• Sanctions are pushing Russia into the arms of rogue states and deepening dependence on China, a think tank said.

• The threat of sanctions against foreign lenders is crippling Moscow's war production, a note from CEPA said.

• But sanctions must work with a more robust Western strategy against Russia, the note's author cautioned.

Western sanctions are straining Russia's ability to fight in Ukraine, even if its war economy appears resilient and its output seems largely unfazed, a think tank expert said.

Writing for the Center for European Policy Analysis, Stephen Blank noted that the Kremlin's issues are becoming more acute, especially considering the relationships it's formed to stay afloat.

"Its defense output is clearly facing problems given the Kremlin is constantly running to North Korea and Iran for missiles, drones, and even artillery shells, thereby incurring serious IOUs that must be paid to these rogue states in the future," the Foreign Policy Research Institute senior fellow said.

The way Blank sees it, that's a consequence of improving sanction efforts. Of note is a US executive order from December, allowing the Treasury Department to place restrictions on foreign financial institutions that support Russia's military industry.

"This may well be a harbinger of a whole new generation of sanctions targeting Russian military production, not just the financial facilitators of Russia's war machine, but the trans-shippers, the intermediate companies, possibly even the salespeople and manufacturers that help Russia's war machine keep humming," he wrote for CEPA in January.

Already, this order has put off lenders in India, China, Turkey, and the United Arab Emirates from working with Russia, Blank said. Even an Austrian bank is under notice from the US, due to a branch it holds in Russia.

Not only is this slowing Moscow's defense production, it's cutting into its oil revenue, with energy firms in the country waiting months to receive payments. Individual sanctions have also targeted vessels carrying Russian crude above the Western $60-barrel price cap, reducing the Kremlin's ability to trade.

With fewer available tankers, freight costs have climbed, and the discount Russia has offered on its oil has eroded. That's caused India to increasingly look elsewhere for crude, despite being the biggest buyer of seaborne Russian oil in 2023.

Instead, China now bears that title, deepening a partnership with Moscow that favors Beijing.

"It also signals the Kremlin's growing dependence on China, which contradicts the entire raison d'être of Russian security policy, namely the assertion of its sovereignty and supposed rights as a great power," Blank said.

Others have gone as far as calling Russia a new economic vassal state of Beijing, securing discounted oil for China and a large market for its products. Bilateral trade between the two countries hit $240 billion last year, while Chinese exports into Russia rose 12.5% in the first two months of 2024.

Although Blank considers criticism that sanctions have been ineffectual to be misplaced, he argued that more needs to be done for the West to fully cripple Russia's war efforts and disincentivize trade with it.

The US and its allies, he said, need to provide a more robust strategy alongside these restrictions, such as timely weapons provisions to Ukraine, and counteroffensive measures to Russian disinformation.

Read the original article on Business Insider