Economic Sanctions in the Financial Sector as a Tool of Foreign Policy

This bachelor thesis focuses on the effectiveness of financial sanctions imposed on the Russian Federation following its full-scale invasion of Ukraine in 2022. The aim is to assess the extent to which these sanctions limited Russia’s ability to finance military expenditures and how they affected its fiscal and monetary stability. The theoretical part describes the basic types of sanctions, with particular emphasis on so-called smart sanctions. The analytical part examines the development of GDP, export revenues, budget deficit, monetary expansion, inflation, and key interest rates during the period 2022–2025. The findings show that while energy sanctions had a delayed effect and temporarily led to increased Russian revenues, financial sanctions had a rapid and profound impact. The freezing of the Russian Central Bank’s foreign assets, disconnection from SWIFT, and loss of access to capital resulted in a structural deficit, a decline in the liquidity of the National Welfare Fund, and aggressive monetary expansion. This led to rising inflation, higher interest rates, and pressure on the corporate sector.