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Russian President Vladimir Putin, center, visits Russian forces in the Kherson sector. U.S. intelligence holds that Russia will be able to fund the war in Ukraine for at least another year, even under the heavy and increasing weight of unprecedented sanctions, according to leaked U.S. military documents. (Wikimedia Commons)
U.S. intelligence holds that Russia will be able to fund the war in Ukraine for at least another year, even under the heavy and increasing weight of unprecedented sanctions, according to leaked U.S. military documents.
The previously unreported documents provide a rare glimpse into Washington’s understanding of the effectiveness of its own economic measures, and of the tenor of the response they have met in Russia, where U.S. intelligence finds that senior officials, agencies and the staff of oligarchs are fretting over the painful disruptions — and adapting to them.
While some of Russia’s economic elites might not agree with the country’s course in Ukraine, and sanctions have hurt their businesses, they are unlikely to withdraw support for Russian President Vladimir Putin, according to an assessment that appears to date from early March.
“Moscow is relying on increased corporate taxes, its sovereign wealth fund, increased imports and businesses adaptability to help mitigate economic pressures,” reads part of the assessment, which is labeled top secret, the highest level of classification.
The documents are part of a trove shared in a Discord chatroom and obtained by The Washington Post. Massachusetts Air National Guard technician Jack Teixeira was charged this month with taking and transmitting the classified papers. He could be facing 15 years in prison.
Since the invasion of Ukraine began last year, the United States and its allies have fired a fusillade of sanctions at Kremlin-linked people and businesses, prohibiting companies from doing business with them, alongside export controls and other trade measures designed to squeeze Russia’s economy and punish its elites.
Those elites “are likely to persist in upholding the Kremlin’s objectives in Ukraine” and in “helping Moscow circumvent sanctions,” the leaked assessment finds. But experts say that the sanctions’ effectiveness — not just to hurt the Russian economy, but to deter, punish and send a message — relies on factors more complex than what a single assessment can take into account.
The document does not address the impact of newly imposed sanctions or the long-term pain of oil price ceilings in Europe. Russian oil revenue has plummeted.
Even if Russia in theory could fund the war for another year, the leaked assessment does not explore other factors that could affect Russia’s ability to fight, such as ammunition expenditure and the need to recruit or conscript new soldiers.
The Treasury Department declined to comment on the documents in question. The White House did not respond to questions about them.
While Putin and those close to him have dismissed the impact of sanctions, which have failed to stop the Russian war effort, by Washington’s own classified assessment, leaked documents also provide a window into the consternation they have caused among some of their intended targets.
While the documents do not include in-depth discussion of their sources, they are marked with a code indicating the data was gleaned from intercepted communications. That suggests that the United States has gained access to the channels where Russian figures privately discuss how to limit the impact of sanctions.
Russian Finance Minister Anton Siluanov, U.S. intelligence found, had drafted a letter to Prime Minister Mikhail Mishustin in early March to seek backing for contingency plans to avoid a “potentially embarrassing collapse” of Russian state-controlled entities such as the International Investment Bank, the International Bank for Economic Cooperation and the Eurasian Investment Bank, because of sanctions imposed by the United States and its allies.
On April 12, the United States imposed sanctions directly on the Budapest-based International Investment Bank, prompting the Hungarian government to announce it would pull out of cooperation with the financial institution, which Russia describes as an international development bank.
Some experts expressed surprise that Siluanov would be so worried about an institution with a relatively small market cap.
“Economically, IIB is not of crucial importance to Russia,” Maria Snegovaya, one of the authors of the recent CSIS report on sanctions, said in an email. “The expectations that the bank will be sanctioned have been there for almost a year at this point.”
But the bank, which was set up during the Soviet era as an international institution with certain diplomatic benefits, had long been suspected of links to espionage and money laundering, said András Rácz, a senior research fellow at the German Council on Foreign Relations.
According to another document, U.S. intelligence found that officials at Russia’s top intelligence agency, the Federal Security Service, or FSB, were concerned about the insufficient amount of foreign currency held by domestic Russian banks. These officials also warned that the United States could impose secondary sanctions on the Chinese companies that still did business with Russia, and urged that such transactions be kept secret.
Employees of Yevgeniy Prigozhin, the Russian tycoon behind the Wagner Group, a private security contractor network that has taken up arms in Ukraine, “understood” that recently announced sanctions on Russia’s MTS Bank would end transactions with American companies resulting in “the suspension of US dollar transactions on 15 May,” according to an intelligence document.
The document also said that a “finance employee” of the oligarch was concerned that Chinese companies would end their business with Russia to avoid the impact of sanctions.
The Washington-based Center for Strategic and International Studies released a report this month that found Russia still possesses a “remarkable degree of adaptability to Western sanctions,” echoing the classified assessment, though they had slowed the pace of Moscow’s campaign to wear down Ukraine.
Putin publicly praised the resilience of the Russian economy in January, suggesting that it had beaten growth expectations to only shrink by about 2.5 percent during 2022. The actual dynamics of the economy turned out to be better than many expert forecasts, he said during a virtual meeting on the economy. Ukraine’s economy, meanwhile, shrank by more than 30 percent.
Prigozhin has also waved off the effects of sanctions. In February, he issued a statement that economic measures by Britain, Canada and United States were “illegitimate” and suggesting they were engaged in terrorism.
It remains unclear what links Prigozhin’s business empire had with MTS Bank. The United States imposed sanctions on the bank in March, only weeks after it had been granted a business license in the United Arab Emirates. The license was subsequently revoked by Abu Dhabi in light of the sanctions.
“I think any argument that the sanctions are not impacting Russia or those who are targeted are belied by the fact that once world class companies have been hollowed out, and that the very people who claim that sanctions have not impacted them are complaining loudly about their injustice,” said Adam Smith, a partner at the law firm Gibson Dunn and former Obama administration sanctions official.
