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Sanctions May Not Be the Solution The West Thinks They Are

Less than two weeks into its invasion of Ukraine, Russia became the target of 2,778 new sanctions—including the previous sanctions against the country, Russia is now the world’s most sanctioned nation. Countries from the West and beyond have bet on sanctions to curb Russian aggression instead of a military solution that, they believe, could risk nuclear war. Such a campaign of sanctions is unprecedented against a nation as large and mighty as Russia.

Over the years, countries have increasingly employed sanctions as a foreign policy tool, often as an alternative to more aggressive measures like military interventions. According to The Treasury Department, the amount of sanctions designations used by the United States grew by 933 percent from 2000 to 2021. Since President Biden has dismissed the idea of sending US troops to Ukraine, he’s sending a message to all countries: Sanctions are in, and the other tools are out. While sanctions offer a convenient response to the Ukraine crisis, they are not the panacea the West wants them to be. Sanctions will not do enough to stop President Putin’s ambitions: They are a tepid solution to a dictator pushing the (special) military operation of his dreams. Putin has prepared for this time since the annexation of Crimea, and sanctions will not wrangle him now.

Before looking at Russia, let’s look at sanctions generally. What makes sanctions ineffective? Steve Hanke, an economist at Johns Hopkins University, puts it simply: “There are always workarounds.” Much like other foreign policy tools, sanctions can be flawed and unable to capture all the ways that a regime can circumvent their measures. It’s like squeezing a balloon: As one end is pressed, the air rushes to another part of the balloon, filling the same space elsewhere. But the analogy ends there. When you squeeze a balloon, it will certainly burst open eventually. Can the same thing be said about sanctions? Perhaps not.

There’s a long track record of sanctions being ineffective. In South Africa, when the international community placed sanctions against the apartheid regime, the measures failed to cover “strategic materials” like coal, diamonds, and some gold, so white minoritarian rule of the country remained as the South African economy shifted to prioritize these sectors. In the end, sanctions worked to upend apartheid, but it appeared a rather rare victory. Sanctions on Venezuela have not ousted its oppressive leader Nicolás Maduro, and, likewise, the United States toiled for half a century trying to bring down the Castros through the embargo on Cuba, but the regime has persisted. Sanctions against Iran, however, were a triumph to halt their nuclear program, but they only became successful after a new president entered the scene. Overall, experts believe that sanctions create a meaningful change in the behavior of target countries 40 percent of the time. The United States is hedging less than a coin flip’s chance on Ukraine.

To return to Russia: The sanctions the country faces in the current crisis are much different from those issued before. They’re much harsher and target specific elites in Putin’s circle and Russia’s central bank administration. But there are still a few things that could pull Russia out of economic doldrums slung on by sanctions.

First, Russia has a lot of money that comes from oil. Last year’s inflationary rise in oil prices has allowed the country to save up money to weather the costs of sanctions. Russia earned $119 billion in oil-and-gas sales last year, an enormous amount that can buoy the country’s military ambitions. Though many countries have moved to ban Russian fossil fuel imports, the money they can earn is still considerable. The United States has banned imports of Russian oil, natural gas, and coal, but it’s not like America buys a significant amount from Russia, as the country only represents 3 percent of the United State’s crude oil imports. The European Union plans to cut its gas imports from Russia by 66 percent by the end of the year, but that still allows Russia a decent chunk of profit to continue plundering Ukraine, especially as Europe relies heavily on Russian imports. Even if sanctions create a drastic dent in Russia’s oil profits, Russia will survive, as the price of oil will increase and Russia can still sell to other countries like China. What also serves Russia is its tight national budget, which can be sustained as long as oil sells at $44 a barrel. The current price is more than double that, allowing for a steady budget for the military and government services.

Second, Russia has accrued a “war chest” of currency reserves. Since annexing Crimea, the country has relied less and less on the dollar and shifted more money towards other currencies. Its currency reserve is worth $631 billion. This is money that can go to lifting the ruble if Russia faces other sanctions and can cover the expenses that Putin is racking up. The United States and other countries aren’t oblivious to this; they’ve moved to prevent the Bank of Russia from accessing foreign currencies held outside Russia, which leaves Russia only $300 billion in currency and gold reserves. But this amount may still leave Russia with enough for its invasion, especially as its military equipment is produced domestically and Putin could find a way to cover the costs. However, $80 billion worth of reserves is held in China, and it seems as if Russia will need the country’s help to keep it afloat. While many speculate that it would be disastrous for China to help Russia, it may be in its strategic interest to establish a Sino-Russo partnership against Ukraine, combatting what Moscow sees as a growing American influence in the region. Nevertheless, the reserves remain an important lifeline for the country. “Russia may be seriously hurt from sanctions,” Kenneth Rogoff, a professor at Harvard University, said, “but it will not run out of cash fast enough to save Ukraine.”

Rogoff’s prediction is in line with some claims experts charge against sanctions. Benn Steil, the director of international economics at the Council on Foreign Relations, said of sanctions, “They rarely work. But when they do work, they tend to take a very long time.” If the aim of these sanctions is to stop Russia’s invasion of Ukraine, even if they are successful and exact damage against Putin, we will be waiting a while until we see their effects. In the meantime, Ukraine might go under. Indeed, the slow-moving effects of sanctions might even prompt Putin to reach for more territory and resources, encouraging a more rapid takeover. As Brian O’Toole, a fellow at the Atlantic Council, suggests, “it may give Putin the idea that the pain of sanctions is less than he anticipates and gives him some incentive to keep pushing the envelope.”

Russia’s advance has slowly turned to a stalemate, but its stalled performance does not prove that sanctions were successful. Instead, other factors like poor logistical capacity and low morale of front line troops have played a significant part. And this failure might prompt Putin to press on against Ukraine, unable to accept defeat, as Russia has traditionally responded to early military failures with more firepower rather than peace. After the quick assault of Kyiv failed, Russia adjusted to a gradual, heavy artillery-reliant strategy that let it grab decent amounts of territory— there’s no reason it cannot shift its strategy again. Though Russia is down, it is not out. When Russia does rise up from the ring, sanctions may not be enough to stop the pugilist that Putin has become.

Sanctions have become a tool that politicians reach for when no other options appear viable. But given their history and the specifics of the Russian situation, we should reconsider their utility, especially as the current conflict rages on.