Evaluating the Russia Sanctions

Photo: Chris McGrath/Getty Images
When the Russian invasion of Ukraine began, massive sanctions were imposed, and more have continued to arrive as the war has continued. Now, some six weeks later, we can draw some conclusions about the sanctions imposed by the United States and its friends and allies. I am not going to provide a litany of all the sanctions. Every law firm in town is busy doing that, and if you want one or two, I would be happy to refer you. Instead, I will look at them in categories and discuss some successes and failures and, as is always the case with sanctions, some unexpected results.
The imposed sanctions can be roughly grouped into four categories: financial (removal from SWIFT, freezing of assets, denial of tax benefits), import (restrictions on imports, removal of WTO benefits, embargoes), export (export and outbound investment controls), and other (denying access to airspace and airports, yacht seizing, removal from sports and cultural events).
One could argue that since the threat of all these did not prevent the invasion, they failed. It is true that sanctions are generally most effective when their threat deters action. If it does not, and you subsequently pull the trigger, as with Russia, you are essentially playing defense from the start. Thus, it is important to define the goals of sanctions clearly. If it is to persuade the adversary to change his mind and withdraw, that is not likely with Russia. If it is to inflict considerable pain immediately with the promise of more to come in the hope of producing an eventual change in behavior, the jury is still out on its effectiveness, and will be so for some time. It is possible at this point, however, to comment on what seems to be working and what is not.
Most observers, including me, have been surprised at the sanctions’ short-term impact, particularly in the financial sector. There are work-arounds (see below), but overall, the allies have been more forceful and unified than anyone—including Putin— expected. At the same time, it is gradually becoming clear that this is a long-term play. We can do considerable damage to the Russian economy, but the full effects will play out in months and years, not weeks.
The main reason for that lies in gaps in the import sanctions. Europe continues to buy Russian gas and oil (though as of last week, not coal). One can debate the wisdom of those exceptions, but both sides acknowledge that with oil prices as high as they are now, failure to cover oil and gas will keep the Russian economy afloat and help it continue the war. The lesson for the Europeans is no pain, no gain.
Export controls and outbound investment restrictions are also long-term plays. Russia already has what it needs for the war in the short term. We are denying it replacement parts and technology that it will need to maintain its military. The impact will play out over time—if we hold firm, Russian capabilities will be undermined and its economy further weakened. However, there is always leakage, and the key issue will be what China does, since the sanctions cover Chinese exports that contain or are made with allied technology. At this point there is little or no evidence they are violating the sanctions, but I expect they will—on a small scale and under the table. We will find out about it, and you can expect the next debate in Washington will be what, if anything, we should do about it.
The “other” category contains actions that are largely symbolic or will affect small numbers of people. Even so, nothing says “pariah” like kicking a country out of international sports competitions or denying their performers a world stage.
As with most things in life, though, there are always countermoves, and sanctions enforcement is a giant cat-and -mouse game where the offending country and those who want to help it use subterfuge and legal technicalities to get around the sanctions. It is axiomatic in enforcement in that if you expect 100 percent success, you are doomed, but if you ensure that your adversary only gets one-third of what it needs at five times the price over a much longer time period, you’ve done your job well. Unfortunately, the world is not short of people who will buy and resell anything to anybody at the right price.
One legal technicality already coming into play is definitional—what is a Russian product? The same issue comes up with the U.S. Buy America Act. If you are going to give favorable or unfavorable treatment to a country’s products, you need to define the affected universe. We are already beginning to see, for example, blended petroleum products being sold as “non-Russian” because they contain less than 50 percent Russian oil. This is inevitable unless you draw the content line at zero.
Finally, a welcome new feature of this war is self-sanctioning. This is a highly visible war. Thanks to the many Ukrainians posting photos and videos, as well as committed journalists in Ukraine, the world is seeing Russian brutality in real time, and companies are responding voluntarily. The atrocities may be hidden from the Russian people, but they are clear to the rest of us. In the long run, the collective actions of outraged people acting on their own may be the most powerful tool we have.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2022 by the Center for Strategic and International Studies. All rights reserved.
