”Hopes that Russia will soon give in to the Ukraine war in the face of drastic Western sanctions are likely to be disappointed. Both the state budget situation and structural characteristics of the Russian economy create sound conditions for a prolonged persistence of a war economy based on autarky.
Russia has achieved visible success in building a stable fiscal position in recent years. This includes very low public debt by international standards (at 20 percent of GDP), high savings, a restrained spending policy, and strong reserve accumulation. The International Monetary Fund (IMF) had also attested to this in its most recent report on Russia's macroeconomic situation (published in January 2021). It also referred to Russia's success in becoming less dependent on the dollar. In addition, there are currently rising revenues from energy exports to countries that are avoiding sanctions or, like Germany, are still maintaining some of their purchases. The current oil price is far above the IMF's estimate of USD 10–15 necessary to balance Russia's budget. An EU oil embargo is unlikely to change this decisively for the time being.
Structurally, Russia is helped by the low importance of the private service sector and the high level of protected employment in the public sector. These employees are the guarantors of President Putin's political support at home and are given preferential support, i.e., protected from the consequences of rising inflation through price controls or income support. The government will massively combat the emergence of black markets, as these could divide society and weaken political support.
The very negative consequences of the lack of important and irreplaceable capital goods from abroad, which are certain to occur in the longer term, will not quickly drive the Russian economy to ruin. The West will have to show long staying power.”