Sanctions against Russia are a necessary response to its brutal war

The wide-ranging packages of sanctions are a necessary response to Russia’s brutal war and the illegal annexation of regions of Ukraine. The sanctions are intended to reduce Russia’s ability to finance its illegal war in Ukraine. Increasingly tight restrictions have been introduced on products and services that are of importance to Russia and the Russian economy. The listings and asset freezes are having an impact on the political, military and economic elite who are responsible for the war. Currently, 1 386 individuals and 174 entities have been listed.

‘The sanctions are becoming increasingly comprehensive, and represent a strong and clear European response to Russia’s war of aggression in Ukraine. The opportunities to engage in commercial activities with Russia have been significantly curtailed and carry a high risk,’ said Ms Huitfeldt.

A number of other countries, such as the US, the UK, Japan, Canada and Australia, have imposed similar sanctions against Russia.

Import ban and price cap on crude oil and petroleum products from Russia

Together with the EU and G7 countries, Norway has introduced an import ban and price cap on crude oil and petroleum products from Russia, and these have been incorporated into the sanctions legislation. This means that actors that purchase oil at a price that is below the designated price cap can continue to use services related to the oil trade, such as marine insurance. The price cap will help to reduce Russia’s revenues. However, it is still possible for Russian oil to be exported to countries outside Europe.

‘Russia must not be allowed to take advantage of high energy prices to pay for a war that it has started. The price cap and import ban will curtail key revenues needed by the Russian state to finance the war,’ said Ms Huitfeldt.

How are the sanctions affecting Russia?

Economic indicators show that the sanctions are having an impact on the Russian economy. In January alone, Russia had a budget deficit of USD 25 billion, some 14 times higher than in January last year. This is due in part to increased military expenditure, but also to the fact that Russia’s oil and gas revenues have fallen by 46 % and state revenues by 35 %.

Before the war, Russia’s GDP was forecast to grow by 2–3 % in 2022. However, according to the World Bank, the International Monetary Fund and the OECD, Russia’s GDP fell by 2.2–3.9 % in 2022. The Russian economy is stagnating and is unlikely to return to pre-war levels for many years.

Key inputs to the Russian war industry and goods that generate substantial revenues for the Russian state are subject to sanctions. Food, agricultural, health and pharmaceutical products are generally excluded from the sanctions, because higher prices for these types of products would have a negative impact on poor countries.

As an indirect consequence of the sanctions, a large number of Western companies have closed down operations in Russia or withdrawn from the Russian market. Western goods, retail chains and restaurants that previously enhanced consumer choice in Russia no longer have a presence in the country.

Norway’s trade with Russia

Norway’s trade with Russia is limited and is traditionally based on raw materials. Due to the sanctions introduced following Russia’s invasion of Crimea in 2014 and Russia’s reactive measures, trade with Russia was already limited before February 2022.

Trade between Norway and Russia is in sharp decline. In the first half of 2022, trade with Russia was 50 % lower than in the first half of 2021. In the fourth quarter of 2022, trade decreased by 65 % compared to the same period in 2021. In January 2023, trade fell by 80 % compared to January 2022.

Norwegian companies are now very cautious about trading with Russia. In addition, multiple Norwegian companies have pulled out of the Russian market. The sanctions are making it difficult to transport goods to and from Russia, and to carry out financial transactions. A number of Norwegian companies have chosen to phase out trade with Russian counterparts, and trade with Russia is likely to decline further as a result.

Ukrainian people paying the highest price

‘Russia is waging a brutal war of aggression against a neighbouring country. As well as providing considerable civilian and military support, one of the best ways Norway can show its solidarity is by standing together with Ukraine and the rest of Europe in taking action to reduce Russia’s ability to finance its illegal war. The longer this war lasts, the longer Ukraine and the Ukrainian people will be subjected to suffering, death and destruction,’ said Ms Huitfeldt.

More information about the sanctions can be found here (Norwegian only): Sanksjoner som svar på Russlands militære aggresjon mot Ukraina – veileder for næringslivet - regjeringen.no