The role of sanctions in ending the war, their broader ripples, and future lessons
With the sanctions against Russia for its invasion of Ukraine moving into their sixth month, three main questions are increasingly being asked: How effective are the sanctions in pressuring Russia to end the war? What are their broader global ripple effects? What lessons do they carry for other uses of sanctions?
Ending the War
While it is too soon to definitively answer the first question, a few initial conclusions can be established.
For all the warnings to Vladimir Putin about how “devastating” sanctions would be, their threat did not deter Russia from invading Ukraine. President Biden later tried to backtrack on the sanctions as a deterrent claim, although official statements were quite explicit: “The purpose of those sanctions is to deter Russian aggression,” Secretary of State Antony Blinken said in January; “the President believes that sanctions are intended to deter,” national security adviser Jake Sullivan stated in February.
With the sanctions and war coming on top of COVID-19 pandemic’s two-plus years of economic disruption, the effects on the global economy are quite extensive.
Once Russia invaded, the sanctions were intended to support Ukraine’s defense and pressure Russia to end the war. They are the most extensive and globally supported sanctions the US has ever imposed. Financial sanctions against Russian banks and dollar-based economic transactions cut many ties to the international financial system, including freezing much of the $640 billion accrued in hard currency reserves. Technology sanctions went after imports like semiconductors, key to both military industries and commercial products like cellphones and cars. Russian oligarchs, top military officials, and Putin himself were hit with individual sanctions on their financial assets, travel bans, superyacht seizures, and other measures. Sanctions on Russian oil exports, while initially minimal, have tightened over time. The new Nord Stream 2 natural gas pipeline was blocked from completion. Existing natural gas shipments were scaled back (though not shut off, given Europe’s even greater dependence on Russian natural gas than on oil).
Sports and cultural sanctions added their own economic effects and added to a sense of isolation for Russians and their society, including bans from the World Cup (men’s and women’s), Wimbledon Tennis, International Ice Hockey Federation, Formula One, Cannes Film Festival, and Eurovision. In contrast to most cases in which major multinational corporations resist sanctions, close to 1,000 companies ended—or at least reduced—business in and with Russia. These include oil companies like BP and ExxonMobil, retail companies like Nike and Ikea, restaurant chains like McDonald’s and Starbucks, auto companies like BMW and Ford, entertainment companies like Disney, tech companies like Apple and Google, and Coinbase, the largest US cryptocurrency exchange.
While some countries refused to join the sanctions—China and India being two major ones—international support was widespread. Even Switzerland, typically neutral in international disputes, agreed to impose similar sanctions to those levied by the European Union. Asian allies such as Japan, South Korea, and Australia also joined in—Singapore, too, which has never before imposed non-UN authorized sanctions. UN sanctions were blocked by the Russian Security Council veto, but the General Assembly voted to condemn the Russian invasion by an astounding 141–5 vote.
Initial economic impact did hit hard. Russian GDP, which grew 4.7 percent in 2021, was projected to contract 10–15 percent in 2022. Inflation was running at 17 percent. In mid-April, Moscow’s mayor warned of 200,000 jobs at risk in the capital city. For the first time since the 1917 Bolshevik Revolution, international debt was defaulted on. The ruble initially depreciated from 84 to each dollar, to 154.
But as sanctioned countries so often do, Russia has had a number of counterstrategies to offset at least some of the economic impact. Turning to alternative trade partners is core to Russia’s strategy. As of this writing, Russian oil exports are down only slightly, as China, and especially India, are increasing their purchases. Before the war, Russia accounted for about 1 percent of India’s oil imports. Now, Russia is close to overtaking Iraq as India’s top oil source. Even with some decline in volume and world oil prices skyrocketing, Russian oil export earnings are projected at $285 billion—that’s up from $236 billion in 2021. With money still flowing in and such domestic measures as central bank interest rate hikes and capital controls, the ruble not only recovered but hit a seven-year high in late June, at 52 to the dollar. Retiree pension increases, company bailouts, and other measures have helped cushion costs for the average Russian. Arrests and other types of political repression subdued the initial wave of antiwar protests from inside Russia. Nor have the sanctions targeted at Russian oligarchs and key government officials become pressure points. The few that have spoken out have paid a price. For example, Oleg Tinkov was forced to dump his $9 billion bank at fire-sale prices after an Instagram post criticizing the war, and then he retreated into hiding.
The Kremlin also retaliated with countersanctions, most significantly cutting natural gas supplies to Europe. Prices have been ratcheted even higher; for example, German electrical power costs have almost doubled from €140 per megawatt-hour in January 2022 to €260 in June. Shortages are already setting in. For example, the German megachemicals company BASF SE, with 39,000 of its own employees and feeding into industrial supply chains, has considered shutting down some production. With the EU-wide target of filling gas reserves to 80 percent before winter sets in at risk, the specter of rationing even home heating looms large for European leaders.
Defending Ukraine is a high priority, but the US has too many global interests to just flat out do whatever it takes.
It may be that these and other Russian counterstrategies prove less effective over time. Elvira Nabiullina, the Russian central bank’s chairwoman, warned that “the period during which the economy can live on reserves is finite.” We also have been seeing reports of Russian combat equipment shortages due to widespread destruction by the Ukrainian resistance and sanctions constraining resupply. There should be no expectation, though, that sanctions will force Putin to say uncle. If things do get to the point that Russia concedes to ending the war on terms acceptable to Ukraine and the international community, sanctions will warrant some credit. The main credit, though, will go to the military strategy. If the Ukrainian forces had not been so skilled and courageous, and the US and NATO had not provided such massive military aid, no sanctions would have stopped Putin from conquest.
Broader Ripple Effects
Even if sanctions had been wholly successful, it would be important to take into account broader global and national ramifications. Climate change is one such ripple effect. It’s become increasingly hard to overstate the severity and imminence of climate change costs and consequences. Yet once again, climate change is being traded off to another pressing priority, a “fossil fuel gold rush” that is being set off. The Biden administration has rolled back limits on domestic oil and gas drilling. Europe has shifted back to coal to offset sanctions on Russian oil and natural gas. For all the billing the recent Group of Seven summit communiqué did of positioning increased investment in fossil fuels as a “temporary response,” the reality is that it runs counter to the commitments made just last year in the UN Climate Change Conference agreement.
With the sanctions and war coming on top of COVID-19 pandemic’s two-plus years of economic disruption, the effects on the global economy are quite extensive. Global GDP growth projections have been cut from 4.4 to 3.6 percent. Coal, steel, aluminum, nickel, and palladium are among other commodities hit by rising prices and supply chain disruptions. Inflation has been ratcheted up in the US, Europe, and most everywhere. Poor and developing countries have been especially hard hit. Estimates are that 40 million people are being pushed into poverty.
Of particular concern is food insecurity. With the loss of the 30 percent of world wheat and 75 percent of sunflower oil that Ukraine and Russia had been supplying added to other factors, nearly half the world population is facing food shortages. While Russian war tactics are principally responsible—destroying Ukrainian agricultural infrastructure, blockading ports, even launching a missile strike on an Odesa food warehouse— African leaders also blame Western sanctions.
One administration after another has overused sanctions, treating them as the Swiss army knife of American foreign policy.
While the Biden administration has had impressive success in mustering international support for the sanctions, this entails trade-offs and concessions on other issues to garner this support. What concessions are on offer to Saudi Arabia in an effort to secure a boost in oil production? To Turkey for agreeing to Sweden’s and Finland’s NATO membership? To the United Arab Emirates to make Dubai less of a safe haven for Russian oligarchs? To India to reduce its Russian oil imports? Defending Ukraine is a high priority, but the US has too many global interests to just flat out do whatever it takes.
Future Sanctions Lessons
The South African antiapartheid sanctions are often seen as the iconic case of sanctions success. But this case took many years of sanctions, and the extraordinary leadership of Nelson Mandela, to help end apartheid and realize a peaceful transition to democracy. The fact that in many more cases, sanctions have failed to promote democracy and protect human rights, in some instances backfiring and misfiring to hurt the very populations they were intended to help, demonstrates that the South Africa case was more an exception than a precedent.
If the Russian sanctions do end up succeeding, it will be important that policymakers and analysts recognize the limits of their lessons. Would, for example, sanctions get comparable support if China invades Taiwan? Two main differences incline to different dynamics. First, while as a blatant invasion of one country against another, Russia violated one of the stronger international norms, the China/Taiwan status is more complicated and mixed and thus less conducive to an international consensus. Second, international business interests are far greater in China than in Russia, making private-sector collaboration much less likely.
Indeed, the US sanctions strategy needs a broad reassessment. One administration after another has overused sanctions, treating them as “the Swiss army knife” of American foreign policy. Too often, sanctions have become a default option. This both crowds out potentially more effective policy options in the moment and, over time, risks making American economic power a wasting asset.
Bruce Jentleson is the William Preston Few Distinguished Professor of Public Policy at Duke University. In 2022, he was in residence at the Woodrow Wilson Center as a Distinguished Fellow, and for many years has been a nonresident Global Fellow. This article draws on his forthcoming book, Sanctions: What Everyone Needs to Know (Oxford University Press, 2022).