Sanctions significantly complicated the life of 23-year-old Muscovite Oleksandr, an art museum employee. The skyrocketing prices forced him to cut back on his expenses and consider finding a part-time job to pay the bills. At the same time, finding certain goods he once took for granted, such as furniture and other household items, has become a much more difficult process, Al Jazeera reports.

However, Oleksandr, who declined to give his last name, is optimistic that the sanctions will bring some long-term benefits to Russia. “It’s as if now we have more opportunities, and our country has remembered that it is capable of producing its own goods,” he said. “It could potentially open the door to something new and positive.”

Over the past six months, sanctions have dramatically changed Russia’s economic relations with the outside world.

In the three decades since the collapse of the Soviet Union, Russia has readily embraced the principles of globalized capitalism. Although political relations between Moscow and the West were often strained, economic ties between them remained strong.

Middle-class Russians could easily book flights to Europe or buy the latest Western consumer goods, from smartphones to jeans. Basic financial transactions, such as sending or receiving money abroad, could be completed in minutes.

Now that era may end forever.

Mixed results

So far, the new sanctions regime has had mixed results. On the one hand, Russia’s gross domestic product (GDP) fell 4 percent in the second quarter compared to the same period last year, a decline that is expected to accelerate to 7 percent in the third quarter.

The new supply restrictions have not only pushed inflation into the double digits, but also undermined Russian manufacturers by depriving them of imported components needed to assemble their final products.

Russian car production, for example, fell by 61.8% in the first six months of this year. Many Russian officials have acknowledged that it will be particularly difficult to find replacements for certain high-end electronic components, such as microchips, which are still largely developed using Western technology.

At the same time, however, the Russian economy has so far shown greater resilience than many initially expected. Despite losing more than 30% of its value in late February and early March, the Russian ruble has since recovered to become the year’s best performing currency.

Inflation has begun to slow gradually in recent months, falling from a peak of 17.8% in April to 14.9% in August. Meanwhile, Russia’s current account surplus (rather than the difference between exports and imports when Moscow is blocked by sanctions) rose to a record $167 billion between January and July, more than tripling from a year earlier.

Two bills that helped the Russian economy

Last month, the International Monetary Fund upgraded its economic forecast for Russia in 2022, estimating that the country’s GDP will fall by 6 percent instead of 8.5 percent as originally expected. That’s still a significant drop, but much smaller than some of the bleakest initial forecasts.

Anton Tabakh, chief economist at Expert RA, a Moscow-based rating agency, told Al Jazeera that two factors supported the Russian economy in the first six months of the new sanctions regime.

• First, it is a significant increase in the export of goods, especially energy carriers. Russia is expected to earn more than $337 billion from energy sales this year, up 38 percent from 2021, according to a government document seen by Reuters.
• The second factor is an increase in government spending.

Tabakh said Russia’s export boom had likely peaked as global demand fell and new embargo restrictions took effect. At the same time, he noted that Russian imports began to gradually recover after a sharp drop at the beginning of this year. The main drivers of this recovery were the stabilization of the ruble and the improvement of logistics.

“The key question now is how the Russian economy will go through what the Central Bank of Russia calls the process of structural transformation,” Tabakh said. “We are talking about the transition of consumers to new products, the emergence of new supply chains and financial intermediaries, as well as the adaptation of companies to new restrictions. In my estimation and that of the Central Bank, we are now in the most difficult phase of the process, which could last from nine months to a year,” he said. (Fully included Al Jazeera)