Sanctions Are Working, And Can Work Even Better
Russia sanctions have hit yacht owners hard. But they have impacted people who travel by more modest means as well. In February 2022, Moscow commuters crowded behind subway turnstiles, searching for coins when their Apple and Google Pay access was cut off.
The sanctions and export controls imposed following Russia’s invasion of Ukraine in 2022 were swift and sweeping. Yet since then, key parts manufactured in the United States, Germany, France, the United Kingdom, South Korea, and Japan have been found in Russian drones, missiles, radios, and armored vehicles. As Russia engages in serial evasion, the question arises: Are sanctions working?
The gains achieved by the sanctions against Russia have not been as dramatic as some imagined they would be. But that does not mean they are not worth the effort to implement and enforce. The sanctions have reduced the amount of funds available to Russia to fight its war, placed pressure on the Russian domestic economy that might make a continued war increasingly politically inconvenient for President Vladimir Putin, and helped prevent the sanctioning nations from themselves funding Putin’s attacks on Ukraine directly. In these respects, the sanctions have indeed been effective.
More can, and should, be done. Increased enforcement activities will enhance the potency of existing sanctions, while new targets and new secondary sanctions can further shape Russia’s calculus.
Modest Success
Whether one considers the sanctions against Russia to have been effective, of course, depends on what one realistically expects them to achieve. Certainly, some of the most dramatic and remote possibilities floated at the time of the sanctions’ initial imposition, like an immediate cessation of the war or the toppling of Putin, remain unrealized. Yet the sanctions have in fact been useful in reducing Russia’s long-term capacity for growth and restricting certain pools of assets that would otherwise be available to fund the war. For example, in December, the chief sanctions economist at the U.S. Department of the Treasury highlighted the decline in Russia’s 2022 imports and exports as compared with 2021, as well as the 2022 contraction of Russia’s economy. The sanctions have reduced the revenue available to Russia to fund its war effort through the freezing of billions of dollars owned by the Russian Central Bank and the National Wealth Fund and held in the sanctioning nations. Though Russian military production continues, the country must divert resources from other sectors in order to achieve it. Russia has been facing significant inflation in recent months as a result of sanctions-linked shortages, along with other causes. The Wall Street Journal, for example, has reported on the marked increase in the price of eggs in Russia due to sanctions, labor shortages, the weak ruble, and other various economic factors.
In the long term, the sanctions also seem likely to have an impact on the development of the Russian economy. While the Russian economy did grow in 2023, the International Monetary Fund’s managing director has commented on the outsized role that military production has played in driving this growth, while noting the ongoing economic challenges Russia faces due to labor shortages and technology restrictions. Foreign direct investment has also fallen dramaticallysince the invasion. This is driven at least in part by the presence of sanctions placing restrictions on such investment into Russia, and also likely by voluntary action taken by private actors. With such significant declines in foreign investment, it seems likely that Russia’s long-term economic development will change its trajectory. Export controls might also deny Russian industry the most advanced technology if similar items cannot be sourced from China, India, or other non-sanctioning nations.
Though sanctions are generally unsuccessful in triggering wholesale regime change by themselves and thus are unlikely to remove Putin from power, the domestic economy would likely be one factor that might help influence any eventual decision by Putin to seek or enter into a settlement of the war in Ukraine.
More Can Be Done
The price cap implemented on Russian-origin crude oil does suffer from enforcement issues at the moment and can be made more effective, as it has become subject to widespread evasion in recent months. Paired with a ban on the import of Russian-origin crude oil into certain of the sanctioning nations, the price cap prohibits G7 nationals from providing services associated with the maritime transport of Russian-origin crude oil above $60 per barrel. Rather than an absolute ban on the provision of such services, the price cap was meant to allow Russian-origin oil to continue to supply the world market but at the same time to reduce the revenue that Russia would amass as a result of its sale. While the price cap in its initial phases succeeded in reducing the revenues accruing to Russia from sales of its crude oil, Russian-origin crude oil is increasingly sold to non-sanctioning nations above the price cap, both by way of direct violation of the price cap’s terms and through shifting the acquisition of oil transport services to those provided by non-G7 nationals.
The price cap should now be improved, rather than scrapped. Measures that can help ratchet the effectiveness of the price cap back up include increased enforcement as well as the imposition of secondary sanctions against parties with significant dealings in Russian crude oil. In December, for example, the G7 announced its commitment to maintaining the price cap through “imposing sanctions on those engaged in deceptive practices” and “updating … compliance rules and regulations as necessary.” To that end, the United States announced revisions to the recordkeeping process designed to document compliance with the price cap. Such continuing measures will be helpful to promote the goals of the price cap.
The existing sanctions measures also provide a legal framework that can be further utilized and refined to increase effectiveness. In particular, the coordinated sanctions response has spurred the development of new European Union sanctions authorities that should be deployed to their full capabilities. The European Union’s eighth sanctions package, for example, allows the union to sanction persons who facilitate the circumvention of sanctions. Likewise, its eleventh sanctions package contains an anti-circumvention tool that allows the European Union the authority to restrict the shipment of goods to third-party countries that are likely sites of sanctions circumvention activities, such as transshipment. The European Union has also been developing new rules to allow for the criminalization of conduct that violates sanctions prohibitions, which would create greater deterrent and punitive effects with respect to existing sanctions prohibitions. Similarly, the new European Union ban on diamonds from Russia, in the twelfth sanctions package, also prohibits the importation of jewelry made from Russian-origin diamonds and the importation of Russian-origin diamonds even when processed in third-party countries. Parallel measures, if implemented in other contexts (such as with respect to petroleum products), would further reduce Russian revenue by making it less attractive for purchasers from non-sanctioning nations to buy Russian-origin raw inputs.
Conclusion
The sanctions against Russia should be maintained, strengthened, and better enforced. Secondary sanctions will likely play an increasingly important role in incentivizing actors from non-sanctioning countries to reduce or phase out their support of the Russian war effort. For example, U.S. President Joseph Biden announced in December the possibility of secondary sanctions on foreign financial institutions that facilitate significant transactions in support of the Russian military-industrial base. Increased enforcement, such as against transshipment activities, will also serve to improve the effectiveness of export controls and help prevent items from the sanctioning nations from being used by Russia on the battlefield. Sanctions generally cannot, by themselves, halt an invasion or topple a despot. But they can achieve, and have achieved with respect to Russia, real and meaningful contributions.
Christine Abely is an assistant professor of law at New England Law Boston. She is the author of the book The Russia Sanctions: The Economic Response to Russia’s Invasion of Ukraine.
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