The first time I saw Apple Pay in use was in 2016 in a cafe in Krasnoyarsk, where teenage Siberians were simply holding up their iPhones to pay for coffee and pastries. Very impressed, I downloaded the Apple Pay app when I returned to Dublin and went to use it in an upmarket Grafton Street store. “I don’t know what that is,” said the baffled assistant. It was some time before we in Ireland caught up on the tech-savvy young Russians.
Then things went into reverse. After Russia invaded Ukraine in February 2022, Apple Pay, Google Pay, PayPal, Zoom and other western online transaction and communication companies withdrew their services from Russia as a “hurricane” of sanctions was imposed, mainly by the United States, the UK and the European Union. Cafe-goers and shoppers had to revert to credit cards and cash. No longer could Russian-issued Visa and Mastercard cards be used for international payments or at stores and ATMs outside Russia.
The Russian financial system had been fully integrated into the world of global telecommunications and international money: now, because of the war, the rouble is no longer fully convertible in global markets and global financial services such as Swift, essential for international financial transactions, have been withdrawn.
Hundreds of western companies that supplied Russia have pulled out, including McDonald’s, which created a sensation when its first store opened in Moscow on January 1st, 1990, (I was in the queue) and Starbucks, Carlsberg, Danone, Unilever and Ikea.
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Today, however, Russia is rolling out its own Bluetooth-based contactless payment system, and city stores are well stocked with Apple products, and are even taking orders for Apple’s new Vision Pro goggles, which will not be launched in the UK or Ireland until later this year.
Initial fears among Russian consumers – that being turned into a pariah nation would mean their favourite western products in the supermarkets would all disappear – have long since been dispelled. Hundreds of western companies have stayed, including Mars, which makes Snicker bars – so popular that the conversion of people to western tastes is sometimes referred to as the Sneakerisation of Russia. McDonald’s restaurants are still everywhere, under new management and rebranded as Vkusno i tochka, “Tasty and that’s it”.
As sanctions piled up, a documentary made in Iran by popular YouTube host Alexey Pivovarov went viral: it showed Tehran stores bustling with sanctioned products and locally made imitations. It assured Russians that western sanctions could be busted, despite being on a scale never attempted before against so large a country, and one so integrated into the world.
From the start, sanctioned products have flowed into Russia. Consumer items are relabelled and rerouted through intermediary countries such as China, India, Turkey and Georgia. Traders in this grey market use shell companies and pay in cryptocurrencies to bypass financial controls.
The EU’s sanctions envoy, David O’Sullivan, described by the author as “one of Ireland’s most respected statesmen”, spends much of his time travelling to the Middle East, Central Asia and East Asia to ensure as far as possible that sanctions are implemented. In December, O’Sullivan told Jack Power of The Irish Times how a sanctioned item “goes from a factory in Europe to somewhere relatively innocent, then ends up [elsewhere] in our neighbourhood, and maybe the Gulf, then maybe Asia and finally maybe Russia.”
Gustafson, a professor of government at Georgetown University, ventures that it is perhaps no coincidence to find “a phalanx of Irish nationals” in FISMA, the EU’s lead department for financial regulation, including Mairead McGuinness, who until last year was EU commissioner for financial stability, financial services and the capital markets union. He maintains this is partly because of the vigorous development of the financial industry in Ireland and the favourable tax regime of which Russian companies and banks took advantage before the invasion of Ukraine. Dublin had become a hub for borrowing by Russian entities through so-called “special purpose vehicles”. After February 2022, the Russian banks and firms abruptly vanished, leaving the lenders with a raft of non-performing loans.
Ireland-based aircraft leasing companies, which provide more than 60 per cent of the aircraft flying around the world, also suffered “immediate and massive losses”. Sanctions required western lessors to terminate leases with Russian airlines, and by mid-2023 some $10 billion in leased aircraft was tied up in Russia. Some have since been bought out, but hundreds remain in limbo.
The author, an expert on the geopolitics of energy, is particularly interesting on the impact of sanctions on the global oil industry. An oil embargo and price cap were imposed to curtail Russia’s oil revenues, though without cutting the volume of exports, as this would squeeze world oil supply and set off a spiral of higher prices.
Russia responded by acquiring a large fleet of second-hand tankers which sail under flags of convenience, and by giving mainstream tankers false flags. This scheme has several flaws, he points out: Russia’s acquisition spree has caused the price of old, retired tankers to soar; many port authorities are reluctant to accept tankers without mainstream shipping insurance, which they cannot get; and flagging services are mostly outsourced to US companies.
[ Is Russia’s war-driven economy approaching its 1989 moment?Opens in new window ]
But the combination of shadow tankers and attestation fraud has helped Russia maintain pre-war levels of exports. It has also moved its oil trading business from Switzerland to the United Arab Emirates, which does not sanction Russia, and which accepts Russian refined products for export to Europe, labelled as Emirati oil.
The author’s key proposition is that much of the sanctions regime is being circumvented, and the Russian economy is relatively stable, but if the sanctions are maintained and vigorously enforced, they will have increasingly severe long-term impacts on the Russian economy, causing its gradual degradation.
This is because they have increased Russia’s debt, reduced transparency and created new vulnerabilities. Russian banks are finding it harder to process foreign transactions and import-export settlements; Russian companies have lost access to western credit markets and can no longer use debt to finance investments; and half of Russia’s foreign exchange reserves in foreign currencies have been blocked.
Russian money-laundering through financial capitals such as London has also been severely curtailed, oligarchs’ yachts have been seized or detained, and the assets of Russian banks, individuals and entities in the West have been frozen.
In the words of Alexandra Prokopenko, a former adviser at the Russian Central Bank (not a former director as described in the book), “Putin’s military adventure in Ukraine and the sanctions have not made a breach in Russia’s economic fortress, but they put a time bomb under its foundations”.
Crucially, the reputation of Russia as a promising market, where foreign businesses were welcomed and risks could be managed, has been shattered. The seizure of assets of companies leaving Russia, such as Carlsberg, has only deepened the mistrust in Russia’s market economy, which the author believes is already “hobbled by a deeply corrupt state and leadership”.
Gustafson writes from the perspective of 35 years studying and travelling in Russia and the former Soviet Union. He examines the impact of the perfect storm of war and sanctions in the context of Russia’s three decades of opening to the world after the fall of communism in 1991. The first saw non-Russian-speaking consultants arrive to lecture Russians on how the market worked and the subsequent madness and mayhem of the Wild East; then, after the turn of the century, disposable incomes reaching unprecedented heights as oil prices soared and society stabilised; and the third was the start of sanctions after Russia’s seizure of Crimea in 2014, which has culminated in the final failure of Russia’s opening to the West.
Once again Russia is isolated from the West, but unlike during the cold war, the enemy is no longer the Soviet Union but Putinism, “a perverted blend of vengeful Russian imperialism, kleptocracy and a distorted reading of history”.
Perfect Storm is a thorough, informed study of the use and abuse of a scattershot economic weapon that falls somewhere between jaw-jaw and war-war. The author ends on an upbeat note: there could be a second reopening of Russia to the West after Putin, even if it faces a wall of mistrust, and continues to remodel itself on China, as the United States turns in upon itself. Let’s hope he is right.
Conor O’Clery is former Moscow Correspondent of The Irish Times
Further Reading
Punishing Putin: Inside the global economic war to bring down Russia by Stephanie Baker (HarperCollins, 2024): A colourful account by a Bloomberg journalist of how the United States and its allies embarked on a world-changing financial experiment, from fixing oil prices to seizing superyachts, to thwart Putin’s war of aggression.
Economic War: Ukraine and the Global Conflict between Russia and the West (Hurst, 2025) by Maximilian Hess: A close look at Russia’s response to western sanctions, and the ensuing skirmishes in London’s courts, on Swiss trading desks and in boardrooms in New Delhi, as pipelines, mines, loans and crypto markets were weaponised.
The Russia Sanctions by Christine Abely (Cambridge University Press, 2023): An expert on sanctions law examines how sanctions on Russia affect, in novel ways, global trading patterns, the world financial system and foreign policy. Makes the case that sanctions should be maintained, strengthened, and better enforced.
