Two years after its full-scale invasion of Ukraine, Russia is still facing an unprecedented number of economic sanctions. It has been excluded from major global financial services, and around €260 billion (£222 billion) of its central bank assets have been frozen.

Russian airspace is closed to most western planes, and western ports are closed to Russian vessels. A formal cap has been imposed on buying or processing Russian oil sold for more than US$60 per barrel (world prices currently fluctuate between $80 and $100. And in theory, it is illegal to sell Russia anything that could be used by the military.

Sanctions have had some effects. According to the IMF, Russia’s GDP is around 7% lower than the pre-war forecast.

Despite all of this, Russia’s economy has not collapsed. But it does look very different, and is now entirely focused on a long war in Ukraine – which is actually driving economic growth.

In fact, the IMF expects Russia to experience GDP growth of 2.6% this year. That’s significantly more than the UK (0.6%) and the EU (0.9%). Similarly, Russia’s budget deficit (the amount the government needs to borrow) is on track to remain below 1% of GDP, compared to 5.1% in the UK and 2.8% in the EU.

One reason for this relative resilience is Russia’s strong, independent central bank. Since 2022, it has imposed massive interest rate hikes (currently at 16%) to control inflation (still above 7%).