May 11, 2025: A major economic weapon against Russia is economic sanctions. These were first implemented in 2014 after Russia seized Crimea and portions of two east Ukraine provinces. Russia has managed to cope with the sanctions, managing to defeat every western effort to make their sanctions more effective.

In 2022 Western sanctions were expanded, blocking Russia from obtaining a lot of industrial equipment for factories or establishing new ones. Russia had particular difficulty obtaining machine tools and components needed to build weapons. These include motors and other components for drones, including lithium-ion batteries that power most drones. Many of these banned components for weapons are also used in non-military items. These are called dual use items, and the new sanctions ban them as well because this is how you guarantee no supplies of items that can be used to build weapons. This includes complex systems like missiles, which require specific chemicals needed to fabricate the solid-fuel motors used.

There are alternative sources for sanctioned items, but the cost is higher, delivery takes longer, and regular deliveries are not guaranteed. Using smugglers to deal with sanctions is expensive but Russia must pay more to keep essential war-time industries going. Russia managed to evade sanctions against its oil exports by offering oil at discounted prices. Many nations were willing to risk political or economic blowback for buying Russian oil. So far, the discreet Russian trade in cheap oil survives.

The Ukraine War saw Russia at odds with NATO countries that control over half the $110 trillion 2024 worldwide GDP. The U.S. and China control 45 percent of that. By comparison Russia had a GDP of $1,845 billion in 2021, $2,265 billion by 2022, $2,020 billion by 2023 and $2,186 billion in 2024. Ukraine had a GDP of $200 billion in 2021, $179 billion by 2023 and $189 billion in 2024.

NATO countries have supplied Ukraine with over $100 billion in military and half as much in economic aid. As the aggressor Russia gets no aid from anyone and has limited trade relations with North Korea, Iran and China. This war is the first between industrialized nations since 1945. When it ends there will be a shift to national reconstruction in Ukraine. NATO nations have promised substantial post-war economic rebuilding aid so that Ukraine can fit count on that aid while planning their own wartime production.

Both Russia and Ukraine have suffered labor shortages because of the war. It was worse for Russia because over a million Russian men were killed, disabled, deserted or fled the country to avoid military service. The labor shortage is made worse by the lack of high school and university graduates with technical training. Too many of those grads concentrated on the humanities rather than industrial and software engineering. As a result, firms manufacturing requiring a lot of people with technical skills cut production. The government responded with bonuses and other benefits offered to students studying technical subjects.

The Ukraine War caused enormous economic damage to both countries. Ukrainian GDP declined 30 percent in 2022 while Russia’s declined about three percent. Russia was hit hard by economic sanctions in 2014 for taking Crimea and parts of eastern Ukraine, and sanctions for its 2022 invasion made it even more isolated from the global economy. Russia’s only arms imports now come from equally poor North Korean artillery shells and rockets and cheap Iranian missiles. China and India help with the funding by purchasing heavily discounted Russian oil and natural gas. Lacking any such planning Ukraine was able to quickly create a plan using its decades of experience as the primary military manufacturing region for the Soviet Union. This ended in 1991 as the Soviet Union collapsed and Ukraine began developing an independent economy.