Sanctions And Their Impact On Russia

June 18, 2015
Two Muscovites in popular t-shirts sold now in many kiosks. The one on the left says "Topol - Not Afraid of Sanctions" and "Sanctions? Don't make my Iskander Laugh." The references are to weapons systems. Photo by

Russian spokesmen at home and abroad regularly tell us that sanctions are a failure and that the government does not care about them. Diplomatic reports also suggest that Putin told Secretary of State Kerry in Sochi that he could take the sanctions as Russia does not care about them. Undoubtedly Moscow would like us to believe that sanctions do not work and that they will not induce the government to renounce its ill-gotten conquests in Ukraine. While that last point is still true, Moscow is typically lying again.

As former Ambassador Michael McFaul just pointed out, if sanctions have no effect then why is Russia expending so much diplomatic activity in Europe to break the EU’s hitherto united front on sanctions? Moreover by every objective account sanctions have a profound impact on the economy and thus the government. While a parade of government spokesmen, analysts, and economists have regularly written that the effect of sanctions and of declining oil prices was diminishing and that the worst was over, the ruble was regaining value and energy prices were again rising, they only told us part of the truth. In fact businesses cannot get foreign loans, capital flight is increasing and inflation, unemployment, and poverty are rising steadily Indeed, at least 3 million Russians have reportedly fallen into poverty this year, thus undermining the main achievement of Putin’s domestic policies, i.e. economic recovery. Growth is still negative and the economy is mired in recession and the absence of reform means that its real structural problems that predated the war in Ukraine continue to go unaddressed.

Perhaps the most telling indicator is that the sanctions and low energy prices as well as Ukraine’s cutoff of cooperation with the Russian defense industrial sector have begun to exercise a discernible impact on defense production and Russia’s military modernization plans. It is increasingly clear that major projects in naval construction and space satellites are being severely crippled by the absence of foreign technologies and the ability of Moscow to obtain them. All the brave talk about going it alone and autarky, just like the similar braggadocio about the unimportance of sanctions’ crippling effect on the economy, turns out be so much typical Russian Vranyo (tall tales) and propaganda to convey an image of machismo, toughness, and strength.

However this propaganda offensive also tells us something else, an unintended message perhaps, but one that is no less clear. The government’s insouciance about the ongoing and apparently accelerating destruction of the Russian economy and of people’s lives reconfirms a long-standing fact of Russian history, namely that for the most part the Russian elite neither cared about nor knew how the Russian people lived. Anders Aslund once observed that Russia’s elites were an exceptionally venal elite and his observation clearly applies to the current ruling caste. If Russia’s rulers genuinely had a vision of the national interest as opposed to an obsession with their own personal interests, greed, and survival in power they might actually have taken steps to reform the economy and to alleviate the deteriorating economic and social conditions that are afflicting Russia. Instead Putin and his fellow Siloviki remain beholden to a modern from of the old Roman imperial mantra of bread and circuses. But even the bread is steadily disappearing even as Putin and his team pursue the ersatz satisfactions of propaganda, displays of machismo, and fantasies of empire.

Sanctions have not yet persuaded the government to retreat from its policies. One reason is because Putin cannot retreat from Ukraine without losing his power. But it is not only because his power is at stake. Sanctions do not represent anything more than a gesture, not a real policy involving many dimensions, let alone a coordinated strategy to reverse Russian aggression in Ukraine. It is necessary therefore to adopt a truly multi-dimensional strategy to achieve those goals, and that involves economic, information, and military measures like arming Ukraine, bringing home to the Russian people through expanded information dissemination of the physical and economic costs of the war, and broadening sanctions now to the entire Russian elite by depriving them of access to the West and to their foreign economic and financial assets. This includes Putin as well as his subordinates, all of whom are continuing to batten off the Russian people and their suffering. As the amount of pain spreads to the elite and the real costs of this war and of Putin’s regime become more widely known, then the ground on which his regime stands will shift and the pressure on him to find a solution will grow. Already Moscow is saying that the Donbass is and should remain a part of Ukraine — so that Kiev bears responsibility for sustaining it — while Moscow retains the levers necessary to destroy Ukrainian statehood and independence at any convenient future date. That goal already marks a retreat from the fantasies of creating a Novorossiia all the way to Moldova which may now be gone. But until we see a truly strategic and broad-gauged Western response the sanctions will fail to realize their full potential. Not only do we need to expose the ongoing lies of Russia’s propaganda at home and in the East and the “useful idiots” who purvey it, we also need to stop reacting to Putin and put him on the defensive through a truly strategic response to the advent of war in Europe. For if we do not do so this, crisis will metastasize until it engulfs not just Ukraine but Russia itself and all of its interlocutors.