Just as the impact of economic restrictions against Moscow reached a critical level, Washington began talking about lifting them. How exactly could the sanctions against Russia be eased, can Europe maintain them without U.S. involvement, and how would this affect the battlefield?
America’s helping hand
At the start of 2025, the Russian economy began showing unmistakable signs of an impending downturn. The banking sector, in particular, faced significant strain, largely driven by the misuse of preferential loans earmarked for the military industry. Alongside this, Moscow grappled with soaring inflation, a tightening labour market, and falling oil prices, among other challenges.
With the Kremlin steadfast in its commitment to ramping up the war economy, a recession in Russia could become a reality before the year’s end. Avoiding this without scaling back military operations would hinge on one key factor: the lifting or easing of international sanctions.
In an unexpected twist, the administration of Donald Trump extended a lifeline to Moscow. Talks of easing U.S. sanctions surfaced in late March 2025, coinciding with growing speculation about a potential ceasefire. At the recent G7 summit, Trump made it clear he had no plans to tighten sanctions further, citing the heavy cost they imposed on American interests.
As the debate over sanctions intensifies, it’s worth examining what easing them might mean for the Russian economy.
Export and import
First, it’s crucial to recognise that the focus here is primarily on U.S. sanctions. While there’s some possibility that restrictions from the EU, Canada, the U.K., and other allies could be eased, that remains unlikely for the time being. Without American involvement, however, the overall effectiveness of these sanctions would be seriously undermined.
Though Congress holds the legislative authority to impose sanctions, their enforcement relies heavily on presidential executive orders and the administration’s actions—orders that can be revoked quickly. In practice, the sanctions regime hinges more on the political will of the White House than on the letter of the law.
Russia is currently pushing to regain access to U.S. markets for aircraft manufacturing, technological equipment, microchips, and more. While it has managed to find alternative supply routes, doing so has come at a steep price.
The greatest risk today for third parties considering trade with Russia lies in the threat of secondary U.S. sanctions that limit access to the U.S. dollar. If these secondary sanctions were lifted, many countries would likely become far more willing to engage with Moscow. The European Union, for example, lacks comparable leverage because the euro remains far from achieving the status of a global currency on par with the dollar.
At the same time, easing sanctions on Russian energy could align with certain U.S. interests, since an increase in supply would likely push prices down. Yet the U.S. has been clear about its goal to expand exports of liquefied natural gas (LNG), making it improbable that it would permit the transfer of technologies banned since 2014. Indeed, restrictions on Russian Arctic gas terminals have been a critical factor in enabling American gas to gain market share.
One potential compromise might involve U.S. companies taking equity stakes in Russia’s gas sector. This would give American firms a direct incentive to help revive an industry that sanctions have all but crippled.
Banking sector
Another highly sought-after move for Russia would be the lifting of restrictions on its banks and the restoration of access to international capital markets. With domestic lending costs having soared, such a development would provide significant relief to the Kremlin.
Easing financial sanctions would enable Russian companies to freely convert and repatriate profits earned abroad—in places like China and India. Even a partial return of foreign investment could help temper inflation and reduce the devaluation pressure on the rouble. Moreover, lifting sanctions on the Central Bank of Russia (CBR) would allow Moscow to recover some of its frozen assets.
Yet loosening financial restrictions could also spark a massive outflow of Russian capital, as investors rush to move funds abroad amid fears that sanctions might be reinstated or even tightened down the line. This scenario has played out before—in 2008 and 2014—when economic turmoil triggered capital flight totaling $134 billion and $152 billion, respectively. Given this history, it’s likely the CBR would maintain strict capital controls even if sanctions were eased.
Return of foreign business
The looming threat of sanctions being reinstated continues to deter American companies from considering a return to the Russian market. Since 2022, the Russian government has demonstrated a readiness to unilaterally seize foreign assets, dealing a severe blow to its reputation within the global business community.
While the sizeable Russian market—with its reduced competition—might seem tempting to some firms, the significant reputational risks involved will likely keep many at bay for the foreseeable future, potentially undermining their operations back home.
The departure of foreign companies has created a boon for certain domestic producers. Key sectors of the occupier’s economy—agriculture, consumer goods, and industries tied to so-called “import substitution”—have thrived under international isolation and show little appetite for renewed foreign competition.
With borrowing costs soaring, even a modest uptick in competition could push hundreds of Russian businesses outside the military-industrial complex toward bankruptcy.
Iran’s experience
A relatively recent example of sanction relief can be found in Iran’s experience. Harsh sanctions were imposed on the country in 2006 and later lifted in 2015 following the signing of the nuclear agreement.
Yet despite hopes that foreign companies and financial institutions would flood back as they had prior to the sanctions, this resurgence never fully materialized. Businesses and banks remained wary, fearing further losses should sanctions be swiftly reinstated—which, indeed, eventually occurred.
Iran’s case illustrates that lifting sanctions does not translate into a rapid return to normalcy. The economy of a sanctioned country suffers deep, long-lasting harm due to the erosion of trust—both from governments and private firms—with these effects stretching over many years.
The world now watches closely as developments unfold in Syria, whose economy lies in ruins after years of conflict and international sanctions. The recent regime change in Damascus is expected to accelerate the restoration of economic confidence. In May 2025, Washington began easing sanctions against Syria, signalling a potential turning point.
How far can the EU go without the US?
The EU’s ability to sustain the sanctions regime without U.S. support would be significantly weakened—but not entirely lost. For example, in May, Brussels and London announced a new, 17th package of sanctions without Washington’s involvement. Europe remains well-equipped to counter Russia’s shadow fleet, since most vessel insurance is processed through London. The bulk of the aggressor’s frozen assets are held in European banks, and the EU retains control over the SWIFT payment system.
However, a major challenge lies in the requirement for unanimous approval to extend EU sanctions every six months. Hungary and Slovakia’s frequent resistance complicates this process. Still, the European Commission has so far succeeded in securing agreements with these reluctant members by leveraging the threat of reduced funding—an enforcement tool that does not require unanimity.
On June 17, the European Commission unveiled a plan to cut Russian oil and gas purchases to zero by 2027. Yet, as of early 2025, the EU was still importing substantial volumes of Russian gas—€18 billion worth in the first quarter alone, only 53% less than in the same period of 2021. The outlook for oil is somewhat more encouraging: imports have plummeted 93%, down to €2 billion in Q1 2025.
The plan’s implementation should finally end the paradoxical situation where Brussels effectively finances both Ukraine—through aid—and Russia, by buying its energy. Undeniably, a return to cheap Russian gas would be a welcome relief for Europeans grappling with soaring energy costs. Still, such a move would trigger fierce opposition across much of the EU’s political leadership.
The only scenario in which Europe might boost its Russian energy imports would be if openly pro-Russian governments took power in its major players—France, Germany, Italy, and Spain. For now, thankfully, that prospect remains remote.
Mistake to avoid
One way or another, easing sanctions will strengthen Russia. The Kremlin would be able to rebuild supply chains, secure vital imports, and lower costs. Inflation and labour shortages won’t vanish overnight, and the Central Bank of Russia will still need to keep interest rates high for the foreseeable future. But renewed access to foreign investment and relaxed energy restrictions would significantly ease Moscow’s economic challenges.
A stabilised economy would free up more resources for Russia’s war industries. Access to international markets would drive down the costs of producing drones, electronic warfare systems, and precision weapons. It would also help Moscow reduce its heavy technological reliance on China by reconnecting with other global partners.
Russia’s military-industrial complex would be able to ramp up production to replace battlefield losses. Western intelligence estimates put Russia’s current output of its latest T-90M tanks at around 300 per year—a sharp increase from just 40 in 2021. Yet, it remains uncertain whether Moscow can expand its manufacturing capacity enough to meet the dual demands of frontline supply and stockpile replenishment.
Most likely, a partial easing of sanctions would enable Russia to sustain its intense military operations for several more years. Such a development would pose a significant challenge not only to Ukraine but to all of Europe—and would markedly boost the aggressor’s chances of achieving its imperial ambitions.
