The problem with sanctions

The West is relying on economic means to retaliate against Russia’s invasion of Ukraine, but the strategy may not be sustainable in the long term.

Vladimir Putin (Russia sanctions Europe)
Western politicians severely underestimated President Putin’s resolve to restore the Cold War world order. © Getty Images

In a nutshell

  • Until recently, Europe was more afraid of climate change than war
  • There is no surefire way to make the Kremlin change its behavior
  • History shows that sanctions often end up backfiring

Russia has been waging an unofficial war against Ukraine since long before February 2022. The invasion began eight years ago, with the annexation of Crimea and the military intervention alongside separatists in eastern Ukraine.

In 2021, Russia started concentrating troops on the Ukrainian border. Intelligence agencies warned of an imminent invasion. Still, the world was shocked when the news came. Only then was it understood that there was more at stake than an attack on the sovereignty and territorial integrity of a country in the middle of Europe, in violation of international law. Russian President Vladimir Putin started a war to establish a new world order – or rather an old one, dating back to before the collapse of the Soviet Union.

Unprepared Europe

This danger was underestimated because political elites in the United States and Europe had long stopped considering the possibility of a large-scale war in Europe. They had become accustomed to the illusions of the early 1990s, when the West triumphed and pocketed the peace dividend. The U.S. was the sole superpower after the dissolution of the Soviet Union. Russia under Boris Yeltsin set out to adopt democracy and a market economy. China’s liberalization and economic boom led many to believe political change would come through trade. The hope was that under the Pax Americana, globalization, modernization and multilateral entanglement would overcome nationalism. The EU was seen as the first step toward a global government. The most burning threats to humanity were the hole in the ozone layer, pollution and climate change. So why invest in deterrence and increase defense spending? The wisdom of “if you want peace, prepare for war” was forgotten.

Ukraine’s accession to NATO is out of the question simply because the basic requirement of full sovereignty over the entire country is not met.

NATO countries reduced their military capabilities. In Washington, Donald Trump’s administration demanded that member states invest at least 2 percent of gross domestic product (GDP) in defense, but the request was broadly criticized. The Kremlin came to the conclusion that the U.S. was a superpower in decline whose center of interest now lay in East Asia.

Confident that Europe was toothless without Washington, President Putin tested how far he could go in Georgia in 2008, and in Crimea and eastern Ukraine in 2014. Only after February 2022 did it dawn on Europe’s political elites that the war taking place before their eyes might not be the last such experiment. All of a sudden, even nuclear war is no longer out of the question. Mr. Putin could, for example, demand land access to the Kaliningrad exclave, where Russian medium-range missiles are stationed, or he could use the Russian minority in the Baltic republics as a pretext for invasion. And then what?

Stopping Putin

Horror, anger and fear of escalation spread. Television stations from all over the world reported around the clock from the theaters of war. Public opinion put governments under massive pressure. People could not stand by while the Russian invaders shelled streets, housing developments and hospitals. “Something” had to be done to stop Putin. But what?

Ukrainian President Volodymyr Zelenskiy has proven an exceptionally courageous man and an excellent communicator. He knows how to strengthen the Ukrainians’ spirit of resistance and appeal to people’s hearts. Impressively, he spoke every day from Kyiv in front of running cameras, explaining what the war was doing to his people. But NATO rejected his demand for military support. 

Ukraine’s accession to NATO is out of the question simply because the basic requirement of full sovereignty over the entire country is not met. Both the imposition of a flight ban and the delivery of fighter jets could have led to a direct confrontation with Russian forces, according to NATO’s assessment. Mr. Zelenskiy’s proposal to admit Ukraine to the EU – along with Moldova and Georgia – was received with sympathy, but in practice, it was put on hold. Admission to the EU would be highly symbolic for the Ukrainian population, but would have virtually no relevance to security policy. So far, the EU has not even managed to admit the Western Balkans states. Early accession of Georgia, Moldova and Ukraine could push the Union to its breaking point.

Volodymyr Zelenskyi
President Volodymyr Zelenskiy holds Ukraine’s application for membership to the European Union. While the European Commission was sympathetic to the request, no real steps toward accession were made. © Getty Images

In view of the hopelessness of using diplomatic means to induce Mr. Putin to cease hostilities and begin negotiations, the U.S. and the EU relied – as they had in response to the annexation of Crimea – on arms deliveries and economic sanctions. 

All the measures taken so far are meant to drive up the cost of the aggression as much as possible. Their goal is to eventually force Russia to withdraw and restore Ukraine’s independence and territorial integrity according to the borders of December 1, 1991. (On that day, 92.3 percent of Ukrainians voted to separate from the Soviet Union.) NATO would have had the opportunity to place Ukraine under its protection together with Georgia, like the Baltic republics. But this proposal by U.S. President George W. Bush failed in 2008 because of vetoes by Germany and France. President Putin would not have dared to start with Ukraine in NATO. The stronger the deterrent, the lower the risk that a tragic miscalculation will trigger a world war.

European countries are now paying a high price for their neglect and for the cowardice and greed of their political and economic elites. In Germany, the state of the Bundeswehr after 16 years under Angela Merkel is pitiful. When it comes to energy supply, the former chancellor maneuvered the country deeper and deeper into dependence on Russia. While she shut down coal and nuclear power plants to save humanity from supposedly imminent ecological disasters, Russia modernized its army with natural gas and oil exports, which account for about 40 percent of state revenues.

Boycotting Russian imports will certainly not force Russia to withdraw from Ukraine anytime soon. In the longer term, however, it could prove effective, because Russia’s growth is stagnating due to its almost exclusive dependence on commodity exports, from which the ruling kleptocracy and the army almost exclusively benefit. 

In the short term, import bans on Russian commodities would severely affect the EU, and – because of their dependence on wheat imports – countries in Africa and the Middle East. For Russia, where almost 20 million people live in poverty, the sanctions imposed are already having disastrous consequences. Will they cause Russians to rebel against Putin, or will they blame the West for further worsening their situation?

Who decides on sanctions?

In the U.S., the International Emergency Economic Powers Act (IEEPA) empowers the president to order sanctions without congressional approval. They can be tightened, relaxed, or lifted at any time. In addition, Congress can also initiate them through legislation. As of February 2022, 23 countries were on the U.S. sanctions list. Some of them – Iran, Cuba and North Korea – have been there for decades.

In the EU, all sanctions-related decisions are the responsibility of the European Council. Member states are required to implement them within their jurisdiction. Restrictive measures are coordinated and reviewed by the European External Action Service (EEAS), the Union’s diplomatic service. The European Commission is responsible for ensuring that they are applied equally by all member countries.

Collateral damage of economic warfare

Whoever imposes sanctions on a country starts an economic war, which differs from protectionist economic conflicts only because of its political purpose. Even for political sanctions, impediments to free trade inevitably result in significant losses of prosperity on both sides. Import shortfalls need to be replaced with expensive contracts with other suppliers or substituted with domestic production, which takes time and costs a lot of money. The longer the sanctions last, the more sectors will be affected.

The burdens of the economic war are unevenly distributed, which increases Russia’s chances of playing off Western countries against each other.

A joint embargo on oil and gas imports from Russia failed because of vulnerabilities in the U.S. and the EU. In America, the loss of imports can be largely compensated for by tapping into fossil fuel deposits since fracking is legal there, unlike in the EU. Europe, on the other hand, must strive to find other import sources and import routes. American fracking oil and LNG are the main options. The burdens of the economic war are unevenly distributed, which increases Russia’s chances of playing off Western countries against each other.

The effectiveness of sanctions is highly controversial. The Global Sanctions Database studies 1,101 cases from 1950 to 2019, and the conclusion is that less than half of the sanctions imposed achieved their goal. Measures against Iran, which Washington imposed unilaterally without consulting allies, are considered a negative example. They directly burdened the Iranian people and strengthened government support rather than weakening it. The Iranian regime’s behavior did not change. Germany was significantly more affected by the negative repercussions of the sanctions than the U.S.

To be effective, sanctions must:

1) maximize the damage to the adversary and minimize damage to the sanctioning party
2) be targeted at the regime and the state apparatus
3) avoid burdening the population so as not to drive them into the arms of the regime
4) be sustainable in the longer term
5) be supported by as many countries as possible

A massive NATO buildup could prove more effective than economic sanctions. Not only because it would increase NATO’s ability to deter and contain, but also because it would put Russia under economic pressure. It was an arms race that accelerated the decline of the Soviet Union in the 1980s.

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