Despite the improvement in budget transparency, Russia still faces sanctions from the European Union and other major nations. These sanctions are due to various factors such as Russia’s incorporation of Crimea as part of Russia in 2014, its military engagements in Eastern Ukraine, and alleged interference in the 2016 U.S. presidential election. The sanctions include restrictions on access to finance, trade, and investment.

The sanctions have had a significant impact on the Russian economy, with the country experiencing a decline in GDP and a depreciation of its currency. However, the government has implemented various measures to mitigate the impact of the sanctions, such as increasing domestic production and reducing imports.

The government has also implemented reforms to improve the efficiency and transparency of its budget. This includes the establishment of a budget system that is based on international standards and the inclusion of information on the composition of government debt in the budget. The Federal Assembly provides adequate oversight during the planning and implementation stages of the budget cycle. Overall, while Russia has made progress in improving budget transparency, it still faces significant challenges due to sanctions from the EU and other major nations.

In 2014, the U.S., Japan, and the EU imposed sanctions on Russia’s energy, defense, and financial sectors. In return, Russia imposed a ban on many food products from the U.S., the EU-28, Canada, Australia, Norway, and Japan. The U.S. announced a significant expansion of sanctions on Russia in April 2021, which included new restrictions on U.S. financial institutions dealing in Russian sovereign debt and the designation of more than 40 individuals and entities for supporting the Kremlin’s activities abroad.

In July 2021, the European Council extended the existing 2014 sanctions targeting specific economic sectors of the Russian Federation for a further six months until January 31, 2022. In August 2021, the UK, along with the US, imposed sanctions on men they said were Russian intelligence operatives responsible for the poisoning of Kremlin critic Alexei Navalny. The two countries targeted seven Russians with sanctions and issued a joint statement warning Russia over chemical weapons. Russia responded by announcing that it would continue its ban on food imports from the EU.

In 2022, Russia’s relations with the EU and other major economies continued to deteriorate following the country’s full-scale military confrontation with Ukraine that started in February 2022. Several major economies imposed severe economic, diplomatic, and trade sanctions in response, which continue to this day. The sanctions have had a significant impact on the Russian economy, with the country experiencing a decline in GDP and a depreciation of its currency. However, the government has implemented measures to mitigate the impact of the sanctions, such as increasing domestic production and reducing imports.

Russia possesses some of the largest proven oil and gas reserves in the world. As of 2021, it has around 80,000 million barrels of proven crude oil reserves and produced 9.1 million barrels of crude oil per day. Russia also has significant natural gas reserves, with around 103 years’ worth of reserves. However, the true scale of Russia’s fossil fuel deposits could be even larger, as additional state support is needed to explore hard-to-reach areas.

To increase its gas supplies, Russia plans to supply at least 700 billion cubic meters per year by 2024, and its gas production level is expected to reach between 795 and 820 billion cubic meters by the same year. Oil and gas exports are a significant source of government revenue, especially to Europe and the U.S.

However, the decline in Russia’s oil exports is a cause for concern. In recent years, Russia’s oil exports have been declining due to various factors such as aging infrastructure, the depletion of existing fields, and the global shift towards renewable energy. This decline in exports could have a significant impact on the Russian economy, as oil and gas exports are a critical source of revenue for the government. Therefore, the government must focus on investing in new oil and gas fields and improving its infrastructure to ensure that it can maintain its position as a significant global energy player.

Following Russia’s full-scale military confrontation with Ukraine in February 2022, major economies across the globe, including mainly Western economies, imposed strict sanctions on the Russian economy, which hindered its economic growth. Most European nations also decided to curtail imports of Russian oil and gas, leading to an overall decline in Russia’s exports of oil and gas. According to the Federal Service for State Statistics (Rosstat), in October 2022, Russia’s oil production declined to 10.78 million barrels per day (bpd), down from 10.80 million bpd the previous month, while seaborne and pipeline oil exports fell by 2% to 4.7 million bpd compared to September 2022.

One of the main reasons for the decline in production was the collapse in output at the Sakhalin 1 offshore Pacific project, which was abandoned by ExxonMobil. The Russian government expects oil and gas production to decline by 17% in 2022 as the economy continues to struggle with the imposition of Western sanctions. It also expects Russian oil output to decline to between 433.8 million and 475.3 million tons in 2022, compared to 524.0 million tons in 2021.

The decline in oil and gas exports will have a negative impact on the Russian economy since the country heavily relies on its oil and gas exports, with Europe being its major market. The decline in exports will lead to a reduction in government revenue, which could negatively affect the country’s ability to finance its operations, including its military and social programs.

Despite Russia’s high level of human development, the increasing emigration from the country is a matter of major concern. According to the UNDP’s Human Development Report 2021-22, Russia ranks 52nd out of 191 countries, with an HDI score of 0.822. This score is an improvement from 0.743 in 1990 and is based on life expectancy, education, and purchasing power parity.

Data from the European Union Agency for Asylum and Country Intelligence Report suggests that an estimated 300,000 Russians left the country from February 24 to May 10, 2022. Most Russians who emigrated went to South Caucasus and Central Asian countries, including Kazakhstan, Kyrgyzstan, Armenia, Georgia, Uzbekistan, and Turkey, mainly due to visa requirements and travel costs.  

Russia performs well across various technological indicators, ranking 40th out of 131 nations on the Network Readiness Index 2022, 47th among 132 economies on the Global Innovation Index 2022, and 31st out of 131 nations for overall information and communication technologies. However, the sanctions imposed by Western economies against the Russian economy since February 2022, particularly the technological sanctions, are a significant concern. These sanctions negatively impact Russia’s ability to develop military technology since much of the equipment it imports comes from abroad.

Some of the technological sanctions include restrictions on the export of specific refining technologies, which makes it more challenging for Russia to modernize its oil refineries. Furthermore, some Russian banks have been barred from the SWIFT international payments system, affecting Russia’s ability to conduct financial transactions globally. There are also wide restrictions on telecommunication, encryption security, microelectronics, aircraft components, lasers, sensors, navigation, avionics, and maritime technologies, as well as the export of military-use goods such as semiconductors. Sanctions have been imposed on Russia’s 10 largest financial institutions, including export control measures that could more than halve Russia’s high-tech imports.

These technological sanctions have a negative impact on Russia’s economy and technological development. The country’s ability to import necessary technological equipment is hindered, and the sanctions limit Russia’s access to the latest technological advancements. These sanctions could negatively impact the country’s ability to attract foreign investment, hindering its economic growth.

Russia has a better business environment than many of its regional peers, ranking 28th out of 190 nations in terms of ease of doing business, according to the World Bank’s Doing Business 2020 report. The country’s score of 78.2 out of 100 was higher than the regional average of 73.1 out of 100, with Russia performing well on indicators such as dealing with construction permits, getting electricity, enforcing contracts, and registering property.

However, according to the Heritage Foundation’s Index of Economic Freedom 2022, Russia ranked 113th out of 184 economies with a score of 56.1 out of 100. In comparison, neighboring countries such as Azerbaijan and Belarus ranked 37th and 45th, respectively. Russia also ranked 43rd out of 45 economies in the European region, with its overall score below the regional and world averages. The country performed well on indicators such as labor freedom, monetary freedom, and tax burden. However, it ranked low with reference to such parameters as property rights, judicial effectiveness, government integrity, business freedom, government spending, fiscal health, and trade freedom.

Overall, while Russia has a better business environment than many of its regional peers, it ranks low on the index of economic freedom.