The Biden Administration and our allies have relied on economic sanctions as the only weapon to confront Vladimir Putin’s ruthless attack on Ukraine. Media reporting has been focused on Putin’s oligarch buddies and their extravagant assets outside Russia. But are sanctions effective? For decades, various administrations have imposed multiple sanctions on Russia that have had no real deterrent effect.
In Congress, I chaired the House Foreign Affairs Subcommittee on International Trade and Economic Policy, a group that had jurisdiction on sanctions and export controls. In the late 1970s, we passed two laws that gave the President such authority.
First, the Export Administration Act (EAA). For national security reasons, such controls were used to restrict the export of technology that would contribute to the military capability of a foreign nation, notably Russia. A government panel would review so-called dual-use technology (commercial and military) that concerned the tech industry at the time. Our hearings on reauthorizing the EAA had the committee room filled with lobbyists and law firms trying to change policies or get exemptions.
Second, the International Emergency Economic Powers Act (IEEPA) authorized the President to declare an “unusual and extraordinary threat….to the national security, foreign policy, or economy of the U.S.” that exists outside the United States. It had wide-ranging authority, allowing him to issue a declaration to block transactions, freeze assets, and impose economic sanctions to deal with such threats.
Aside from Iran, Russia has been the main target, most recently in 2014, when Russia annexed the Ukraine peninsula of Crimea. More were added after U.S. allegations that Moscow interfered in the 2016 presidential election. Regardless of the situations or the reasons that prompted such actions, they were mostly symbolic. Sanctions are “not an end to themselves and should not be treated as such,” Steven Pifer, a former State Department official wrote in 2020.
So what’s going to make the difference this time? Putin had no clue that his draconian actions would prompt such a fierce reaction. But will it deter him? In my view, the latest round of sanctions will prove more effective for the reasons listed below:
- In the past, It was the United States taking unilateral action. This time, not only NATO members and our allies, but most nations around the world are taking similar actions. In the past, Putin’s response was his defiant facial smirk, disregarding America’s sanctions, as he would simply pivot to other nations to fill the gap.
- A big hit on Russia’s largest companies and major revenue producer, the energy sector. This has gone way beyond the sanctioning of Russian executives. Europe’s growing dependence on Russia’s abundant oil and gas supply was abruptly halted when Germany put a hold on the Nord Stream, a 1,200 km pipeline under the Baltic Sea, that would provide Germany with much needed gas. Also, British Petroleum, which had a 20 percent share in Rosneft (Russia’s largest oil producer), pulled out, as did Shell Oil Co.
- This time U.S. and European private companies are taking similar actions, including Boeing and Airbus, both suspending their major operations and no longer providing parts, maintenance, and technical services to Russia airlines. More evident on the streets of Moscow, the popular McDonalds, Starbucks, and multiple retail food outlets, plus noted credit card companies, are now closed.
- The financial sector, ultimately the stranglehold, often is immune, but not this time. In just a week, Russia is reeling from the impact of massive financial sanctions, including on individual Russian banks. Beyond government actions, some key financial firms are restricting their Russian services, such as VISA and MasterCard.
- Finally, revoking the Permanent Normal Trade Relations with Russia, thus allowing the U.S. and G-7 countries to increase tariffs and impose trade restrictions, will further isolate Russia from the global economy.
What is the real effectiveness of these economic, financial and trade sanctions on Russia? It will take time to answer this key question.
Russia will take the hit as never before, now in damage control mode with the ruble tumbling, banks shutting down, disruption of financial norms that will trickle down and impact ordinary Russian citizens. Also, there are significant consequences on America, Europe, and elsewhere, especially the higher energy prices and soaring inflation. Another key question: How long is this sustainable?
I really liked Don Bonker when he was in Congress. His was a voice of sanity there. But IMHO he is way off base in thinking sanctions are going to hurt Russia more than the West.
Vladimir Putin (aka “Hitler,”) himself has said that Western sanctions have been a great boon to developing the Russian economy. They forced the country to get off its addiction to oil and gas money, drove the development of many other sectors of the economy, and helped make Russia the most self sufficient country on Earth.
This latest blind frenzy of sanctioning everything is playing with fire for the U.S. and Europe. The leaders in the West seem to think it is still 1995 and Russia is nothing more than a “gas station with nukes.” But a lot has changed over the last 30 years since the fall of the USSR.
The seizure of Russian Central Bank reserves in particular has focused attention all around the world. It is yet another incentive for countries to move away from the dollar. Weaponization of the dollar has been a self defeating policy. Even the Federal Reserve and much of Wall Street opposed these latest actions. But the neocons in the Biden administration are ideologues. They either cannot or will not see that the move away from the dollar is now accelerating. Saudi Arabia won’t take calls from Biden. And now the U.S. is going, cap in hand, to humbly ask Venezuela for oil? You can’t make this stuff up.
A new bloc is forming right before our eyes. Russia and China are at its core. India is smart enough to know what part of the world it lives in, and is acting accordingly. Look for the long simmering border disputes between India and China to finally be resolved soon. And look for Mackinder’s “heartland,” the “world island” of Eurasia, with most of the world’s population and resources, to move ever closer and ditch the dollar in order to no longer be under the thumb of the Washington DC neocons.
The longstanding demonization of Russia has pushed them into China’s arms, and that process is probably now irreversible. These latest sanctions have been laid down by Westerners who think they control the world. But in 2022 they no longer do. They don’t realize that, but the rest of the world does. What happens to the U.S. standard of living when the petrodollar becomes the petroyuan? A horrible decline, one that has been unimaginable to people convinced that they own the world.
The real tragedy is that it absolutely did not have to be this way. But hubris mixed with arrogance and stupidity can work wonders. As Talleyrand, one of the greatest diplomats of all time, once said: “it was worse than a crime. It was a mistake.”
A mistake that the U.S. and Europe will likely be paying for, for a very long time.
China is friends with North Korea, too. That’s the direction Russia is going, and China isn’t going to make it work for Russia any better than it works for North Korea.
The game we’re playing here is not just for Ukraine, it’s for Taiwan down the road. Thank heavens the US is once again part of the international community, and that community is working together.
North Korea is under UN sanctions, Russia is not. That’s a big difference. There are plenty of countries willing to help Russia evade western sanctions, notably China, Iran, and India to name a few.