Oleh Sarkits — entrepreneur, economist, volunteer, crisis management expert, and founder of the public organisation People’s Dream, as well as co-founder of the To the Dream charitable foundation — spoke with The Ukrainian Week about the weak spots in Russia’s economy, how effective Western sanctions have been, and what economic strain means for the Kremlin’s war machine.
— A few weeks ago, senior Russian officials started openly acknowledging economic difficulties. For instance, Elvira Nabiullina, head of Russia’s Central Bank, warned that the country’s economic resources are depleting, and Finance Minister Anton Siluanov described the beginning of a “period of stagnation.” How accurate do you think these assessments are?
— The Russian economy is clearly stuck in stagnation. A good place to start is by looking at the state of the country’s reserves—specifically, the liquid assets in the National Wealth Fund. Before the full-scale invasion, the total value of these assets was more than double what it is now. Today, it’s down to 2.8 trillion roubles, and foreign currency reserves have fallen to 154 billion yuan, after Russia shifted most of its holdings into the Chinese currency. Gold and foreign currency reserves have also taken a serious hit, dropping to 140 tonnes—down from more than 400 tonnes at the start of 2022. That’s a clear sign the Kremlin is scrambling to find new ways to plug the holes in its budget.
Back in early 2022, the National Wealth Fund was worth around $140 billion, with more than $60 billion of that readily available. Now, as of early 2025, the fund still holds roughly $60 billion, but only $20 billion is considered liquid—money that can be accessed and used freely. Again, that points to Moscow working hard to keep the budget afloat. Experts say the projected budget shortfall for 2025 is around $50 billion.
Another red flag: the central bank’s key interest rate has soared to over 20%. That’s more than double the 9.5% rate it held before the invasion.
That said, we shouldn’t underestimate the enemy or start popping champagne corks just yet. Since the war began and the first sanctions were imposed, Russia has proven incredibly resilient and adaptable. They constantly hunt for loopholes and use every available tool to keep their aggression going. To truly stop them, the civilised world must unite and show unwavering consistency.
The biggest challenge we face is Russia’s cooperation with partners like China, India, Brazil—and even some countries within the European Union. We understand that, in many cases, these EU nations act out of necessity, still relying to some degree on Russian energy supplies.
Right now, our European partners are actively working to build alternative energy supply routes and break free from this dependence. According to the EU’s strategy, they aim to accomplish this by early 2027.
— You referenced the key interest rate set by Russia’s central bank. Many economists now see the banking sector as the weakest link in Russia’s economy. Do you share that view, and could our allies potentially deal even more damage to it?
— Absolutely. This is evident in the two most recent EU sanctions packages, the 17th and 18th, which imposed restrictions on 22 Russian banks alone. With previous rounds factored in, the total now reaches 45 banks.
Beyond that, there are expanded sanctions targeting banks and crypto services in third countries that help Russia skirt restrictions or use alternative Russian financial systems.
Sanctions have also been placed on Russian cryptocurrency—though it’s more accurate to call it BRICS cryptocurrency. Known as A7A5, it was created specifically to dodge sanctions and facilitate transactions between BRICS countries, mainly to support Russian energy exports.
The 18th package even targeted several major Chinese banks that enabled Russia to carry out sanction-busting transactions, effectively helping to prop up its budget.
All this shows that targeting the financial sector remains one of the most powerful levers to apply pressure—not just on Russia, but also on its partners. If these measures continue, Russia will struggle to fully fund its budget or sustain its military-industrial complex, which will severely hamper its ability to keep up its war effort in Ukraine.
— If funds run short, do you think the Russians would be willing to slash social and other non-military spending to keep their military-industrial complex funded?
— Russia’s National Wealth Fund was set up as a stabilisation tool to cushion economic swings and ensure steady funding for the social sector, primarily pensions. The fact that they’ve already drained more than half of it sends a clear message: they won’t hesitate to divert money away from pensioners to fuel the military-industrial complex—in other words, to finance their war against Ukraine.
Fortunately for us, that’s exactly what’s happening. The Russian population is about to start feeling the impact, and in theory, this should provoke some kind of response. Of course, we understand that ordinary people there aren’t really in a position to challenge their leadership’s decisions.
Moscow is pulling more and more people—young and even elderly—into work for the military-industrial complex. They’re operating with a Soviet-era mindset, forcing people into defence roles. We can’t expect them to show much compassion or concern for social issues.
— Recently, President Zelensky said that curbing Russia’s war effort hinges on cutting its oil revenues, suggesting that a price of $30 per barrel could force Russia to halt the conflict. Reports also showed that in May, Russia’s oil revenues hit their lowest point in two and a half years. How dependent is Russia really on oil and gas revenues? And what more can our allies do to tighten the screws?
— They’re already moving on this, as shown by the 18th sanctions package. The biggest hit to the Russian economy comes from the introduction of a new oil price cap, which is calculated differently than before. It’s based on the average Brent crude price over the past three months, minus 15%. That final figure becomes the price cap for Russian oil. So, what does that mean in practice? EU countries aren’t allowed to buy Russian oil above this set price.
Right now, that cap is about $48 per barrel. They took a three-month average of around $60, then knocked off 15%, landing at $48. This way, EU countries cannot pay more than $48 per barrel for Russian oil. And even if Russia tries to export oil outside the EU, European logistics companies are barred from transporting it if the price cap is exceeded. On top of that, Russia loses the option to insure those shipments through Western insurance firms.
This is a crucial restriction because Russia’s partners want to buy oil cheaper, but at the same time still rely on international insurance and logistics services.
As President Zelensky has noted, lowering the price cap will deliver a tangible hit to Russia’s finances—and the math is clear. With Russia producing about 10 million barrels a day and exporting roughly 7 million, a $10 drop per barrel translates to a daily revenue loss of $70 million.
That’s a substantial setback, given that energy exports account for nearly 40% of Russia’s government revenue.
— What’s your take on the so-called “shadow fleet”? Is it really an effective way for Russia to sidestep sanctions, especially the price cap?
— It is a functioning mechanism. The shadow fleet accounts for about 40% of Russia’s energy exports. Under the 18th sanctions package, 105 shadow fleet tankers were targeted. In total, Europe has imposed restrictions on 444 tankers. Adding in sanctions from the US and the UK, roughly 650 tankers have been blocked. Estimates of the total number of such tankers vary — some sources say around 800, others claim it exceeds 1,200. An exact count is difficult to determine.
Russia is actively seeking loopholes to bypass these restrictions. They employ what is known as ship-to-ship transfers, moving oil from sanctioned tankers to unsanctioned ones. However, this increases costs and makes Russian oil less attractive on the market.
— Right now, President Trump is threatening to slap 100% tariffs on countries that continue trading with Russia. If he follows through, do you think this would actually be effective?
— Yes, it would be effective. Take China’s trade with Russia as an example: in 2024, their turnover hit $240 billion, with roughly 60% coming from Russian exports to China.
We know the U.S. is the world’s largest economy and China the second largest, with their bilateral trade totalling about $1 trillion. If China had to choose the more advantageous partner purely economically, it’s clearly the U.S. Yet, Russia remains a key strategic partner for China geopolitically, which means Beijing could respond with countermeasures against Washington.
It’s important to note the Lindsey Graham amendment, which means the U.S. won’t sanction countries that trade with Russia but also support Ukraine—mainly EU nations.
If tariffs are imposed, they could trigger a strong response from China. For now, it’s a matter of patience as we watch how the situation develops.
— Do you think Trump would really follow through with this, or is it more likely to end in another deal, like we’ve seen before with other countries he threatened with steep tariffs?
— He tried this aggressive approach during the trade war with China, imposing tariffs as high as 145%. But China hit back with tariffs of 125%. The Chinese aren’t playing Trump’s game—they’re ready to fight back. Not a physical war, but an economic one: a trade war.
At the same time, we’re all seeing the escalating shelling of civilian cities and Moscow’s massive push to gain ground on the front lines. Right now, Russia has no incentive to come to the negotiating table. They’re building up their military-industrial complex not to negotiate, but to keep fighting.
— There’s no question Russia has made major strides in mobilising its economy for war. Do you think Ukraine should consider adopting any of Russia’s tactics when it comes to economic mobilisation for the front? If so, which areas?
— Our country’s defence strategy is more humane, more civilised. The Ukrainian government is carefully balancing the need to fund the budget through taxation across small, medium, and large businesses, while also developing the military-industrial complex.
Russia, by contrast, relies on a post-Soviet model that pulls people into defence enterprises with a mix of incentives and coercion. It’s reminiscent of Soviet-era tactics—during World War II, for example, prisoners were taken and sent to the front lines or forced to work in military factories. Russia is essentially repeating that now.
Our approach is fundamentally different and more humane—both in how we shape economic policy and how we treat personnel. Ukrainians are a different people, driven by a genuine will to defend our land. I believe there’s no need for us to forcibly mobilise people into the defence industry.
Instead, our government should focus on decentralising the economy and cracking down on corruption, which by the end of 2024 had cost the state roughly 400 billion hryvnias.
If judicial, customs, and tax reforms succeed, the government could fill the budget without raising taxes. In fact, it would open the door to tax liberalisation, allowing small and medium-sized businesses to grow—because right now, many are just struggling to survive.
— In your view, how long before the decline in Russia’s economy produces tangible effects? When might we realistically see its impact on Russia’s ability to sustain the war?
— Let’s recall how Ronald Reagan, back in 1986, applied economic pressure on the Soviet Union by driving down the price of oil. At the time, it was $42 a barrel, and working with partners and OPEC countries, he managed to push it down to just $12. That move helped set the stage for the Soviet Union’s collapse in 1991. I truly hope this time the process will be much quicker and we won’t have to wait five years.
But, again, a lot depends on Russia’s partners—powerful players like China and the other BRICS countries. We’ve already seen India announce plans to look for alternatives to Russian oil if the U.S. imposes restrictions. Yet, many countries still try to balance maintaining good relations with the U.S. while continuing to buy cheap energy from Russia.
Predicting the exact timing of Russia’s economic collapse is tough, and whether it will happen at all remains uncertain. We might get clearer signs if the U.S. follows through with the promised tariffs—and even more so if the EU adopts a 19th package of sanctions.
It could all happen much faster than we expect. But, unfortunately, the more likely scenario is a drawn-out process that lasts for years. For our partners, the cost of delay is time. For Ukraine, the cost is immeasurable: the lives of our people.
