Do Dollars Make Sense? How Russian Savers Responded to Sanctions

• In Event: International Cooperation, Domestic Politics, and Public Opinion

Abstract

Recent Western economic sanctions targeting Russia following the invasion of Ukraine have reinvigorated a longstanding debate within both academic and policy circles about whether such tools are effective. One goal of the 2022 Russian financial sanctions was to cause a significant devaluation of the Russian ruble. After a brief crash, the ruble's exchange rate quickly rebounded and stabilized near its pre-sanctions level, despite intensifying economic pressure. Why did sanctions fail to cause a deep and lasting depreciation of the ruble? Drawing on data from seven nationally representative surveys of Russian citizens before and after the imposition of sanctions, we find that the “sanctions shock” significantly decreased Russian demand for dollars. Moreover, we find that the negative effect of the sanctions shock on the desire for dollars is considerably stronger among wealthy Russians. Meanwhile, Russian demand for rubles, in particular cash rubles, rose in roughly the same proportion as falling dollar demand. We conclude that the Russian government’s capital controls and foreign exchange restrictions thwarted Western policymakers’ goals by preventing a run on the ruble. These Russian countermeasures reduced the public’s desire to use the dollar. More broadly, our study provides micro-level evidence of how sanctions operate within targeted states, across different groups within society.

Authors

• Daniel McDowell, Syracuse University

• David A. Steinberg, Johns Hopkins University