Western sanctions are having a ‘significant impact’ on the Russian economy and may render it unsustainable by 2026, the EU’s sanctions envoy has said. David O’Sullivan, a veteran Irish official, told the Guardian in a rare interview that the war-based economy was under its greatest strain since the early days of the full-scale invasion of Ukraine.
‘I am fairly bullish. I think that the sanctions have really had a significant impact on the Russian economy,’ O’Sullivan said. ‘We may be, in the course of 2026, coming to a point where the whole thing becomes unsustainable, because so much of the Russian economy has been distorted so much by the building up of the war economy at the expense of the civil economy. I think defying the laws of economic gravity can only go on for so long.’
O’Sullivan, appointed EU special envoy for sanctions in December 2022, said the bloc had imposed 19 rounds of sanctions targeting more than 2,700 individuals and entities, and halting trade across energy, aviation, IT, luxury goods, diamonds and gold. He acknowledged that sanctions were ‘not a silver bullet’ and faced circumvention, but insisted they were having an effect.
Oil revenues are plummeting, inflation is running at about 6% and interest rates at 16%, O’Sullivan noted. Russia’s federal budget revenues from oil and gas halved in January to the lowest level since July 2020, according to the finance ministry in Moscow. The EU has taken action against the Russian shadow fleet, with nearly 600 vessels under sanctions as of December, and has tightened screws on circumvention.
O’Sullivan said the EU had had some success in preventing re-export of critical products for weapons through central Asia, the Caucasus, Turkey, Serbia, the UAE and Malaysia. However, he singled out China for ‘backfilling and providing support’ to Russia, though not in the form of direct military equipment. EU leaders had raised this with Beijing, but ‘the answer is always the same: “Nothing to see here.”’
The EU has faced criticism from the US for not going far enough. US Treasury Secretary Scott Bessent accused the EU of ‘financing the war against themselves’ after it signed a trade deal with India without including more sanctions on buying Russian oil. Since the full-scale invasion, India has been a top purchaser of discounted Russian crude.
