What can Russian sanctions achieve?
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The international community responded to Russia’s invasion of Ukraine with harsh sanctions. But a year later, Russia is still fighting in Ukraine.
“You can try to sanction Putin and his oligarch cronies, but there’s no way that you’re going to bankrupt them,” Eddie Fishman says.
So are sanctions working?
“If the only evidence of it working would be if Russia had retreated to their barracks, then of course, the answer is the sanctions haven’t worked,” Adam Smith says.
Today, On Point: What have the Russia sanctions achieved?
Adam Smith, he runs the sanctions practice for the law firm Gibson, Dunn & Crutcher. Former senior adviser at the Treasury Department’s Office of Foreign Assets Control (OFAC), which enforces sanctions.
Frank Vogl, co-founder of Transparency International, Chair of the Partnership for Transparency and a professor of government at Georgetown University. Author of The Enablers: How the West Supports Kleptocrats and Corruption, Endangering Our Democracy. (@frankvogl)
Sergey Aleksashenko, former Russian deputy finance minister and first deputy chairman of the Russian Central Bank. (@Saleksashenko)
Edward Fishman, professor at Columbia University and former State Department official who worked on Russia and Iran sanctions. (@edwardfishman)
On the international community’s goals for the sanctions
Adam Smith: “I think they’ve changed, to be honest. I do think that to start with a President Biden and the alliance were really trying to have the sanctions be a deterrent. When that proved to be unsuccessful, I think they did pivot, and they pivoted to a couple of ideas that I think continue to this day. The first, I think, is to degrade Russia’s ability to continue fighting the war on the terms it would like.
“Limiting the ability to digitize its military, recoup its losses, etc. So that’s sort of the actual economic and physical goods sort of restrictions into Russia. And then perhaps even more importantly, is a messaging one. When parties are sanctioned, especially by such a global multilateral approach, there is a message that what they are doing is outside the norm and really beyond the pale. So, I think a combination of actual degradation of abilities combined with the messaging that what they’re doing is completely inappropriate.”
Frank Vogl: “Deterrence, before the invasion started, was clearly a very important factor. But it was also important as a mechanism to build the coalition that President Biden was so interested in doing. And many countries might not have been able to agree at that time on military cooperation and so forth. But agreeing on the economic sanctions in the event of a Russian invasion was a very useful mechanism to get that sort of coalition-building going.
“The second point I would make is that the sanctions come in two fundamental different forms. One is sanctions on the Russian economy, and on the Russian state. And the second type of sanctions are sanctions on individuals. All the members of the Russian parliament, the Duma, have been sanctioned. Many businessmen have been sanctioned. Many people in the Kremlin individually have been sanctioned. And the purpose there is to place increasing pressure on the Kremlin to force an end to the aggression, by making life really tough for all the individuals sanctioned. The hope is that they, in turn, will influence President Putin to relent and change policy.”
Have sanctions ever worked as a method of deterrence?
Adam Smith: “When I was still in the government and working on the first round of Russia sanctions after the Crimea invasion in 2014, there were Ukrainians and there were sanctions then, not nearly as comprehensive as they are today. There were Ukrainians at the time after 2014 who sort of said, well, the sanctions aren’t working. Because Russia is still in Crimea, which is where they were at the time.
“However, there were other Ukrainians who would tell me that, in fact, the sanctions did work because if not for them, Russia would have already been in Kyiv or Lvov or elsewhere. So it forces this sort of interesting counter historical. I mean, there are cases, I would argue, if not of deterrence, of certainly compulsion, where sanctions, for example, brought Iran to the table with the nuclear talks … five to ten years ago at this stage.
“You know, there are cases with the apartheid cases with Libya, cases with the former Yugoslavia, where sanctions have changed the calculus of those in charge in a way that supported the policy interests for which the sanctions were imposed. But deterrence is a very challenging sort of assessment because you’re always trying to prove that which did not happen, or that which happened, but might have happened differently.”
On the Russian economy today
Adam Smith: “There are significant sort of characteristics of the Russian economy that are true today that certainly weren’t true prior to the sanctions that I think are caused by the sanctions directly and indirectly. I mean, the big one, of course, is that it’s completely scrambled the deck as to where Russia gets its money from with respect to its oil and gas sales. You know, it used to be very, very linked up with Europe, of course, and now it’s increasingly delinked from Europe and I think does change that. The uncertainties with respect to Russia on a going forward basis.
“Second of all, you’ve seen in the actual manufacturing and sort of real economy space. You know, the closure of factories, the inability for Russia to continue importing high end computer chips and other sorts of technology, that makes it very challenging for Russia to continue competing in a global economy. Its entire civil aviation sector has been essentially shuttered because of the restrictions with respect to European and U.S. measures as well.
“And perhaps most importantly, the one that’s really unseen in some ways, is the incredible brain drain that you’ve seen in Russia. Tens of thousands of Russians, high educated Russians who could leave, have left and gone to places like the UAE and … Europe and, of course, in the U.S. and elsewhere to get away. And I think that’s going to be a huge drain on Russia today, but certainly in the future as well.”
On a history of sanctions
Edward Fishman: “Historically, sanctions have a mixed track record at achieving U.S. foreign policy objectives. And I don’t think that’s unusual. I mean, does military force work? It worked in World War II. It didn’t work so well in the Vietnam War. So, like any tool of statecraft, sanctions have capacity to advance U.S. foreign policy objectives, but they also have capacity to do nothing, and they have the capacity to actually work at cross-purposes with what the U.S. is trying to achieve.”
On effectiveness of sanctions
Frank Vogl: “There’s no question that the sanctions have had an effect. But. Overall look at the fact that we’re talking about just a 2% GDP decline last year. The International Monetary Fund sees no decline in the economy this year and actually an upswing towards the end of the year and into next year. So what is really happening? Yes, we can find all sorts of data points from a huge reduction in car production in Russia all the way through to microchip production and so on.
“But the Turks, the Indians, the Chinese, the United Arab Emirates and numerous other countries are helping the Russians to beat the sanctions. Yes, our allies, Turkey and the UAE, are right up there in front helping the Russians to beat the sanctions. There was a lovely little item in the New York Times the other day about how wealthy Russians in Moscow are going to their restaurants. The restaurants are packed and they can eat sea bass that has been flown in overnight every day from Turkey. I mean, the sanctions are not doing the two things we talked about at the beginning of the program.
“They are not deterring the Russian will to fight, and they are not through the individual sanctions, having the effect of adding pressure on Putin to change his policies. And we have to keep our mind, I think, I’ll focus on the fact that our diplomacy relative to sanctions and our justice system, relative to sanctions so far have not met the expectations that Biden and Johnson and others set when they made these big announcements one year ago.”
On corruption in Russia
Frank Vogl: “Russia is not a normal economy. This is a country run by a kleptocratic regime that steals massively from its people. There is a huge informal economy that doesn’t go through the data and the statistics. There is a very large group of people, many of whom have now individually been sanctioned, who run the economy within the economy. They have assets all over the world. They are protected by some of the world’s biggest banks and by some of the most reputable law firms in the world who have no shame and work for these oligarchs and their assets.
“Just yesterday, the Swiss, under enormous pressure from various governments, said they would take action against some of the dirty money in Switzerland from Russia. So what did they do? They prosecuted four people at Gazprombank. That is the Swiss affiliate of Russia’s Gazprom energy company. And they went after, they said, people who had been aiding a cellist. Now, if you like music, maybe you’ve heard of Sergei Roldugin, but he has $50 million, apparently, according to the Swiss authorities, in a Swiss bank. He is a front man for Vladimir Putin.
“We need to understand that when we look at sanctions and the Russian economy, we have to directly address this unbelievably huge and efficient and effective corruption conspiracy that keeps Putin in power, that keeps his wealth, that allows so many people in the top of the Russian intelligence service, the military, the bureaucracy and, of course, the business community to live a very good life. Even though we’ve announced sanctions on them, and so long as they have all this comfort and maybe a little bit of inconvenience because of sanctions, then we’re not getting a real sense of really having effective sanctions.
“So we need to really boost our Justice Department, stop it from putting out silly little statements about how they’re doing more than ever before. Let them bring these people to justice. Let them name the names, let them seize, and then confiscate the assets. And let’s put real pressure on these people. And if we don’t, then I’m afraid history will say the sanctions were more bluster and fine rhetoric than real hardship for Russia.”
On freedom for the people of Ukraine
Frank Vogl: “Let’s talk in the last word about the people of Ukraine. Their freedom is absolutely crucial. If we want to really help them, we must give them not only military support, we must see that the sanctions are enforced really fully and effectively. The way we can help the people of Ukraine who are suffering every minute is by saying we have diplomatic enforcement of sanctions. Justice enforcement of sanctions, and full economic enforcement of sanctions. Have those three things, and we help the Ukrainians.”
This article was originally published on WBUR.org.
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