Russia’s economic defences likely to crumble over time under sanctions onslaught

Russia’s economic defences likely to crumble over time under sanctions onslaught

LONDON - Russia has spent the past seven years building up formidable financial defences, yet in the long run, its economy is unlikely to withstand the onslaught of coordinated sanctions from the West.

Europe and the United States are raining down reprisals after President Vladimir Putin sent tanks into Ukraine, adding to sanctions already pledged in response to his decision to recognise the independence of two breakaway Ukrainian provinces.

"The view Russia will be unaffected is wrong. The negative effects may not be felt up front but sanctions will hobble Russia's potential in the longer run," said Christopher Granville, managing director at consultancy TS Lombard and a veteran Russia watcher.

Steps by the West include sanctions and asset freezes on more Russian banks and businessmen, a halt to fundraising abroad, the freezing of an $11 billion gas pipeline project to Germany and limiting access to high-tech items such as semiconductors.

Russia has dismissed sanctions as counter to the interests of those who imposed them. And they won't immediately dent an economy with $643 billion in currency reserves and booming oil and gas revenues.

Those metrics have earned Russia the "fortress" economy moniker, alongside a current account surplus of 5% of annual GDP and a 20%