Since Ukraine's victory in this war is clearly in Estonia's interest, we must continue to weaken Russia, Kannik said this week in a speech to the Constitutional Committee of the Riigikogu, where he gave an overview of the impact of sanctions so far.

"All in all, the sanctions have been quite successful, but we need to work on improving and expanding them in the future," Kannik said.

The head of the Center for Defense Studies recalled that the first restrictions were imposed on Russia by the European Union, the United States and other Western countries as early as 2014, after the annexation of Crimea, but their scope was very limited compared to what has been decided since 2022. However, even the sanctions that were in place before the outbreak of the full-scale war also had an impact.

Since 2014, there has been only one year in which the real earnings of Russian citizens increased – in 2021. In all the preceding years, it either fell or remained at the same level, Kannik said. "This is actually a very important sign of the impact of sanctions."

He said that the stagnation of real wages may have been influenced by the fact that oil prices peaked in 2013-2014 and have not risen as much since then, but nevertheless, the combination of the impact of sanctions and the fall in oil prices has had a very significant impact on Russian citizens.

"Turning to the Russian economy in general, the Russian National Wealth Fund is important for the functioning of the Russian macroeconomy. If we compare the state of this fund over the past two years, the liquid part of the fund was $113 billion on February 1, 2022, and now it has fallen to $55 billion, a more than twofold decline in two years," Kannik said.

This shows that the Russian economy, while not immediately collapsing, is moving closer to a critical situation. "More slowly than we'd like, but it's happening," Kannik said.

The depletion of the fund, however, presents Russia's leaders with unpleasant choices, he continued. "They have two options: to start cutting their military spending and their internal security spending – neither of which they like. Or the other way to free up large sums of money is to cut social spending, which in turn carries huge domestic political risks," he said.

He said that today's Russian leadership remembers very well the late 1980s and the 90s – the situation when people were not paid their salaries and pensions, and the discontent that resulted.

"That's the situation we want to put them in – so they don't have the money to pay their military or pay their retirees," Kannik said.

Oil and gas revenues have fallen sharply

Oil and gas income have historically been the most important source of money for Russia, accounting for 30-35 percent of the Russian state budget in different periods before to the full-scale war. By 2023, it had dropped to just 23 percent of the budget, showing that sanctions on the oil and gas sector continued to have a substantial impact, Kannik explained.

"Despite the fact that Russia exported more oil and gas in 2023 than in 2022, the overall [revenue] decline in that sector remained 24 percent in 2023. That's a significant impact," he said.

"Even if the price tag isn't as effective as we'd want, it still works: if Russia cannot sell these resources to the West, it could still do so to India and China. Yes, India and China will buy from Russia, but given their market position, they may negotiate a very low price, which will still be a serious blow to the Russian economy," he said.

Russia lacks offensive missiles and civil aircraft

The scarcity of resources can be seen by the fact that, last winter, Russian troops conducted missile attacks against Ukrainian military and infrastructure targets almost every week, using 70-80, and in some cases more than 100, highly advanced missiles by Russian standards.

"But this winter the pace is very much slower, and this is not because the Russians no longer want to attack Ukrainian infrastructure, housing, or military installations, but because their industry – despite having gone to a wartime regime – is unable to produce the new missiles they need under the sanctions regime," he said.

Currently, Russia carries out an average of one missile strike every two weeks, using between 20 and 50 missiles. Only once this winter has Russia launched an airstrike with more than 70 missiles.

"The effects of sanctions are being felt clearly in civil aviation. With spare parts for Western-made aircraft difficult to obtain, the number of incidents has increased significantly, particularly in recent months: in the first nine months of 2023, Russian passenger aircraft experienced 150 serious incidents, compared to only 50 in the same period in 2022," Kannik said.

"All of this shows that the sanctions are having an impact. It is moving slower than we would want because the countries of the 'Global South' have yet to join in, but the leverage is there and being used. According to the latest news, banks in both the United Arab Emirates and Turkey have begun to cancel accounts of Russian individuals and businesses, and this will have an impact," he said.

He pointed out that the United States in particular, but also the European Union, can influence third countries through the threat of secondary sanctions.

On Thursday, the Council of the European Union formally adopted the 13th package of sanctions, which already imposes direct restrictions on four companies from China, as well as companies from Kazakhstan, India, Serbia, Thailand, Sri Lanka and Turkey, which indirectly support the Russian military-industrial complex in its war of aggression against Ukraine by selling electronic components.

Divestment: gains for the West, losses for Russia

Kannik said that the West's efforts to release frozen Russian assets has a twofold effect: it constrains and penalizes Russia while also providing an opportunity to support Ukraine with confiscated funds, so decreasing the burden on the West.

"The fact that this procedure is irreversible is undoubtedly helpful. If the assets of the Russian state or Russian oligarchs are expropriated, there is very little possibility that these decisions will ever be reversed, and it is in our interest that Russian aggression does not go unpunished," he said.

"But I would like to mention another moment here. It is clear that both we and our allies are currently providing very substantial support to the Ukrainian state. And in the end, these assets are also the resource that we will have to use to support less. If these assets are not used, the burden that comes out of our budgets and out of the budgets of our allies, out of the pockets of the taxpayers, will be even greater. So divestment would also have practical benefits for us and our allies," he said.

Sanctions have been extremely disruptive for Russia

Kannik said that it is very clear that the whole issue of sanctions has been extremely disturbing for the Russian leadership. "Back in 2014, they convinced their population and the business elite that the Europeans were going to do what they did in 2008 in the aftermath of the Georgian aggression: not talk to us for six months and then everything would normalize. But this time it hasn't gone back to normal, on the contrary – it's gotten worse," he said.

"The impact of sanctions can be seen by the fact that when Russian oligarchs or other private persons are sanctioned, a large majority of them resort to court to have the restrictions repealed. Some of these have been successful, but most of them have been dismissed by Western courts, which have ruled that these individuals have a direct connection to the Russian state," he said.

"We see the same thing in the words of Russian political leaders or their spokespersons, (Russian Presidential Spokesperson Dmitry Peskov and Russian Foreign Ministry Spokesperson Maria Zakharova,) which have been quite painful. Historical practice shows that if Russians are not aware of the problems, they usually do not pay any attention to the issue, they keep quiet about it. But if there is a cry of distress, it means that they recognize the problem," he said.

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