Since Russia launched its full-scale invasion of Ukraine in February 2022, Western countries have imposed unprecedented economic sanctions targeting key sectors of the Russian economy, including energy, finance, and technology. These measures were designed to cripple Russia’s access to global markets and limit its ability to sustain its war efforts. However, despite these restrictions, Russia’s economy remains relatively stable, largely due to its pivot towards Eastern economic partners—particularly China and India.
The Limited Impact of Sanctions on Russia’s Economy
Although sanctions have undeniably hurt Russia, the overall contraction of its economy has been modest. In 2022, Russia’s nominal GDP stood at over $2.27 trillion, and by 2024, it had only decreased slightly to $2.18 trillion. While this represents a decline, it is far from the economic collapse that many Western policymakers had hoped for.
One of the key objectives of the sanctions was to limit Russia’s exports, particularly in the oil and gas sector, which historically has been the backbone of its economy. While Russia’s total exports of goods and services declined significantly from $635 billion in 2022 to $466 billion in 2023, this still positions Russia as one of the world’s largest exporters.
Russia’s Economic Shift to the East
With its traditional trade routes with the U.S. and Europe restricted, Russia turned to new economic partners in the East. China and India have emerged as crucial lifelines, increasing their trade with Russia and mitigating the impact of Western sanctions.
China’s Growing Trade with Russia
China’s total imports from Russia have surged dramatically. In 2020, China imported just $57.8 billion worth of goods from Russia, but by 2023, this figure had skyrocketed to over $129 billion. A significant portion of these imports—$94 billion—consists of mineral fuels, oil, and distillation products. This demonstrates China’s increasing dependence on Russian energy, particularly as Western sanctions have limited Russia’s ability to sell oil and gas to Europe.
Conversely, Germany’s imports from Russia tell a different story. German imports from Russia plummeted from $31.2 billion in 2022 to just $4.2 billion in 2023, a sharp decline reflecting Europe’s efforts to wean itself off Russian energy supplies.
India’s Strategic Oil Purchases
India has also taken advantage of Russia’s need to find new buyers for its energy exports. Over the past few years, India’s imports from Russia have increased significantly, primarily in the oil and gas sector. One major reason for this surge is that Russia has been selling oil to India at discounted rates. Reports indicate that Russia has been offering oil at prices below the $60-per-barrel price cap imposed by Western nations, at times when global oil prices were hovering around $75 to over $100 per barrel.
This discount has been a financial boon for India. Estimates suggest that between 2022 and 2024, India saved between $10.5 billion and $13 billion by importing cheaper Russian oil. Not only did this reduce India’s energy expenses, but it also allowed Indian refiners to boost their profit margins by processing less expensive crude.
China’s Expanding Economic Influence in Russia
Beyond energy, China has stepped into sectors abandoned by Western firms. When major Western companies exited Russia due to sanctions, Chinese businesses seized the opportunity to fill the void, particularly in the automotive and consumer electronics sectors.
Chinese Automakers Take Over Russia’s Car Market
Chinese automotive brands have seen a dramatic rise in market share in Russia. For instance, Chery, a leading Chinese automaker, saw its revenue in Russia quadruple to over 590 billion rubles in 2023, making it one of the top foreign companies operating in the country.
While Russia’s domestic brand LADA remains the top car brand in the country, Chinese brands like Chery, Haval, and Geely have significantly expanded their presence. Chery, for example, increased its market share from just 2.6% in 2021 to 11.2% in 2023. Meanwhile, South Korean brands like Kia have suffered massive declines, with Kia’s market share dropping from 13.1% in 2021 to just 3.2% in 2023. Renault, a major European automaker, has effectively exited the Russian market altogether.
China’s Dominance in Consumer Goods and Electronics
It is not just the automotive sector that has seen a shift. Chinese consumer electronics, household appliances, and industrial goods have also flooded the Russian market. As a result, Chinese exports to Russia have surged from $50.5 billion in 2020 to $111 billion in 2023.
By category, China’s top exports to Russia include:
- Machinery, nuclear reactors, and boilers: $25.22 billion
- Vehicles: $22.5 billion
- Electronics and electrical equipment: $17 billion
This surge in trade has reinforced China’s economic footprint in Russia and solidified its role as Russia’s primary economic partner.
The Rise of Ruble-Yuan Transactions
Another key development in Russia’s economic adaptation has been the increasing use of the Russian ruble and Chinese yuan in bilateral trade. With Western sanctions limiting Russia’s access to the U.S. dollar, both Moscow and Beijing have moved towards de-dollarization. Reports suggest that up to 80% of China-Russia trade transactions are now conducted in their respective national currencies rather than in U.S. dollars.
This shift is evident in China’s annual cross-border payments, where the yuan has overtaken the U.S. dollar in transactions with Russia. The benefits of this arrangement include:
- Reducing dependence on Western financial systems, making both countries less vulnerable to sanctions.
- Strengthening the yuan’s role in international trade, aligning with China’s long-term goal of challenging the dollar’s dominance.
China’s Indirect Support for Russia’s Military-Industrial Complex
In addition to economic trade, reports suggest that China has been supplying non-lethal components and dual-use goods that bolster Russia’s military production. China has allegedly provided industrial equipment, microchips, and other essential components, enabling Russia to sustain its military operations despite Western sanctions.
The Strategic and Political Motivations Behind China’s Support
China’s growing economic ties with Russia are not just about financial gains. While buying cheap Russian oil and expanding market share in Russia’s consumer sectors offer economic advantages, China’s support for Russia is also deeply political.
The “no limits” partnership declared by Presidents Vladimir Putin and Xi Jinping in early 2022 symbolizes a broader alignment. Beyond trade, their collaboration represents a shared resistance to Western economic and political dominance. By backing Russia, China is not just securing economic benefits—it is also promoting a multipolar world order where Western financial and political influence is diminished.
Conclusion
Western sanctions against Russia have undoubtedly impacted its economy, but they have not brought about its collapse. Instead, Russia has managed to stabilize itself by deepening economic ties with China and India. China, in particular, has emerged as Russia’s most crucial partner, purchasing its oil, replacing Western consumer goods, and even assisting in the de-dollarization of trade.
At the same time, China’s support for Russia is not just economic—it is also ideological. By strengthening its partnership with Russia, China is positioning itself as a leader in a new world order, one that seeks to challenge Western dominance in global finance and geopolitics. While the full impact of this economic shift remains to be seen, one thing is clear: Russia’s economic survival is increasingly dependent on its eastern allies.