The Trump administration will discuss the possible easing of sanctions against Russia only after a ceasefire is established, U.S. presidential envoy Steve Witkoff told Bloomberg on March 19. However, not even a thaw in relations between Putin and Trump can solve the myriad problems that plague the Russian economy, economist Vladimir Milov argues. In his view, other countries are likely to keep their sanctions in place — an critical fact given that Russia’s main trading partner is Europe, not the U.S. At the same time, however, Trump’s actions are helping Putin delay a financial collapse while rearm the Russian military, including with the help of DOGE head Elon Musk, who may weaken U.S. efforts at sanction enforcement.
Given the clear determination of the U.S. president and his team to improve relations with Russia at any cost — regardless of whether Putin makes any concrete concessions on Ukraine — the prospect of the Trump administration lifting sanctions on Russia is becoming increasingly real. If Washington does reduce its economic pressure against Moscow, whether by lifting sanctions or simply by weakening the enforcement of whatever measures remain in place, what would the likely consequences be?
The good news
Let’s start with the good news — good news for opponents of Putin, that is. A unilateral lifting of U.S. sanctions by Trump will not eliminate the international risks for Russia or the aura of toxicity that has formed around the country due to its aggression against Ukraine. There are two reasons for this.
First, a significant number of democratic countries will maintain sanctions against Russia, and would likely even tighten them in response to Trump’s unilateral actions. This is a crucial point. The European Union, the United Kingdom, Canada, Australia, and Japan play just as important a role in the global economy and international transactions as the U.S does. Their combined GDP is comparable to that of the United States, and their respective currencies hold a share in international settlements similar to that of the dollar.
As a result, for much of the Western world, Putin’s Russia will remain toxic, and the potential downside to businesses looking to partner with Moscow will not significantly decrease. Yes, U.S. authorities will no longer penalize cooperation with Russia, but the governments of other major Western economies will continue to do so.
For much of the Western world, Putin’s Russia will remain toxic even if the U.S. lifts sanctions
There won’t be many businesses willing to take the risk of working with Russia while the EU, the UK, Canada, and other countries maintain their sanctions. Most major international players operate across multiple markets, and the disappearance of U.S. penalties for doing business with Russia would do little to change their calculus. Only a rare company that operates exclusively in the U.S., without expanding into the international market other than for deals with Russia, would be immune. As long as EU and other sanctions remain in place, Russia will not achieve the desired international “rehabilitation.”
The second reason is the extremely high risk that the U.S. could reintroduce sanctions in the future. This could happen if Putin and Trump have a falling-out, or if Trump loses the influence necessary to dictate U.S. policy towards Russia. Without speculating on the likelihood of these scenarios, consider, for example, the possibility that Trump loses control of Congress in the 2026 midterm elections. Given the current unpopularity of his economic policies, that risk is significant.
There is historical precedent for Congress overriding a U.S. president’s veto against imposing sanctions — such was the case in 1986 with measures against South Africa’s apartheid regime. As for 2028, the situation is even more uncertain, making it difficult for corporate decision-makers to plan ahead. The example of 2021 is fresh in everyone’s mind — after Trump’s departure, many elements of his policy were swiftly reversed by the next administration.
In 2021, after Trump left office, many elements of his policy were swiftly reversed
Thus, in the eyes of investors, Trump’s actions to lift sanctions will not be seen as a permanent shift in U.S. policy, but rather as a strange temporary deviation — one not supported by other major market democracies and unlikely to last long. Jumping headfirst into doing business with Russia in this situation would be an extremely risky move, and there is no reason to believe that a significant number of players would adopt such a strategy.
Furthermore, Russia itself is hardly an attractive destination for investment today. The economic situation is deteriorating, and even under the most favorable scenarios, recovery would take a long time. Even the Russian authorities predict an economic slowdown and high inflation in the coming years. A wartime economy inevitably brings higher taxes, stringent regulations on foreign investors (where even minor financial transactions require approval from a special government commission), and rampant nationalization, which has affected American investors as well. Expecting a surge of investment into such a toxic environment — one still under EU and other Western sanctions — is, at best, naïve.
In fact, these assessments can be found in virtually any significant corporate report or memorandum discussing the wisdom of doing business with Russia. Neither Trump nor Musk can change this — Russia simply does not offer the kind of profits or premiums that would justify taking on such risks.
It’s worth remembering that Russia has declared a rejection of imperial ambitions and opened up to the world before — in the 1980s and 1990s, when Moscow’s move coincided with efforts to dismantle authoritarianism. Even then, Russia failed to achieve anything approaching spectacular success in attracting foreign business. The country saw a net capital inflow only briefly, from 2005 to 2008, after which there was neither investment nor growth — this despite the absence of significant sanctions.
Russia does not offer the kind of profits or premiums that could compensate investors for the significant risks
Moreover, simply due to geography, the U.S. has never been a major trading partner for Russia. In 2021, even after years of efforts to pivot trade toward China, European countries still accounted for about half of Russia’s exports. This is not surprising given that nearly 85% of Russia’s population lives in the European part of the country, which produces roughly the same share of its total regional gross product (including the Urals and Western Siberia). Europe is Russia’s natural trading partner, and in recent years, Moscow’s struggle to shift trade toward Asia has been hampered by massive logistical costs, numerous infrastructure bottlenecks, and other challenges.
Meanwhile, the U.S. accounted for less than 4% of Russian exports in 2021. Even if all U.S. sanctions were lifted, the American export market simply cannot compensate for Russia’s loss of access to Europe — especially at a moment when a central pillar of Trump’s policy is a strong focus on import substitution and the aggressive imposition of trade barriers against countries seeking to replace American goods in the U.S. domestic market.
The U.S. accounted for less than 4% of Russian exports in 2021
Thus, Russia is unlikely to see any significant economic improvement until it restores trade relations specifically with Europe. The U.S. plays only a secondary role in this, and businesses have no confidence in a lasting shift in Washington’s stance toward Russia. The lack of interest in Russia is evident, as reported by journalists from The Bell, who surveyed 60 major Western companies that left the country after the war began.
In certain sectors, some American companies may seek to take advantage of a window of opportunity to make quick profits. However, such opportunities would be limited mainly to consumer-oriented industries such as food, beverages, tobacco, and oil and gas service operations. Since the start of the full-scale invasion of Ukraine, Russia has lost two of the world's largest oilfield service providers, Halliburton and Baker Hughes.
Indeed, The Bell's survey further confirms that the profile of potential returnees largely hail from sectors requiring minimal investment that yield quick returns: food, tobacco, and oil services. However, cooperation with such companies would do little to change Russia’s broader economic landscape. To reverse its economic downturn, Russia primarily needs investments and export markets, not soda and oil services — neither of which the U.S. can provide at a meaningful scale anyway.
Before the war, Europe was not only Russia’s primary export market but also its largest investor. As of early 2022 (before the Russian central bank stopped publishing data), around two-thirds of Russia’s total accumulated foreign direct investment came from European countries. This figure excludes offshore jurisdictions like Bermuda or the British Virgin Islands. In contrast, the U.S. accounted for less than 1% — under $5 billion — of Russia’s total direct investment inflows. Over the entire span of Russia’s unsuccessful democratic experiment, American businesses never found the country to be an attractive investment destination. That is unlikely to change anytime soon, no matter what Trump and Putin may agree to.
Since the collapse of the USSR, Russia has never become an attractive investment destination for American businesses
There has been much talk about Trump signing some supposedly massive “deals” with Putin for the development of Russian resources — from Arctic oil and gas to rare earth metals. But let’s bring expectations back to reality: in the three decades leading up to Russia’s full-scale invasion of Ukraine, there was no influx of American investors into Russia’s resource sector. And there won’t be one now, either. American investors have long been deterred by Russia’s legal and investment climate. To attract major resource investments, Russia had to create a special, more favorable framework, particularly through production-sharing agreements in the oil and gas sector.
This is how Russia secured its largest American resource investment — ExxonMobil’s entry into the Sakhalin-1 project back in the 1990s. But even that story ended badly. After decades of disputes with Russian authorities over how profits should be split between investors and the state, Exxon ultimately withdrew from Russia, writing off billions in losses.
The experience of developing Sakhalin’s oil fields also demonstrates that it takes years — if not decades — from the start of negotiations before actual revenues are generated. In short, Russia should not expect any quick financial windfalls from the hypothetical return of American resource sector investors. Moreover, the conditions for developing new reserves today are far worse than they were in decades past.
Journalists and commentators often make casual references to the “immense wealth of the Arctic,” but the question of whether its development is economically viable remains open. Given the region’s remoteness, extreme climate, and lack of infrastructure, extraction costs frequently exceed reasonable limits — one of the key reasons why many oil and gas giants have recently abandoned Arctic projects.
The cost of developing Arctic deposits often exceeds reasonable limits
When Rosneft, in partnership with ExxonMobil, drilled an experimental offshore well in the Kara Sea in 2014, the estimated cost of commercial extraction remained strictly classified. However, American colleagues told me that the production cost per barrel could have potentially been even higher than the global oil price at the time. And that’s not even counting transportation expenses.
The Americans pointed out that the Kara Sea lacks its own industrial base for resource development, meaning equipment and personnel would have to be transported from Murmansk, leading to exorbitant costs. In fact, not even the Chinese have moved into the Arctic. Back in 2013, Rosneft made a big announcement about CNPC’s future involvement in developing the oil and gas shelf of the Barents and Pechora Seas, but there has been no news of any actual collaboration since.
As for rare earth metals, the hype surrounding them seems to have been largely inflated by the media. While Russia does have reserves, the deposits are located far away from existing infrastructure, making their economic viability highly questionable. That’s precisely why they remained undeveloped and frozen for years. Even if some progress is made, Russia is unlikely to see significant revenues from it — certainly not anytime soon.
All the talk about a potential resource partnership between Trump and Putin, therefore, appears to be nothing more than unrealistic media speculation.
The bad news
However, in addition to the good news, there is also bad news. The removal of U.S. sanctions could help Putin stabilize his domestic situation in certain ways, even without the arrival of investors or the return of lost markets.
First and foremost, this concerns banks. The Russian banking sector is highly concentrated — almost all of its assets are controlled by a narrow group of the largest institutions, which are entangled in sanctions. Smaller banks cannot compete with them in terms of correspondent account networks, branches, or digital infrastructure. Removing major Russian banks from U.S. sanctions would significantly simplify their transactions, particularly with China and other countries of the Global South.
The removal of major Russian banks from U.S. sanctions would significantly simplify their transactions with China and other countries of the Global South
Furthermore, Putin could quickly gain legal access to American technologies and components for military production, potentially the most severe consequence of the removal of U.S. sanctions in terms of future global security. Putin may then focus on rapid rearmament by selectively using critical American technologies which Russia currently lacks.
Several major export-oriented Russian companies could quickly increase raw material supplies to the global market — for example, Novatek in liquefied natural gas (its projects were blocked by Biden administration sanctions), and Norilsk Nickel and Rusal in non-ferrous metals. Such a development would bring billions of additional revenue to Russia.
Another important point is that due to the degradation of American government institutions by Elon Musk's DOGE team, the ability of the U.S. Treasury Department — and especially of its sanctions enforcement unit, the Office of Foreign Assets Control (OFAC) — to effectively monitor compliance with sanctions and take action against violators may be seriously impacted. If no one is monitoring sanctions compliance and punishing violators, the sanctions regime will collapse on its own. In fact, there are signs that this is already happening, presenting the possibility that the Trump administration is already effectively abandoning sanctions pressure on Putin.
Due to DOGE, the U.S. Treasury may find it more difficult to track sanctions enforcement
Neither Europe nor any other global player has the administrative capabilities to monitor sanctions compliance on the same level the U.S. does — or did. Other countries did not create their own versions of OFAC due to the simple fact that they could rely on the Americans to do the job better. Such departments can of course be created elsewhere, but this will require time and money, and European taxpayers are unlikely to be thrilled at the idea of hiring more bureaucrats amidst their planned increases in military spending.
Under these conditions, the effectiveness of sanctions enforcement is expected to decline, even without their formal repeal. Musk's team will simply paralyze the American bureaucracy, allowing Putin to dramatically increase the effectiveness of sanctions evasion schemes and thereby earning additional revenues. While the magnitude of these numbers should not be overestimated, even small gains would be a godsend for Putin in light of the sharp depletion of Russia's financial resources currently underway.
Relaxations will also affect Putin’s oil export revenues, as operating the infamous “shadow fleet” will become easier. Although its role is often overestimated, and even if Russia is still unlikely to receive more than a few extra dollars per barrel of revenue from the “shadow fleet” (since oil prices have been relatively low for a long time, making significant profits difficult), it still adds up to money.
On the other hand, Trump’s overall policies and the trade wars he initiated are leading to a slowdown in the global economy, reducing demand for oil, and, consequently, driving down forecasts for oil prices. The overall decline due to Trump’s actions may cause Putin more problems than he stands to gain from increased opportunities for sanctions evasion.
Results: Not a rescue, but a significant gift
Overall, Trump's actions are unlikely to help Putin pull the Russian economy out of the hole it has fallen into. Achieving this would require the collective will of the West to reconcile with Russia and lift all sanctions, and such a prospect is not yet in sight. Softening or lifting only American sanctions will not fundamentally change the situation and will only open opportunities for those businesses that are willing to take on high risks or that are capable of making quick profits. However, such firms operate in a narrow group of sectors that, by itself, cannot significantly impact the overall situation in the Russian economy. America also will not provide Russia with the market for its products, nor with the investments that Putin is counting on. Here, only a reconciliation with Europe could solve his problems.
However, a number of measures — even the simple voluntary refusal of the U.S. to enforce many of the sanctions that remain on paper — could significantly help Putin delay financial collapse and rearm his military. In terms of enforcement — especially regarding sanctions compliance — Europe cannot yet fully replace the U.S., and it is unclear whether it will be able to do so anytime in the foreseeable future.
Although Trump is unable to save Putin and his economy, he can certainly prolong their existence, enabling Russia to accumulate certain reserves for its next strike — whether against Ukraine or someone else. The scale of the overall impact depends on which sanctions will be eased or lifted — and when. Still, the process is already underway, and the enthusiastic reaction of the Russian market to the latest trends speaks for itself.