Russia’s Amb. Semivolos: On the Negative Consequences of Anti-Russian Restrictions for Their Initiators

By H.E Vladlen Semivolos 

The current slowdown in global economic development (according to the IMF, world GDP growth did not exceed 3.2% in 2024, with a forecast of 3.2% for 2025) is generally seen as a consequence of the “tariff confrontation” launched by the United States. At the same time, among the major factors that generated uncertainty and aggravated the global economic landscape in recent years were the effects of unlawful unilateral restrictions imposed by Western countries on Russia.

The restrictive measures against Russia’s economy have dealt a blow to international production and supply chains, created an imbalance in investment and trade flows, contributed to exacerbation of the debt problem, reduced access for many countries to goods, services, finances and technologies, and are undermining the principles of fair competition.

It is important to note that the harmful consequences of these restrictions have been and continue to be felt by those who use them for their geopolitical interests. According to the IMF, the growth of developed economies as a whole did not exceed 1.8% in 2024, whilst the forecast for 2025 is 1.6%. Relatively high GDP growth rates for the past year were recorded only in the United States at 2.8%. In the UK, Japan, and Canada, the situation is teetering on the brink of recession.

The countries of the Old World are in a particularly difficult situation. According to various estimates, the cumulative economic losses incurred by the EU due to the adverse effects of anti Russian sanctions amount to 1–1.6 trillion euros over the period from 2022 to the first half of 2025 inclusive. Most affected are capital intensive and export oriented industries, such as the chemical sector, automotive industry, mechanical engineering, and energy production. European companies that ceased its operations in Russia have suffered significant losses. The Institute for International Studies of MGIMO University (MFA of Russia) estimates that their losses (including the decline in market capitalization, restructuring losses, etc.) amount to 400–450 billion euros, with over 100 billion euros in asset write offs.

Although the EU has begun to recoup direct losses of previous years in 2024–2025 (the greatest damage to the European economy from the reverse effect of anti Russian sanctions was inflicted in 2022–2023), the impact of indirect losses – manifested as foregone GDP growth – will persist in the EU economy for a long time. According to the IMF, economic growth in the euro zone was only 0.9% in 2024, and it is not expected to be higher than 1.2% in 2025.

The gap between actual and potential growth in major “old Europe” economies such as Germany, France and Italy continues to widen. For instance, according to IMF estimates, Germany’s gross product contracted by 0.5% in the past year; zero growth of about 0.2% is expected in 2025, followed by an increase to 0.9% in 2026. In France, GDP grew by 1.1% last year, with the prospect of decreasing to 0.7% in the current year, and to 0.9% in 2026. In Italy, GDP increased by 0.7%, with forecasts of 0.5% for the current year and 0.8% for the following year.

As the European Commission notes, the main sectors of economic activity in countries such as Germany, Italy, the Netherlands, and France continue to stagnate steadily. At the same time, the EC has to admit that this is the cessation of energy cooperation with Russia that prevents the EU’s largest producers from maintaining competitiveness. As a result, the industrial sector faces a challenging situation, with energy intensive industries being especially affected. The energy crisis and the ill-conceived policy of decarbonization risk resulting in deindustrialization for Europe.

The French National Institute of Statistics and Economic Studies (INSEE) records a deterioration in operating conditions across many sectors of French industry. According to the Ministry of Economy, Finance, Industry and Digital Sovereignty, French businesses are experiencing their highest bankruptcy rates since 2009. Thus, in the third quarter of the current year, these rates were 5% higher compared to the same period in 2024. The FRANCE CHIMIE association of chemical producers reports a rapid weakening of the industry. The average capacity utilization rate over the past two years has not exceeded 75%, while the minimum utilization rate required to ensure production profitability is 80%. In France alone, about 50 chemical plants and up to 15,000 jobs are at risk, while in the EU as a whole, from 200 to 300 such enterprises could close.

According to estimates by the REXECODE analytical centre, the French automotive industry is also in dire straits due to low sales, a small number of orders, and increasing competition with Chinese manufacturers.

The Federal Republic of Germany has been the most affected by the blowback from the anti-Russian sanctions. Germany’s export driven economic model is facing challenges due to reduced competitiveness of its goods in international markets following the refusal of cheap energy resources from Russia. The German Ministry for Economic Affairs and Energy forecasts a further decline in the country’s share of the world market. Negative dynamics in foreign trade are expected in the coming years: a decline of 1.4% in 2025, followed by 0.5% in 2026 and 0.2% in 2027.

The loss of competitiveness of products made in Germany has affected the development prospects of German manufacturers. In Germany – once the driving force of the European economy and now the “weakest link in the G7” (according to the IMF) – production volumes have declined by 5.3% year on year. Local experts estimate that the underutilization of production capacity today exceeds the indicators typical of a recession by 5%. The chemical industry has been hit hardest by the energy crisis – the volume of its output has decreased by 23% over the last two years. German companies have reduced spending on the modernization of fixed assets by 5.9%.

A threat looms over Germany’s once successful automotive industry. The country’s automotive industry, providing employment for 744 thousand people, produced at most 4 million cars in 2024, which is 25% less than in the pre-pandemic period. The first half of 2025 saw an 8% reduction in automobile manufacturing and a 12% decline in exports compared to the same period in 2024. Over the past year, the German automotive industry has already lost around 51 thousand jobs (7% of total employment); by 2030, job losses in the sector could reach up to 200 thousand.

Component suppliers are also compelled to implement staff optimization measures: ZF Friedrichshafen has announced cuts of up to 14,000 personnel, and BOSCH up to 13,000 jobs.

The local labour market is experiencing challenging times, as evidenced by data from the German Economic Institute. According to its findings, 35% of German enterprises intend to reduce their workforce, with companies in the industrial sector leading the way (42%). The German Ministry of Economics report indicates that the unemployment rate is expected to reach 6,3% by the end of the year.

All this threatens Germany with the loss of its position as the driving force of the European economy in the foreseeable future. A wave of bankruptcies is gaining momentum due to the high cost of energy resources. CREDITREFORM credit agency estimates the total volume of debt claims at 56 billion euros. In 2025, according to the German Federal Statistical Office, the number of bankruptcies is expected to reach 24 400, compared with 21 800 recorded in 2024.

Along with the increasing number of bankruptcies, German authorities have listed the outflow of direct investments (326 billion euros over the past four years) as one of the main challenges. Several foreign companies have abandoned major projects in Germany. INTEL has frozen the construction of a semiconductor component plant worth about 30 billion US dollars. Norwegian EQUINOR is withdrawing from a joint program to build a hydrogen pipeline from Northern Europe to Germany.

Billion euro injections into Germany’s military and industrial complex fail to improve the situation. Despite the growth of industrial indicators in regions with a high share of defence enterprises, the opposite trend is observed in areas dominated by civilian production: a decline in automobile and machine building output, as well as a decrease in construction volumes.

The dire situation in Germany’s industrial sector is negatively impacting the economic situation of other European countries. Since the economies of smaller EU states are deeply embedded in the supply chains of larger countries, difficulties experienced by major European economies affect the whole European Union.

The policy of phasing out Russian energy supplies resulted in higher energy prices and, as a consequence, greater energy import expenditures for the EU. According to Eurostat estimates, the European Union has overpaid approximately 200 billion euros for natural gas since the introduction sanctions against Russia, while Russian experts estimate this figure at 750 billion euros. The United States emerges as the primary beneficiary of the current situation, having earned the most from gas sales to Europe. During EU US tariff negotiations, the parties have agreed that the EU will purchase US energy resources worth 645 billion euros over the next three years – a figure that, according to expert assessments, is feasible only at prices significantly above market levels. At the same time, the EU has approved a plan envisaging a complete cessation of natural gas imports from Russia by 2028. The difference in energy prices is driving the relocation of production from Europe to the United States. The reduction in production volumes in Europe over the last two years amounted to 5.7%, while in the United States this indicator decreased by only 0.5%. There is a steady trend of companies with capital exceeding 1 billion US dollars relocating from the EU to US jurisdiction. Generous tax incentives and cheap electricity, provided by the US Inflation Reduction Act, are reducing the attractiveness of production in Europe. The number of American investment projects has plummeted by a record 27% in Germany, by 11% in France, and by 7% in Britain.

In addition to high energy prices, caused by European countries’ refusal to cooperate with Russia in the energy sector, the initiators of the sanctions confrontation have been affected by reciprocal Russian restrictions in several areas of previously mutually beneficial cooperation.

After Russia’s reciprocal closure of its airspace to airlines from unfriendly countries, their carriers faced a loss of competitiveness due to a sharp increase in flight duration on Asian routes. Many European companies had to reduce the number of flights or completely abandon flights to China. Chinese airlines took advantage of the vacated niche. The governments of several European countries had to bear substantial costs to support their airlines and even use administrative resources to compete with Chinese rivals.

The European woodworking industry, which relies on products from Russia’s timber industry, is experiencing a similar situation. The lack of access to Russian timber has led to higher raw material prices and reduced competitiveness of the final product. For Finland, which has traditionally maintained close cooperation with Russian companies in this sector, the breakdown of economic ties with Russia has resulted in a rise of bankruptcies among specialized enterprises and companies in related fields. According to 2024 results, GDP contracted by 0.1%, and inflation reached 8.4%.

Faced with economic challenges, the European Union had to broaden its fiscal stimulus initiatives to support businesses. Substantial government subsidies in the EU have contributed to the growth of public debt and related servicing costs, which can also be regarded as indirect losses due to anti Russian sanctions. In countries such as Greece, Italy, France, Spain, Belgium, and Portugal, public debt has been exceeding 100% of GDP annually and continues to rise.

The imposition of Western sanctions and the use of reserve currencies as a weapon by Washington and its satellites have undermined the trust of international players in the global financial architecture based on the dominance of the US dollar and the euro, leading to an increase in the share of alternative currencies in international settlements and reserves. Within such associations as BRICS, SCO, ASEAN, as well as on a bilateral basis, countries are intensifying dialogue on the use of national currencies in mutual trade and are taking steps to build the necessary payment and settlement infrastructure, independent of Western states. Volatility in the markets is driving up gold prices while reducing the interest of sovereign investors in US dollar investments.

These costs are only the visible part of the price for the attempts at “economic blackmail” against Russia. The long-term consequences for the collective West, including a decline in the share of the dollar and euro in international settlements, the creation of new trade infrastructure beyond Western control (encompassing international transport corridors and production distribution chains, etc.), are to be assessed.

H.E Vladlen Semivolos, Ambassador Extraordinary and Plenipotentiary of the Russian Federation to the Republic of Uganda