because key igu es
in Russia’s inancial leade ship eached op posi ions du ing his ime and
ha e since been esponsible o economic s a ec a and decision-making.
The yea s be o e he 2008 global inancial c isis we e a pe iod o no majo
c ises o he Russian economy.
Ad hoc managemen in his con ex e e s o decisions made by he
coun y’s inancial au ho i ies o alloca e o wi hd aw unds om he
economy ou side es ablished ins i u ional p ocedu es. This includes
ac ions like bypassing he budge p ocess, making non- ax wi hd aw-
als om he co po a e sec o , and making sudden shi s in ax e e-
nues om he egions o he cen al go e nmen . Eme gency decisions
o adjus key in e es a es also all in o his ca ego y. In his con ex ,
inancial c ises a e cha ac e ised by sha p declines in he alue o i-
nancial asse s and inc eased isks o inancial s abili y.
1 Ana olyChubais,‘Неплатеживpоссийскойэкономике1990-х:непредвиденныйинститут’
[Non-paymen sin heRussianEconomyin he1990s:AnUn o eseenIns i u ion],Vop osy
Ekonomiki7(2023):pp. 142 – 158,h ps://doi.o g/10.32609/0042-8736-2023-7-142-158.
Fo he las 15 yea s, he
same key igu es ha e
been esponsible o
economic s a e c a .
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
 5
His o ically, he in e al be ween majo c ises a e ages 10 o 15 yea s.2 Rus-
sia has been excep ional in acing ou majo c isis episodes in he pas 15
yea s: he 2008 global inancial c isis, he 2014 – 2015 end o he commod-
i y supe cycle, he 2020 – 2023 COVID-19 pandemic, and he epe cussions o
he wa agains Uk aine ha began in Feb ua y 2022, along wi h wo mini-
c ises ela ed o g ain expo s in 2010 – 2011 and ade issues wi h Tu key
in 2015 – 2016. This high equency o shocks wi hin a ela i ely sho ime
ame indica es ha he Russian economy has been unde pe sis en s ess
o he pas decade and a hal .
In e es ingly, he second and ou h c ises we e consequences o he K emlin’s
o eign policy decisions. Howe e , he s uc u e o P esiden Vladimi Pu in’s
egime and he pe sonalis ic na u e o Russian s a ec a ha e limi ed he ac-
coun abili y o key ins i u ions like he S a e Duma, he go e nmen , and he
cen al bank in add essing why Russia has epea edly aced such shocks. In
imes o c isis, he emphasis shi s owa ds c isis managemen , which o en
elies on ad hoc app oaches and e en manual con ol p ac ices, a he han
policies aimed a building and s eng hening ins i u ions.
In no mal economic condi ions, egula o s ypically sepa a e mon-
e a y policy and mac op uden ial measu es, such as keeping an eye
on isky inancial ac i i ies o p e en hem om causing p oblems o
he whole inancial sys em. Tha is because o Tinbe gen’s ule, which
ad oca es uni y be ween policy goals and ins umen s. Pu simply, he
p inciple, o mula ed by Nobel lau ea e Jan Tinbe gen, s a es ha o
achie e a gi en numbe o in e ela ed goals, i is necessa y o ha e a
leas he same numbe o economic ins umen s in place.
Howe e , du ing c ises, main aining inancial s abili y becomes pa a-
moun , and policies a e adjus ed acco dingly. Financial s abili y is es-
sen ial no only o p ice s abili y bu also o policymake s’ abili y o
abso b shocks and p e en hem om spilling o e in o he eal econ-
omy. Du ing all o he c isis episodes men ioned abo e, he Russian
economy aced inancial ma ke u moil, ab up p ice and exchange
a e luc ua ions, in la iona y p essu e, wi hd awals o in es men s
by non- esiden s, and dec eased ansac ion ac i i y, which o en led
o luc ua ions in commodi y p ices. The abili y o inancial leade s o
con ain a c isis wi hin he inancial sec o and p e en i om spill-
ing o e in o he eal economy hinges on he s able unc ioning o he
inancial sec o . In Russia, bo h he cen al bank and he inance min-
is y ha e done his job mo e o less success ully.
I is wo h no ing ha he same leade ship has guided Russia’s economic poli-
cies h oughou he pe iod in ques ion. El i a Nabiullina and An on Siluano ,
he key igu es in Russia’s economic managemen , se ed in 2008 as minis e
o economic de elopmen and depu y minis e o inance, espec i ely, and
ha e since solidi ied hei oles, becoming cen al bank go e no and inance
2 LeonidG ininandAnd eyKo o aye , Глобальный кризис в ретроспективе: От Ликурга до
Алана Гринспена[GlobalC isisinRe ospec :F omLycu gus oAlanG eenspan](Moscow:
URSS,2010),h ps://cliodynamics. u/index.php?op ion=com_con en & ask= iew&id=218&I em
id=1.
The Russian economy
has been unde
pe sis en s ess o he
pas decade and a hal .

ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
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minis e . The succession o c ises has ins illed a speci ic mindse in hese ac-
o s: he pe pe ual need o add ess challenges ha s em om ac o s beyond
hei con ol, such as policies un ela ed o mone a y and iscal ma e s, which
has kep hem in a s a e o pe pe ual eadiness o unexpec ed c ises.3
This eadiness has led o a conse a i e app oach o go e nance ha a ou s
he accumula ion o ese es o e he s imula ion o in es men and, ul i-
ma ely, es ains ins i u ional de elopmen . Building ins i u ions akes
ime and con idence. The ixa ion on ese es gene a es endless wai ing
o a ainy day and educes he appe i e o ins i u ional de elopmen and,
consequen ly, in es men . This can a i icially slow down he business cy-
cle and lead o slowe economic g ow h. In imes o c isis, ins i u ion-based
managemen , like long- e m budge a y p ocedu es o he budge ule, which
aims o con ibu e o economic s abili y by sa ing excess oil e enues du -
ing boom pe iods and using hem du ing economic down u ns, may con lic
wi h manual in e en ions, and a mo e eac i e app oach p o ed o be jus i-
ied in he ace o he shocks o 2022. Howe e , in he medium o long e m,
con inuous ad hoc managemen can be de imen al o he economy. While i
may be e ec i e in o e coming shocks, i can impede economic g ow h and
de elopmen .
The global inancial c isis
The i s c isis aced by Pu in’s go e nmen , when he was p ime minis e ,
was caused by he 2008 global inancial c isis. Be o e he shock, he Russian
economy and inancial sec o we e g owing apidly. Unde a quasi- ixed
exchange- a e egime, he ouble was subjec o con olled loa ing wi hin
he bounda ies o a dual-cu ency baske composed o he US dolla and
he eu o. Agains he backd op o ising oil p ices, Russia’s mone a y au-
ho i ies we e accumula ing gold and o eign exchange ese es, and non-
inancial companies and banks we e ac i ely inc easing ex e nal bo ow-
ing. The bank up cy in Sep embe 2008 o he Ame ican inancial se ices
i m Lehman B o he s and he ensuing panic in global ma ke s had acu e
consequences o Russia as well. The p ice o B en c ude oil ell om i s
peak o $ 146 a ba el in July 2008 o $ 37 in Decembe . Tha yea , he ne
capi al ou low o he p i a e sec o om Russia amoun ed o $ 133.6 billion.
F om he beginning o Augus 2008 o he end o Feb ua y 2009, he o eign
exchange ese es o he Bank o Russia ell by $ 215 billion.4
By he s a o he c isis, he o eign-cu ency deb o he banking and co -
po a e sec o amoun ed o $ 418.5 billion, and in he con ex o he global
c isis, he oppo uni ies o e inancing his deb we e signi ican ly limi ed.
In ha pe iod, he Bank o Russia egula ly conduc ed cu ency in e en-
ions o adjus he exchange a e o new condi ions mo e smoo hly. F om 30
3 And eyYako le ,‘Стратегиибизнесакакфакторстабилизациироссийскойэкономики:
успешныйопыт2022годаинеясныеперспективынабудущее’[BusinessS a egiesasa
Fac o inS abilising heRussianEconomy:ASuccess ulExpe iencein2022andUnclea P os-
pec s o  heFu u e],Sociodigge ,10Ap il2023,h ps://sociodigge . u/a icles/a icles-page/
s a egii-biznesa-kak- ak o -s abilizacii- ossiiskoi-ehkonomiki-uspeshnyi-opy -2022-goda-i-
nejasnye-pe spek i y-na-budushchee.
4 ‘Годовойотчет2008’[AnnualRepo 2008],Cen alBanko  heRussianFede a ion,2009,
h ps://www.cb . u/collec ion/collec ion/ ile/7805/a _2008.pd .
In he medium o long
e m, con inuous ad
hoc managemen can
be de imen al o he
economy.
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
7
Sep embe 2008 o 31 Janua y 2009, he olume o he cen al bank’s o eign-
cu ency ese es ell by 31.7 pe cen o $ 370.4 billion. I is no ewo hy ha
he economy’s le el o dolla isa ion inc eased e en mo e — o 39 pe cen
by Feb ua y 2009.5 In o he wo ds, while he mone a y au ho i ies we e
spending ese es o main ain he ouble’s exchange a e, households and
i ms we e ac ing specula i ely by buying o eign cu ency and so o cing
he cen al bank o inc ease sales. To s abilise he si ua ion in he inancial
sec o , in Oc obe 2008 he Bank o Russia began o p o ide loans wi hou
colla e al on an eme gency basis, and he a es a such auc ions ose o 19
pe cen .6 Two mon hs la e , lending secu ed by non-ma ke able asse s was
launched.
The c isis ha un olded in 2008 – 2009 ma ked he onse o ex ensi e go e n-
men in ol emen in he Russian economy. Du ing his pe iod, o e 1 il-
lion oubles ($ 10.7 billion) was alloca ed o suppo a ious companies, wi h
a signi ican po ion di ec ed owa ds he inancial sec o .7 No ably, sub-
s an ial suppo was ex ended o p ominen co po a ions, including $ 4.5
billion o Rusal, a leading aluminium p oduce owned by Oleg De ipaska;
$ 1.8 billion o E az, a majo mining company owned by Roman Ab amo -
ich and pa ne s; assis ance o he na ional ca make A o az, which a he
ime was in a conso ium wi h Ros ech and Renaul -Nissan; and suppo o
en e p ises in he mili a y-indus ial sec o .8 The go e nmen es ablished
a lis o s a egically i al indus ies and en e p ises and engaged in he
manual alloca ion o inancial assis ance o hese en i ies. In hindsigh , Pu-
in would la e desc ibe his app oach o economic managemen as op imal.
By 2010, Russia’s signi ican GDP g ow h, a 4.5 pe cen , had la gely o se
he decline expe ienced in 2009.9 One o he key lessons ha Pu in and his
economic eam lea ned om his c isis was an awa eness o he ini e na-
u e o ese es and he need o p ese e hem.10 In subsequen yea s, he
Russian go e nmen and cen al bank p io i ised he p uden managemen
o ese es and he c ea ion o inancial bu e s o sa egua d he economy
agains u u e c ises. This s a egy in ol ed accumula ing o eign-cu ency
ese es and building he Na ional Wel a e Fund, which could be apped
in o when needed o mi iga e economic shocks. Howe e , he impe a i e o
main ain hese ese es also empe ed in es men in in as uc u e and
o he de elopmen ini ia i es.
To sum up, he key lesson om his c isis was ha main aining ese es
and low le els o go e nmen deb is c i ical o ensu ing mac oeconomic
s abili y.
5 Ibid.
6 Ibid.
7 ‘МакроэкономическаякартинавРоссииивмиреза1кв.2020’[TheMac oeconomicPic u e
inRussiaand heWo ld o Q12020],Roscong essFounda ion,2020,h ps:// oscong ess.
con en . cmedia. u/upload/medialib a y/605/Mak oobzo _upd_ e .15042020_o o mlen.pd .
8 Na alyaSu o o a,‘Размерыспасения’[RescueDimensions],RBC,20Oc obe 2014,h ps://
www. bc. u/magazine/2014/10/56bc7e499a794701b81d2b66.
9 ‘Национальныесчета’[Na ionalAccoun s],Ross a ,h ps:// oss a .go . u/s a is ics/accoun s#.
10 O - he- eco din e iewwi haRussiansenio o icial,conduc edon hecondi iono anonymi y.
The c isis in 2008 – 2009
ma ked he onse o
ex ensi e go e nmen
in ol emen in he
Russian economy.
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
8
The end o he commodi ies supe cycle and
he i s sanc ions
In 2014 – 2015, he Russian inancial sec o aced a double blow. On he one
hand, he supe cycle in he commodi ies ma ke ended and oil p ices ell
sha ply. Be ween la e June 2014 and ea ly Janua y 2015, he p ice o B en
c ude oil plumme ed by 60 pe cen o $ 47 a ba el. On he o he hand, he
US, he EU, and se e al o he na ions imposed economic sanc ions on key
Russian banks and companies in esponse o Russia’s annexa ion o C imea
and in ol emen in hos ili ies in Uk aine’s Donbas egion, which included
he downing o ligh MH17 o e eas e n Uk aine.
These sanc ions coincided wi h he de e io a ion o he global hyd oca -
bon ma ke , esul ing in a weake ouble, and ising in la ion. In jus a ew
mon hs, he p ice o B en c ude oil nea ly hal ed, alling om $ 115 a ba el
in June o $ 55 by he end o Decembe .11 This had a de as a ing impac , as
app oxima ely 70 pe cen o Russia’s budge elied on oil and gas e enues.
Consequen ly, he ouble-dolla exchange a e su ged om 32 oubles pe
dolla a he beginning o 2014 o 56 oubles in Decembe , e en ually each-
ing 79 oubles on a pa icula ly u bulen day.12 The ouble and he dolla
a e in e dependen because o he la e ’s global impo ance, Russia’s eli-
ance on oil expo s p iced in dolla s, and a ious economic and geopoli i-
cal ac o s. Changes in he dolla - ouble exchange a e can ha e signi ican
consequences o Russia’s economy and ade ela ionships.
In his cus oma y New Yea ’s E e mee ing wi h he go e nmen a he end o
2014, Pu in called o a shi o a ‘manual mode o economic managemen ’.13
This en ailed close coo dina ion be ween he go e nmen , he cen al bank,
and he p esiden ial adminis a ion as well as heigh ened con ol o e c i ical
sec o s o he economy. Pu in ci ed he managemen p ac ices employed du -
ing he 2008 c isis as a model o ollow. The go e nmen op ed o an expedi ed
app oach, in oking he ump ca d o e e ing o he 2008 expe ience: ‘Fo ce-
ul measu es we e aken hen, bu he e was a need o apid ac ion wi hou
he leng hy p ocess o app o als.’14 In e ec , his app oach in ol ed di ec
go e nmen in e en ion in alloca ing s a e suppo o he co po a e sec o in
exchange o inc eased bu eauc a ic in ol emen in co po a e managemen .
As a esul o his o m o managemen , subs an i e e o ms aimed a build-
ing and o i ying ins i u ions we e ei he delayed o ne e in oduced.15 Ex-
11 ‘B en C udeOilP ices–10Yea DailyCha ’,Mac o ends,h ps://www.mac o ends.ne /2480/
b en -c ude-oil-p ices-10-yea -daily-cha .
12 ‘КурсдоллараСШАв2014году’[USDolla ExchangeRa ein2014],Ra es a s,h ps:// a es a s.
com/dolla /2014/.
13 Pe Ne eba,‘Путинпоручилправительствувключитьрежимручногоуправления
экономикой’[Pu inIns uc ed heGo e nmen  oEnableManualCon olo  heEconomy],
RBC,24Decembe 2014,h ps://www. bc. u/economics/25/12/2014/549b 109a794746becedc
1e.
14 Ibid.
15 In2012,expe sincoo dina ionwi h hego e nmen p oposeda e o mp og ammecalled
S a egy2020.I wasno app o edasano icialgo e nmen ac ionplan,bu manyo i sp o i-
sionswe eimplemen ed h oughindi idual egula ions.Thes a egyen isaged heb oadap-
plica iono p ojec managemen ,g ea e  inancialau onomy o  he egions, hede elopmen 
o mechanismso publicpa icipa ion,andcon olo e economicli e.An onFeinbe g,‘Центр
КудринаобъяснилнеудачиреформвРоссии’[TheKud inCen eExplained heFailu eso 
Re o msinRussia],RBC,27Decembe 2016,h ps://www. bc. u/economics/27/12/2016/58613e
d19a7947897126 05.
A he end o 2014,
Pu in called o a shi
o a ‘manual mode o
economic managemen ’.
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
 9
amples o such e o ms include he ansi ion o p ojec -based managemen
in s a ec a , he eplacemen o sho - e m in es men s wi h long- e m ones,
and he inc eased p o ec ion o p i a e p ope y.16 In sho , his app oach p i-
o i ised immedia e c isis managemen o e long- e m s uc u al e o ms.
In au umn 2014, he Bank o Russia ini ia ed a ansi ion o an in la ion-
a ge ing egime ahead o i s planned schedule. This ansi ion included a
shi owa ds a loa ing exchange a e o he na ional cu ency. The deci-
sion o mo e o in la ion a ge ing was p eceded by a dep ecia ion o he
ouble’s exchange a e, d i en by geopoli ical isks and alling oil p ices.
This change was necessa y, among o he hings, so ha he go e nmen and
he cen al bank would no ha e o spend a signi ican po ion o ese es
o suppo he ouble exchange a e in he e en o a c isis. S a ing on 5 No-
embe , he cen al bank e mina ed unlimi ed cu ency in e en ions on
a spo ma ke , cu ency epo ( epu chase ag eemen , a o m o sho - e m
bo owing) was p o ided ins ead, and by 10 No embe , i had e ec i ely
comple ed he shi o a eely loa ing ouble exchange a e by discon inu-
ing egula in e en ions and he loa ing co ido o he cu ency baske .
A c i ical si ua ion un olded in he cu ency ma ke on 15 – 16 Decembe
2014. This si ua ion esul ed om se e al ad e se e en s, including an an-
nouncemen by a ep esen a i e o he O ganisa ion o he Pe oleum Ex-
po ing Coun ies abou main aining oil-p oduc ion quo as despi e he po-
en ial decline in oil p ices o $ 40 a ba el. Addi ionally, he e was conce n
o e an opaque bond deal in ol ing Russian ene gy company Rosne .17
These e en s igge ed panic in he cu ency ma ke , and a an eme gency
mee ing, he cen al bank aised he in e es a e o i s maximum le el o 17
pe cen .18
A ha ime, he e we e no manda o y equi emen s o expo e s o sell
hei o eign-cu ency ea nings, and he go e nmen e ained om di ec
capi al low con ol measu es. Howe e , Pu in in o mally eques ed leade s
o majo companies o sell hei o eign-cu ency ea nings,19 and he go -
e nmen u ged he i e la ges expo ing companies o educe hei o eign-
cu ency holdings.20
The shi o a loa ing exchange- a e egime led o a sha p dep ecia ion o
he ouble, whose alue ul ima ely ell by abou hal . Ne e heless, a ha
momen , main aining a ixed exchange a e would ha e equi ed he cen-
al bank o con inuously sell o eign cu ency o o se i s sho age in he
16 Eka e inaMe eminskaya,FilipS e kin,andAlexand aP okopenko,‘ДмитрийМедведев
предложилВладимируПутинуизмениться’[Dmi yMed ede In i edVladimi 
Pu in oChange],Vedomos i, 22Ap il2016,h ps://www. edomos i. u/poli ics/
a icles/2016/04/22/638724-dmi ii-med ede -p edlozhil- ladimi u-pu inu-izmeni sya.
17 Yu iBa suko e al.,‘“Роснефть”провеласекретноеразмещение’[Rosne Conduc eda
Sec e Placemen ], Komme san , 12Decembe 2014,h ps://www.komme san . u/doc/2631053.
18 ‘ОключевойставкеБанкаРоссии’[Abou  heKeyRa eo  heBanko Russia],Cen-
alBanko  heRussianFede a ion,30Janua y2015,h ps://www.cb . u/p ess/
p /? ile=30012015_133122dkp2015-01-30 13_15_49.h m.
19 E geniyKalyuko ,‘Улюкаевопровергтребованиекгоскомпаниямпродаватьвалюту’
[Ulyukae Denied heRequi emen  o S a e-ownedCompanies oSellFo eignCu ency],RBC,
23Decembe 2014,h ps://www. bc. u/ inances/23/12/2014/549978d49a79476dbdbb83 c.
20 DenisSko oboga koe al.,‘Валютныйрыноквылечатотаритмии’[TheFo eignExchange
Ma ke WillBeCu edo A hy hmia],Komme san ,23Decembe 2014,h ps://www.komme -
san . u/doc/2639259.
A c i ical si ua ion
un olded in he
cu ency ma ke on
15 – 16 Decembe 2014.
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
16
a su p ise o hem.41 A e hese sanc ions we e announced, he ouble-
dolla and ouble-eu o exchange a es b oke h ough he 120 and 150 ouble
ma ks, espec i ely, and people ushed o banks o wi hd aw hei deposi s
and s ash hem unde hei ma esses. The ou low o unds om he bank-
ing sys em exceeded 2 illion oubles ($ 30 billion) in he i s wo weeks o
wha Moscow called he special ope a ion in Uk aine.42
The go e nmen and he cen al bank esponded by banning he wi hd aw-
al and physical expo o cu ency om he coun y o Russians and non-
esiden s, obliging expo e s o sell 80 pe cen o hei o eign-cu ency
ea nings wi hin h ee days a e hey we e deposi ed in hei accoun s, clos-
ing he s ock exchange, and inc easing he in e es a e o 20 pe cen . In
ac , he cen al bank and he inance minis y pu he economy in o an a -
i icial coma. Res ic ions on capi al lows li e ally locked o eign-cu ency
liquidi y inside he Russian inancial sys em, main aining i s s abili y.
Wi h he excep ion o he in e es a e change, such mo es had no been ap-
plied in p e ious c ises. Mo eo e , he egula ion o capi al lows in Rus-
sia had been consis en ly libe alised in p e ious yea s. Thei es ic ion,
among o he hings, indica es he ex ao dina y na u e o he egula ion in-
oduced. On he one hand, he a e inc ease cooled economic ac i i y, as ew
people we e eady o ake ou loans a such a p ice; and on he o he hand,
i made deposi s a ac i e again, because people and companies s a ed o
e u n unds o hei accoun s. A an ex ao dina y mee ing on 27 May 2022,
he Bank o Russia sha ply educed he a e again om 14 pe cen o 11 pe
cen .43 This le el was s ill a ac i e o people o keep hei money in bank
deposi s, and i was less damaging o c edi pu poses.
Fo he eal economy, he sanc ions es ic ed companies’ access o echnol-
ogy and equipmen , while he closu e o Wes e n ma ke s o ced he sec o
o seek new cus ome s in Asia and he Middle Eas by adap ing p oduc s and
adjus ing supply chains. As he economy shi ed o he new eali ies, he
igh ening measu es we e li ed. Indeed, he adap a ion was as e han ex-
pec ed: while in Ap il pessimis ic scena ios we e dominan ,44 by Sep embe ,
acco ding o su eys by he Bank o Russia, posi i e changes in he economy
we e eco ded hanks o high in en o ies and hei eplenishmen due o
he s eng hened exchange a e and, as a esul , he apid adap a ion o busi-
ness.45
By mid-2022, he inancial sec o and he economy had been s abilised. The
ouble, a e a sho all om 76 oubles pe dolla on he e e o he in a-
sion o 120 oubles pe dolla in ea ly Ma ch 2022, s eng hened sha ply o
41 Alexand aP okopenko,‘TheCos o Wa :RussianEconomyFacesaDecadeo Reg ess’,Ca n-
egieEndowmen  o In e na ionalPeace,19Decembe 2022,h ps://ca negieendowmen .o g/
poli ika/88664.
42 Ibid.
43 NadezhdaNizamo a,‘ЦБснизилключевуюставкудо11%:чтобудетскредитамии
ипотекой’[TheCen alBankReduced heKeyRa e o11%:Wha WillHappen oLoansand
Mo gages],Banki. u,26May2022,h ps://www.banki. u/news/day heme/?id=10966832.
44 ‘Очемговоряттренды:Макроэкономикаирынки’[Wha  heT endsA eTalkingAbou :Mac-
oeconomicsandMa ke s],Cen alBanko  heRussianFede a ion,Ap il2022,h ps://www.
cb . u/Collec ion/Collec ion/File/40953/bulle in_22-02.pd .
45 ‘Очемговоряттренды:Макроэкономикаирынки’[Wha  heT endsA eTalkingAbou :Mac-
oeconomicsandMa ke s],Cen alBanko  heRussianFede a ion,Sep embe 2022,h ps://
www.cb . u/Collec ion/Collec ion/File/42297/bulle in_22-05.pd .
The cen al bank and
he inance minis y
pu he economy in o
an a i icial coma.

ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
17
50 – 60 oubles pe dolla in June – No embe 2022.46 Consume p ices, which
had jumped in Ma ch 2022, almos s opped g owing by Ap il. A yea la e ,
p ice g ow h exceeded he p e ious yea ’s le el by only 2.3 pe cen .47 In any
p ospe ous, non-mili a ised de eloping coun y, such a es o p ice g ow h
would be conside ed qui e accep able. Bu his p ospe i y was he p oduc o
a combina ion o se e al ac o s whose e ec ceased by he sp ing and ea ly
summe o 2023. And he au ho i ies e u ned o ad hoc economic manage-
men modelled on he beginning o he in asion: in esponse o he sha p
weakening o he ouble, he cen al bank aised he key a e a an eme -
gency mee ing, and he go e nmen e u ned o he discussion o capi al
low con ols.48
The go e nmen decided o delay he in oduc ion o egula o y es ic ions
bu used manual con ols ins ead: Russian depu y minis e o indus y and
ade Vik o Ye ukho held a mee ing wi h e aile s a which he demanded
p ice limi s o se e al goods,49 and he go e nmen in o mally ag eed wi h
expo e s ha hey would be mo e ac i e in selling o eign cu ency.50
Conclusion
The p ima y objec i e o aming he economic cycle is o smoo h ou luc-
ua ions while helping businesses and households o adap o he econom-
ic olle coas e . This impe a i e is pa icula ly signi ican o eme ging
coun ies, including Russia. Recen esea ch highligh s he pi o al ole o
ins i u ional quali y, such as he ule o law, and i s ela ionship wi h coun-
e cyclical policies in shaping he economic and inancial epe cussions o
global shocks on eme ging economies.51 Pa adoxically, coun ies wi h mo e
e ec i e coun e cyclical policies may ha e less incen i e o bols e hei
ins i u ions. In he 2020 co ona i us c isis, he Russian cen al bank and
go e nmen success ully na iga ed esis ance om lobbyis s om he eal
economy o enac coun e cyclical measu es. This success was la gely due o
decisions ha we e made by a selec g oup o echnoc a s, including Nabiul-
lina, Siluano , and Maxim O eshkin, a o me minis e o economic de el-
opmen and cu en p esiden ial aide, hen endo sed by he p esiden and
subsequen ly implemen ed.
46 ‘КурсдоллараСШАв2022году’[USDolla ExchangeRa ein2022],Ra es a s,h ps:// a es a s.
com/dolla /2022/.
47 ‘КлючеваяставкаБанкаРоссиииинфляция’[Banko RussiaKeyRa eandIn la ion],Cen al
Banko  heRussianFede a ion,h ps://www.cb . u/hd_base/in l/.
48 ‘Russia’sEli eSpli In oSquabblingFac ionsO e  heRuble’,Bloombe g,18Augus 2023,
h ps://www.bloombe g.com/news/a icles/2023-08-18/no-one-in- ussia-could-ag ee-on-how-
o-w es -con ol-o - he- uble.
49 AdamTooze,‘Cha book236:Russia’sLong-Wa Economy’,Cha book, 30Augus 2023,h ps://
adam ooze.subs ack.com/p/cha book-236- ussias-long-wa -economy.
50 Dmi yG inke ichandGalinaKazakulo a,‘Властирешилипоканеужесточатьвалютный
контроль’[TheAu ho i iesHa eDecidedNo  oTigh enFo eignExchangeCon ols o Now],
Vedomos i, 16Augus 2023,h ps://www. edomos i. u/economics/a icles/2023/08/16/990533-
las i- eshili-poka-ne-uzhes ocha - alyu nii-kon ol.
51 And eaFe e oe al.,‘Wo kingPape Se ies:Leaningagains  heglobal inancialcycle’,
Eu opeanCen alBank,Decembe 2022,h ps://www.ecb.eu opa.eu/pub/pd /scpwps/
ecb~3 8276 7dc.wp2763en.pd .
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
18
The Russian au ho i ies ha e gleaned aluable lessons om he ou c ises
o he pas 15 yea s, by s i ing o enhance he coun y’s economic esil-
ience, e ine hei an i-c isis s a egies, and manage eme ging isks be e .
Key akeaways o he way Pu in and his economic eam ha e g appled wi h
ecen c ises include he adop ion o an ul a-conse a i e mac oeconomic
policy cha ac e ised by cau ious ese e spending (wi h accele a ed ac-
cumula ion be ween c ises), highe ese e equi emen s in he inancial
sys em, educed compe i ion in he banking sec o o easie managemen ,
and s ingen mone a y and iscal policies. These policies, while p omo ing
s abili y, ha e, a imes, come a he cos o lowe economic g ow h, wi h he
a e age g ow h a e be ween 2013 and 2022 ho e ing a a ound 1 pe cen .52
By 2023, Russia had ga ne ed he unen iable dis inc ion o being he wo ld
leade in e ms o he numbe o sanc ions imposed on a coun y, wi h a o-
al o mo e han 13,000 indi idual measu es. Despi e hese challenges, Rus-
sia’s economic con ac ion in 2022 was milde han some had an icipa ed, a
2.1 pe cen o GDP. The coun y’s economy demons a ed esilience agains
shocks, which can be a ibu ed o ac o s including he go e nmen ’s con-
sis en eadiness o c ises and he inancial au ho i ies’ acu e ocus on i-
nancial s abili y. High le els o ese es, buil up by businesses be o e he
wa , and he s eng hened ouble exchange a e in he second qua e o
2022, along wi h liquidi y bu e s in he banking sec o and he Na ional
Wel a e Fund, allowed he au ho i ies o quickly sa u a e he economy wi h
money e en while he cen al bank’s ese es we e ozen.
This s a e o cons an p epa edness has compelled he Russian au ho i ies
o add ess mos challenges manually, while he economy, accus omed o
his s yle o managemen , exhibi ed limi ed esis ance. In 2022, a po ion
o he budge ule ha cons ained addi ional go e nmen expendi u e was
suspended, and in 2023, he componen manda ing he accumula ion o ex-
cess oil and gas e enues was also disapplied. Majo co po a ions, such as
Gazp om and oil companies, did no objec o subs an ial paymen s o he
budge ,53 while businesses, acco ding o Russian i s depu y p ime minis-
e And ey Belouso ,54 app oached he go e nmen olun a ily o con ib-
u e addi ional axes.55 Anonymously, business ep esen a i es complained
o he media ha he new axes had ha dly been discussed wi h hem.56 Cou-
pled wi h a subs an ial ade su plus, which eached a eco d $ 332 billion
in 2022, his managemen sys em allowed he Russian economy o wi hs and
signi ican shocks.57
52 ‘Данныепонациональнымсчетам’[Na ionalAccoun sDa a],Ross a ,h ps:// oss a .go . u/
s o age/mediabank/VVP_god_s_1995-2022.xls.
53 ‘Russia’s“new o mula” oinc ease ax e enue omoilexpo e s’,The Bell,18Feb ua y2023,
h ps://en. hebell.io/ ussia-s-new- o mula- o-inc ease- ax- e enue- om-oil-expo e s/.
54 ‘АндрейБелоусов:«Ядроустроенонеизэкономики,оноустроеноизсмыслов»’[And ey
Belouso :‘TheCo eIsNo Madeo Economics,I IsMadeo Meanings’],RBC,13June2023,
h ps://www. bc. u/business/13/06/2023/6482d3389a79473805ee8978.
55 ‘Pu insignslawonwind all ax’,Reu e s,4Augus 2023,h ps://www. eu e s.com/ma ke s/
eu ope/pu in-signs-law-wind all- ax-2023-08-04/.
56 MaxSeddonandAnas asiaS ognei,‘K emlinun eilswind all ax o aiseRbs300bn omoli-
ga chs’, Financial Times,13June2023,h ps://www. .com/con en /c6080d1e-d3c3-4b1d-b7 3-
e3ac 1876ca.
57 ‘ФТСРоссиичастичновозобновляетпубликациюданныхтаможеннойстатистики
внешнейторговли’[TheFede alCus omsSe iceo RussiaPa lyResumes hePublica ion
o Da aonCus omsS a is icso Fo eignT ade],Cus omsSe iceo  heRussianFede a ion,
13Ma ch2023,h ps://cus oms.go . u/p ess/ ede al/documen /385906.
Fac o s o esilience
include he go e n-
men ’s eadiness o
c ises and he inancial
au ho i ies’ acu e ocus
on inancial s abili y.
The Russian au ho i ies
ha e gleaned aluable
lessons om he ou
c ises o he pas 15
yea s.
ZOiS Repo 4 / 2023 Pe manen C isis Mode: Why Russia’s Economy Has Been so Resilien agains Sanc ions
 19
While Russia’s capaci y o espond o c ises and i s inely uned an i-c isis
s a egies migh appea success ul on he su ace, hey also ein o ced a
penchan o manual in e en ion, a managemen app oach ha is p o ing
unsus ainable in p esen -day Russia. This app oach has, in u n, hinde ed
he de elopmen o ins i u ions ha cons i u e he amewo k o he econ-
omy. Ha ing s ong ins i u ions, such as p ope y igh s, a p edic able ax
sys em, o he budge ule, will a ou he Russian economy. Bu he pe ma-
nen c isis mode and he habi o ad hoc managemen has cos he economy
i s g ow h a e. As a senio o icial said, i you wea a helme all he ime, you
can sa e money on acciden insu ance.58 In o he wo ds: I you a e always in
c isis, why do you need wo king ins i u ions and expec economic g ow h?
58 In e iewwi hano icial om he inancesec o ,conduc edinpe sonbe ween2018and2022.
Imp in
Au ho
Alexand a P okopenko
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Alexand a P okopenko: ‘Pe manen C isis Mode:
Why Russia’s Economy Has Been so Resilien agains
Sanc ions’, ZOiS Repo 4 / 2023, (h ps://en.zois-be lin.
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ISSN 2512-7233
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Yuko S ie
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