Sanctions strategy and sanctions theater
The good, the bad, and the silly
Sanctions on Russia are essential. Sanctions on Russia are foolhardy. Sanctions will likely cripple Russia’s military. Sanctions could lose the war for Ukraine.
All of the above can be true at once, because sanctions take many different forms.
To quickly review some truisms about sanctions and trade:
Sanctions almost never cause regime change. South Africa and … who else?
Depriving a country of key imports can be impactful. A crippling oil embargo on Japan helped motivate Pearl Harbor.
But such impact depends greatly on how easily the sanctioned item can be substituted for. Duh.
Sanctions can enrich kleptocrats. (Most famous example: Iran’s Revolutionary Guard.) Monopolies on scarce imports can be very valuable.
Stifling trade can be terrible for the worldwide economy. The Great Depression comes to mind.
Sanctions’ effects are hard to predict. Macroeconomic forecasts are always hard, especially when they pertain to authoritarian countries that lie about their numbers. Forecasts are harder yet in the face of large and unusual shocks.
With that as background, let’s dive in.
Sanctions on Russian imports
Sanctions on Russian manufacturing inputs seem to be working well. Anecdotes suggest various Russian manufacturing shutdowns or other difficulties. Reporting suggests that alternative suppliers are not easily being found. Notably, China is not stepping up to fill many gaps. India doesn’t seem to be either.
Common sense suggests these difficulties will sharply limit Russia’s ability to replace expended munitions and military equipment, but such outcomes are not yet confirmed.
General damage to Russia’s economy from such sanctions is, of course, very hard to estimate.
Sanctions on Russian oligarchs
Many of the early sanctions on Russia have focused on punishing Russian oligarchs. The apparent theory is that they’ll be displeased and pressure Putin accordingly. The apparent reality is that they have little power to do so. Indeed, Putin mocks them in his speeches for their misfortunes.
Sanctions on Russians’ travel
Many of Russia’s top managers, programmers and so on would like to leave Russia and resettle in the West. Travel sanctions make it harder for them to do so. This is regrettable, and seems to outweigh any alleged benefit such sanctions have.
Sanctions on Russian exports
Now we get to the complicated and confusing part: sanctions on Russian exports, especially oil and natural gas. For starters:
It is widely claimed that buying fuels from Russia allows Russia to pay for its invasion of Ukraine.
However, it is hard to find numerical support for that claim.
It is hard to estimate the economic harm to Russia from fuel sales sanctions.
It is possible that the harm to other countries far exceeds the harm to Russia.
The upshot is a diplomatic and political mess. In one indication of how confused this all is, Western countries and Russia itself are each imposing sanctions on Russian sales of natural gas.
The biggest problem with Russian export sanctions may be the threat to Western unity. In most respects, Western countries are quite united in their approach to the Russia-Ukraine war. But they differ strongly in their preferences about fuel sanctions. Worse, some leaders seem to want Ukraine to end the war before it is militarily optimal to do so; it seems likely that there are two predominant reasons for such views:
Misplaced concerns about nuclear escalation.
The hope that fuel sanctions could be ended or reduced.
Kamil Galeev has posted many interesting tweet threads about Russia’s economy (and other subjects).
My own earlier tweet thread on sanctions contained an indicative little example.
Ukraine’s Foreign Minister Dmytro Kuleba published an article in Foreign Affairs that clearly lays out Ukraine’s military strategy and makes a forceful case for additional military aid. However – and this is my point in citing that link – the short sections asking for more sanctions aren’t nearly as detailed or well-argued.
Similarly, some of the best analysts of the Russia-Ukraine war praised and tweeted a recent overview of Russia sanctions. Yet this apparently best-in-class piece is confusing, and unpersuasive about the sanctions’ effects.
UK intelligence officials believe that Russia is running out of precision munitions. (A key goal of sanctions is to hinder Russia from manufacturing more.)
Putin’s mid-March screed about oligarchs was vicious.
I explained last week why a Ukraine ceasefire could be catastrophic.