As another year of the Russia–Ukraine war draws to a close, one question continues to haunt Western capitals: why have neither the weight of sanctions nor the scale of losses on the battlefield pushed the Kremlin toward compromise? The answer lies less in macroeconomic charts than in something more elusive: the way Russia’s power system has been rebuilt over the last three decades. Since the 1990s, the relationship between the Kremlin, society and business has been quietly but radically transformed. What used to be a messy, conflict-ridden pluralism has evolved into a system in which property, careers and personal safety all depend on political loyalty – and where almost no one outside a narrow circle can meaningfully influence state decisions. In such a system, sanctions designed for a more pluralist Russia end up hurting those who no longer have levers of power, while often locking increasingly frightened elites even more tightly into the regime.
From the trauma of the 1990s to a new social contract
The starting point is the trauma of the Soviet collapse. Hyperinflation, non-payment of wages and the spectacular enrichment of a handful of “oligarchs” convinced much of Russian society that political freedom did not guarantee dignity or stability. The 1990s were remembered as a time when democracy meant poverty – a memory the Kremlin has deliberately reinforced ever since.
Putin’s early years were built on an implicit bargain. Citizens retained many of the civil liberties won in the 1990s – independent media, competitive (if manipulated) elections, the ability to protest – but only as long as they did not threaten the core interests of the state. In exchange, the Kremlin promised rising incomes, regular pensions and a sense of national revival. Political rights were gradually devalued; prosperity became the only recognized measure of success.
Step by step, the political side of this bargain was dismantled. The abolition of direct gubernatorial elections in 2004, justified as a response to terrorism, turned regional leaders into presidential appointees rather than representatives of their voters. Parliament was reshaped into a rubber stamp. Real competition moved from the public arena into intra-elite bargaining behind the Kremlin’s walls.
When power proved stronger than money
The second turning point was the destruction of Yukos and the imprisonment of its owner, Mikhail Khodorkovsky, in 2003. Formally, it was a tax case. Substantively, it was a message: those who challenged the Kremlin politically, or tried to build independent centers of influence, would lose everything.
From that moment, the hierarchy between money and power was settled. In the 1990s, billionaires could hire politicians; under Putin, politicians could unmake billionaires. Access to property – and the right to keep it – now flowed from proximity to the state. The “new oligarchs” of the 2000s were not rogue tycoons but loyal managers of assets ultimately controlled by the Kremlin.
Over time, this logic spread from big business to the bureaucracy and state-owned corporations. Careers in the central bank, ministries or large companies no longer depended only on competence. They also depended on an unwritten pledge not to challenge the system, not to speak out and certainly not to cross the invisible line between “management” and “politics”.
By the time Russia annexed Crimea in 2014 and launched the full-scale invasion of Ukraine in 2022, this evolution was largely complete. Political competition had vanished; property rights were conditional; and the state’s decision-making core had shrunk to a small, opaque circle around the president.
The Putin regime made it almost impossible for Russians to rise up
If power trumped money at the top, repression eroded agency at the bottom. Political scientist Ekaterina Schulmann has described how the Kremlin’s repressive machine, especially in 2024–2025, moved from targeting opposition politicians and activists to systematically broadening the circle of “undesirables”. New categories of “foreign agents”, “extremists” and “terrorists” appeared; pressure spread to queer people, migrants and even street musicians or pro-government public figures who stepped out of line.
The message was simple: anyone can be next, regardless of their previous loyalty. This is not classic totalitarian terror, but a calibrated system of fear that keeps society depoliticized. People are encouraged to stay out of politics not because they are satisfied, but because the cost of involvement is unpredictably high. The war only accelerates this trend. Mobilization, censorship and the criminalization of “discrediting the army” make any attempt to publicly oppose the war risky not only for individuals, but for their families and employers.
In such an environment, calls from abroad for “Russians to rise up” sound detached from reality. Ordinary citizens have almost no safe channels to influence foreign policy. They cannot vote the leadership out; they cannot organize mass protests without facing draconian sentences; they have few alternative media sources left inside the country. The choice is not between protest and apathy, but between survival and high-risk heroism.
Russia’s “technocratic” elite: from managers to accomplices to hostages of the regime
The evolution of Russia’s elites is equally important. Economist and Carnegie researcher Alexandra Prokopenko, in her recent book Accomplices. Why the Russian Elite Chose War and in a series of interviews and podcasts, argues that the ruling layer has undergone a “pseudomorphosis”: it preserved the outward appearance of a modern technocratic elite but gradually lost any internal autonomy.
The officials and top managers who administer Russia’s finances, energy sector or defense industry are often well-educated professionals. Yet they are increasingly trapped in a system where decisions are made elsewhere – and where their personal and professional survival depends on implementing those decisions, including the decision to wage war.
Prokopenko describes how sanctions and the prospect of international isolation did not split this elite, but helped forge what she calls “negative loyalty”: many officials do not love the regime, but fear the consequences of breaking with it more than they fear the future if they stay. They are afraid not only of losing jobs and property, but of “social death” – becoming traitors in the eyes of their peers with no place to go.
Schulmann has captured the same dynamic with a different metaphor: the system offers an easy entrance – promotions, status, access to state resources – but almost no legal or safe exit. To leave is to risk exile, prosecution or worse. In this sense, the Russian state has turned its own elite into hostages, not partners.
Sanctions that strengthen the lock-in
This transformation helps explain why sanctions often produce counter-intuitive results. Western policy has largely assumed that if the broader business community, bureaucratic class and middle class feel enough pain, they will pressure the Kremlin to change course. In practice, these groups lack both the institutional tools and the personal security needed to do so.
Travel bans and visa restrictions directed at large categories of Russians may be morally satisfying, but they mostly affect people who already have little say in government decisions. At the same time, they encourage the narrative that the West is punishing “all Russians”, reinforcing defensive nationalism and the propaganda line that “Russia is under siege”.
Financial and legal sanctions on companies that continue to work in or with Russia have a similar double edge. They raise the cost of cooperation with the regime – but they also close off exit routes for capital and managers. For many businesspeople, especially those whose names do not headline Western sanction lists but who are indirectly affected, the message is: you cannot safely move your wealth or yourself out of Russia, and the only actor still able to protect you, however imperfectly, is the state.
The bureaucracy experiences the same trap. Mid-level officials in ministries, regions or state corporations bear the practical burden of war and sanctions, but they are not invited to the table where strategic decisions are taken. They are, however, acutely aware that open dissent would expose them to both domestic repression and foreign isolation.
A game without an exit – and why it matters for Europe
Game theory teaches that in high-stakes conflicts, it is dangerous to corner an opponent with no way out. One of the classic Chinese stratagems advises leaving a “golden bridge” for a retreating enemy, to encourage withdrawal rather than desperate resistance. Modern Russia’s internal architecture – and the way sanctions interact with it – has created the opposite situation.
For Russian society, business and much of the bureaucracy, there is no clearly articulated path by which their behavior could lead to relief from external pressure. Western policy mostly offers punishment without conditions for rehabilitation. For the narrow circle around the Kremlin, meanwhile, the signal is that any compromise – even a tactical one – might be interpreted as weakness and invite both domestic instability and harsher demands from abroad.
None of this means sanctions are useless; they complicate Russia’s war effort, limit access to technology and erode long-term growth. But if the goal is to influence political behavior in Moscow, they must be recalibrated to the reality of today’s Russia, not the semi-pluralist system of the early 2000s.
That would require at least three shifts in thinking. First, accept that ordinary Russians cannot “change the regime” on demand, and design measures that minimize unnecessary collective punishment. Second, differentiate more clearly between genuine decision-makers and those who are merely implementing orders. Third, think in terms of conditionality: define, however cautiously, what kinds of actions – inside Russia or in relation to Ukraine – could eventually lead to partial relief for individuals or institutions that distance themselves from aggression and repression.
Europe’s slow-motion learning curve
Each year of the war, Europe has started by declaring that certain steps are off-limits – heavy weapons, long-range missiles, the freezing and possible use of Russian state assets – and ended by crossing some of those self-imposed red lines under pressure of events. The continent is learning, but mostly by reacting.
The next lesson may be that pressure on Russia cannot be effective if it is blind to how the Kremlin has re-engineered its relationship with society and elites. A system that has turned business and bureaucracy into accomplices, and society into a frightened spectator, will not be nudged into change simply by making that society poorer.
Sanctions will remain part of Europe’s toolkit. The question is whether they will continue to operate on autopilot – hitting the loudest targets but missing the true centers of decision – or whether they will be redesigned to exploit the vulnerabilities of a regime that looks monolithic, but is in fact held together by fear, dependence and the belief that no other future is possible.
