In just under two weeks, the international community has imposed a dizzying array of international sanctions on Russia, following its military invasion of Ukraine. Prohibitions on banks and technology exports were followed by Russia’s removal from the SWIFT financial payments system; the seizure of personal fortunes from Russian oligarchs; and perhaps most significantly, a freeze on Russia’s access to tens of billions in foreign bank reserves. This week, the United States cut off oil and gas exports from Russia.
The Russian ruble has cratered in value, interest rates in Russia have doubled, the stock market has shut down, and the economy is in free-fall. The inflation rate in Russia was 9 percent last week and is likely climbing. Economic forecasters are projecting that Russia’s productivity drop will match that of 20 years ago when the country experienced a major financial crisis. Further, Moscow may be on the verge of defaulting on its debt. Never before have we seen a developed nation take such an immediate and devastating economic hit.
The question now for Western policymakers is not whether they’ve gone far enough—but rather have they gone too far?
Granted, this might not seem like the most appropriate question at the same time that Russian forces are indiscriminately shelling civilian targets in Ukraine, including a horrific missile attack on Wednesday against a maternity hospital. President Vladimir Putin and Russia have more than earned global condemnation and their current pariah status.
But sanctions are not benign policy instruments. While they are intended to target the policymakers implementing malign policies, it is not they who suffer, but innocent and ordinary citizens. Crippling and catastrophic sanctions imposed by the West will cause horrible suffering among the Russian people, and the ripple effects could spark a global downturn and harm countries and peoples thousands of miles from Ukraine.
The time is now to begin questioning precisely how far the international community is willing to go in sanctioning Russia—and whether there’s another path to ending the tragedy in Ukraine.
To be sure, the motivation for what French Foreign Minister Bruno Le Maire infelicitously called “all-out economic and financial war” stands on largely unimpeachable ground. Moscow has violated a bedrock global norm against cross-border invasion and is engaging in a brazen military assault that shocks the conscience. Imposing sanctions has an immediate and crucial goal: squeeze Russia hard enough that either Russia decides to end the war in Ukraine or it becomes more difficult for it to continue.
The United States and its Western allies pledged to implement precisely this policy and warned of severe consequences if Russia went to war with Ukraine. Credibility is often given more credence than it should in international affairs, but not this time. From a reputational perspective, the West had little option other than to deliver a robust response to Russia’s actions.
But as Daniel Drezner, professor at Tufts University and a writer at The Washington Post, noted this week, the real reason for the sanctions appears to be more elemental: “Foreign policy leaders want to punish Russia for what it has done.”
Such attitudes are understandable, but they don’t get Ukraine any closer to an end to hostilities. In general, sanctions are rarely effective at ending military assaults and, so far, they don’t appear to have fazed Putin. Indeed, his response to what he labels “economic warfare” waged by the West has been to ramp up the viciousness of the actual war in Ukraine.
More important, sanctions are not intended to punish. Their purpose is to change behavior. As angry as we might be over Putin’s war, we shouldn’t lose sight of the bigger picture. Stopping the war must come first.
Indeed, sanctions can have the perverse effect of increasing the lethality of a conflict. As Erik Sand and Suzanne Freeman wrote this week in War on the Rocks, “Economic pressure can lead states at war to adopt riskier strategies, often involving escalation.” They point to the example of crippling prewar U.S. sanctions against Japan, particularly an oil and gas embargo lodged in August 1941 against Tokyo. As the sanctions began to take a toll and sparked a domestic backlash, the country’s leaders decided that they must do something. Unwilling to end their military adventurism, they chose instead to go to war the with the U.S. and bomb the American fleet in Pearl Harbor, even though few inside the Japanese government believed they could prevail in the conflict.
While Putin may be able to weather a domestic backlash—and likely by increasing repressive measures—his citizens will pay a hefty price. In the short term, millions of Russians may lose their jobs and be unable to feed their families. From a long-term perspective, the damage could be even more severe. Foreign direct investment in Russia will likely dry up. Many educated and affluent Russians will abandon ship, creating a further brain drain. Putin’s efforts to modernize the Russian economy will be stopped dead in their tracks.
As Russia becomes a pariah state, abandoned by international commerce and economically destitute, there is the possibility that Putin’s behavior becomes more irrational—and he considers utilizing the biggest tool in his toolbox (nuclear weapons) to demand the world’s attention.
Finally, there are the downstream effects on the global economy. For Russia’s neighbors, the impact of the war will be felt the hardest. Poland, Hungary, and Moldova are now dealing with serious humanitarian crises as millions of Ukrainians flee their war-torn country. The impact of the declining ruble can also be felt in Central Asian countries whose currencies shadow the ruble.
Since Russia is the eleventh-largest economy in the world, removing it from the global supply chain also has a damaging cascade effect. Russia is responsible for a quarter of the world’s copper supply and close to 20 percent of wheat, as well as natural gas exports. Nickel and aluminum exports are also key aspects of Russia’s export economy. Global prices for these commodities will inevitably rise.
Already, the cutting off of Russian gas exports has led to an increase in oil prices, which could produce a global downturn. The International Monetary Fund warned this week that war in Ukraine has led to an additional rise in already high global energy and food prices, which will undoubtedly be felt the most by the world’s poorest and most vulnerable citizens.
And as economic instability rises, so too may political instability. Recent polls suggest that Americans are willing to accept higher gas prices if it punishes Putin for his invasion of Ukraine. They say that now, but if gas prices rise to more than $5 a gallon are Americans still going to be as altruistic? The same sticker shock could hit in other Western countries (where gasoline, of course, already costs a good bit more) and potentially lead voters to embrace populist politicians who promise to get things under control.
As if all this isn’t enough to concern Western leaders, with little sign that Putin is inclined to back down any time soon, the international community will need—for some time to come—to devote substantial resources and focus to ensuring that Russia remains contained and defanged.
In the near term, this is a price the world likely will need to pay to stop Russia’s aggression (while doing everything possible to alleviate the economic pain for those countries affected). Yet Western governments must provide Russia with a clear set of conditions under which sanctions can be lifted. Economic pressure—with no hope of an end—will likely not stop the fighting. If anything, it could make the situation worse.
In addition, the U.S. and the West need to continue providing off-ramps to war, even if right now Moscow clearly has no interest in taking them. Engaging diplomatically and providing potentially face-saving moves for Putin is critical. Putin appears to be disinclined to end the war, but perhaps he will reach the point when he feels he has no other choice. Providing him the opportunity to do so is essential—as distasteful as it might seem.
If Putin doesn’t hear the West’s message that there is a path out from under sanctions, perhaps others around him will—and decide to take matters into their own hands. No one should be Pollyannish about the potential consequences of regime change in Russia (they have tended to go poorly in the past), but moving Putin off the stage might be the only hope for ending the war. To the extent the U.S. can make clear to the Russian elite, military, and the Russian people that it is Putin’s stubbornness that is responsible for their plight, the better. But, unfortunately, that too is likely a slim possibility.
The reality of the situation in Ukraine is that there are no good options. Pressuring Russia is undoubtedly the right thing to do, but it brings with it awful consequences for millions of innocent people. The international community has little choice but to remain resolute, while at the same time seeking to alleviate the pain it is causing and making every possible effort to push Russia off the path it’s taken.
