Despite the unprecedented scope of Western economic sanctions on Russia for invading Ukraine on February 24, one question remains: how effective are these measures really?
For now, the Russian economy seems to have avoided the collapse that many anticipated, its financial system has regained some stability, and the country still receives hundreds of millions of dollars a day from oil and gas exports.
However, behind this apparent normality, Russia has begun to suffer an inevitable setback , says Edward Fishman, an expert who in the past helped design sanctions against that country for the United States government.
During an interview with BBC Mundo, Fishman assures that the intensity of the measures against Moscow will increase to a maximum level when they reach its oil and gas exports.
The European Union, a key customer of Russian energy, has begun considering a proposal by its executive committee to ban oil imports from Russia, although some countries in the bloc are initially opposed to the idea.
Fishman anticipates that a withdrawal of Russian oil from international markets will further push crude prices higher and consumers around the world will be affected.
The following is a summary of the telephone dialogue with this former leader for Russia and Europe of the office of economic sanctions of the US Department of State during the government of Barack Obama:
How effective have the sanctions imposed on Russia been since February until now?
The sanctions imposed on Russia in recent months are unprecedented in their speed, scale and scope.
We have never seen in modern history sanctions being imposed so quickly against a major economic player like Russia.
To put it in context, on the eve of [Russian President Vladimir] Putin’s invasion of Ukraine, the intensity of the sanctions against Russia was like two on a scale of 10. And in a few days, it went to seven or eight on 10. .
And there could be more sanctions in the coming months.
It is not clear how the sanctions are affecting Putin’s politics and calculations.
The initial goal was to use the threat of sanctions to persuade Putin that invading Ukraine was not worth it. Unfortunately that didn’t work.
The goal of sanctions now is less to change Putin’s calculus and psychology, and more to degrade Russia’s ability to do more harm. It’s about making it harder for Russia to get the technology and funding it needs to fuel a military machine against countries like Ukraine and other neighbors.
In that sense, I think the sanctions will succeed: they will make it much more difficult for Russia to have a modern military capability.
This is your balance for a very short period since the sanctions were applied. Do you foresee that in the coming months the Russian economy will suffer more from the sanctions?
Undoubtedly. The impact of sanctions is only going to grow over time.
When the sanctions were imposed, there was an immediate financial panic that has subsided and there is some level of stability.
But I think the stability we see masks what’s going on under the surface. They can’t get the inputs they need to make many things, like cars or sophisticated machinery. And as a result, there will be a significant level of unemployment and inflation the rest of the year in Russia.
A contraction of between 10% and 15% of Russian GDP is expected. That’s more than double the contraction Russia experienced after the 1998 financial crisis, when it defaulted on its debt.
So the economic fallout for Russia will only increase and I don’t think Russia can function as a modern economy under the current sanctions.
As long as the sanctions are in place, the Russian economy will fall far behind. Russia will be a pariah state, the North Korea of the Volga.
Will other countries also suffer the effects of sanctions on the Russian economy?
The war in Ukraine is having negative consequences for the world economy. It is not just about sanctions, but about the war itself.
Russia invaded Ukraine and shut down much of its industry, causing hundreds of billions of dollars in damage. As a consequence, we see things like a shortage of grain and food. Ukraine is one of the largest agricultural producers. By invading it, Russia created a food crisis elsewhere.
So I think the invasion of Ukraine will have rebound effects on the world economy.
There are also second-order effects from sanctions. There always are. Especially in countries exposed to the financial system and economy of Russia, on its periphery.
Do you expect Putin to become more aggressive as sanctions take effect on Russia?
I don’t see how Putin could be more aggressive than he already is. Remember that Putin launched this massive invasion of Ukraine in February, before the devastating sanctions went into effect.
And are there any identifiable results so far of the sanctions in the way Putin behaves?
No, I don’t think the sanctions are shaping Putin’s behavior. I think we have to be honest with ourselves.
The best opportunity for sanctions to affect Putin’s behavior was before the invasion took place: to use the prospect of economic devastation to persuade him not to.
After Putin made the decision to invade, I don’t think sanctions had much of a chance of changing his calculus.
It is hard to imagine a dictator like Putin walking away from Ukraine because of sanctions. When he decided to invade, the only way to really change his calculus was for the Ukrainian people to bravely defend themselves and show the Russian military that he was going to have it harder than they thought. And Ukraine has achieved that.
How does the sanctions regime against Russia compare with others applied to different countries?
Even now the sanctions against Russia are not as comprehensive as the US sanctions against Iran.
The country most sanctioned by the US continues to be Iran. All major Iranian banks and energy companies are isolated from the US financial system, which has launched a global campaign to cut off Iran’s oil exports. Basically, Iran is under maximum sanctions of 10 out of 10.
What is unprecedented about sanctions on Russia is that it is a much larger and more systematically integrated economy than other sanctions targets, such as Iran, North Korea or Cuba.
Russia’s central bank had assets worth $640 billion when it was sanctioned, more than the size of the entire Iranian economy, which at its peak had a GDP of about $550 billion.
And do you expect the level of sanctions on Russia to increase in the coming months?
Yes i wait. I think that in the end we will reach 10 out of 10. Finally there will be sanctions on Russian oil and even gas exports. But it will take a while to get to that.
The EU has announced new proposals for sanctions on Russia, including a ban on imports of Russian oil by the end of this year, as the US has already done. Do you have any idea how or who would pay the cost of replacing Russian oil? ?
By withdrawing Russian oil from the world market, prices are likely to rise. In many countries, consumers themselves will be the most affected: they will pay higher prices at the pump. Governments will have to do things to support the people who will see gasoline prices rise.
This is Putin’s fault. By invading Ukraine and launching an imperialist war against neighboring Ukraine, Putin has affected the whole world because oil prices are going to go up.
How sure can you be that these sanctions against Russia will work and that they will not impose economic suffering on a certain population without any guarantee of achieving the objectives?
Sanctions are never intended to have undue effects on innocent civilians. And I think often those effects can be exaggerated.
It is important that we are honest and, over time, monitor how the sanctions are working and make changes if necessary.
But so far the evidence suggests that the sanctions are having a rather dramatic effect on Russia’s economy.
Venezuela has been under sanctions perhaps more damaging than those imposed against Russia: they include the oil sector, a key leg of the Venezuelan economy, which has really sunk. However, Nicolás Maduro is still in power and the US and its allies have not achieved their goal of calling democratic elections in this country * . So why are sanctions going to work on Russia when they haven’t on Venezuela?
Let us remember that the objective of the sanctions against Venezuela has been to overthrow the Maduro government: regime change was the objective of the Trump government. And they have failed. They have not produced a regime change; Maduro remains in command.
The goal of sanctions against Russia is not regime change. I want to be clear. The goal is simply to weaken Russia’s ability to cause chaos, violence and destruction in the world. And I think they will be successful in that regard.
The objective of the sanctions against Russia is not as ambitious as that of the sanctions against Venezuela. Regime change is the most ambitious goal you can have with sanctions. And the record of sanctions is very bad in terms of bringing about regime change: they often don’t. Look at Cuba, under a decades-long US embargo and still with the Castro regime in power.
I would not compare Venezuela with Russia, because the objective of the sanctions is totally different.
He says the purpose of the sanctions is to weaken Russia’s ability to do harm in the world. But he is talking about one of the world’s two largest nuclear military powers. How can you reduce your ability to do damage when you already have an arsenal of nukes?
But they do not use their nuclear arsenal. In the war against Georgia in 2008, against Ukraine in 2014, against Syria in 2015 and against Ukraine in 2022 they are not using their nuclear weapons. They use conventional military power to intimidate, invade neighbors and redraw the map of Europe.
But they don’t use nuclear weapons because of mutually assured destruction. They do not want to enter into a nuclear war against other nuclear powers: this is not what Putin wants; I don’t think he’s suicidal.
I’m not saying that sanctions will end Russia’s nuclear program. That’s not the objective. The aim is to make Putin have to make some tough decisions: whether he is going to use the income Russia still gets to finance and modernize its military machinery, or to pay government employees and pensions.
He hadn’t had to make those tough decisions until now.
Would you say that Russia has learned something from the sanctions imposed on Venezuela to try to prevent damage to its economy?
I don’t think there is anything Russia can do to prevent economic damage. But I think if there is a lesson from sanctions on Venezuela it is that even crushing economic pain does not necessarily lead to regime change.
If all Putin cares about is maintaining his regime, perhaps the Venezuelan sanctions will give him some consolation that even if his economy is in massive recession and falling apart, he can still hold on to power.
That is a sad comment on Putin and his place in Russian history. Russia is a great civilization, a great society. I think they deserve more than a dictator who is willing to see his country lose 20 years of economic development to stroke his own ego and his imperial fantasies.
- Gerardo Lissard
- BBC News World