Russia’s invasion of Ukraine triggered the start of a historic economic war. Aiming to cripple Russia’s $2.2trn economy, the West imposed an unprecedented battery of sanctions against the aggressor. Over two years later, war is still raging in Ukraine and Russia does not appear to be slowing down. This motivates a review based on three questions: What sanctions have been imposed, and why? Have the sanctions been successful? How should we evaluate the sanctions with the future in mind? As I argue, while being justified and necessary, sanctions have underperformed expectations. This results in the emergence of two realities that can no longer be ignored by Western countries and their allies.
What Sanctions Have Been Imposed, and Why?
Starting on 24 February 2022, the first day of the Russian invasion, Western countries imposed sanctions on Russia, soon turning it into the most sanctioned country since WWII. Sanctioning countries include the G7 and the European Union (among others) who boast over 20 times the GDP of Russia (over $50trn versus $2.2trn). Even Switzerland, famous for its neutrality, joined. Sanctions consist of trade embargoes and financial measures. The former ban or limit exports to and imports from Russia. The latter target individuals (e.g. oligarchs), banks, and companies, by freezing assets and restricting their actions. For instance, $323bn of Russian Central Bank’s currency reserves currently remain frozen. Within two years, respective blacklists amassed over 16.500 targets and are regularly updated to prevent circumvention. This partly explains why new sanction packages are constantly being issued.
Western sanctions are focusing on two strategic objectives: First, they are supposed to impose economic costs on Russia’s oligarchic elite, thereby causing discontent. Second, they strive to diminish Russia’s productive and financial capacities, preventing it from building sophisticated weapons and funding their warfare. As the President of the European Commission, Ursula von der Leyen, stated in 2022: “Our sanctions are eroding sharply Russia’s economic base (...).”
Have the Sanctions Been Successful?
Providing a definitive answer is challenging since it crucially depends on the yardstick used to measure “success”. Let us review the mentioned objectives. Have sanctions caused costs for the Russian elite and caused discontent? Probably somewhat. However, certainly not to an extent that endangers Putin’s grip on power, which the Kremlin dictator only solidified in recent years. Have sanctions diminished Russia’s productive capacities? Yes. Calculations by the US Treasury estimate the Russian economy to be 5% smaller than it would be if no sanctions were imposed. Nonetheless, Western sanctions have tremendously underperformed expectations.
While the International Monetary Fund had expected a contraction of 10% for the years 2021 to 2023 at the beginning of the war, the Russian economy actually grew slightly. And although Western countries tried to block Russia from its technological goods, it e.g. imported more than $1bn worth of semiconductors designed in the West in 2023. Russia’s carnage continues and its war economy is booming – dedicating around 6% of its annual GDP on defence spending. Whereas sanctions surely troubled the Russian bear, they have failed to inflict grave damage. A 5% difference in GDP may be some “success”, but let us face it: Sanctions have disappointed.
How Should We Evaluate the Sanctions With the Future in Mind?
Sanctioning Russia is right, as I firmly believe that it is important to do everything in our power to punish the Kremlin for its horrific actions. Underperforming expectations neither implies that sanctions had no effect nor that they were wrong. Yet, moving forward, we must ask ourselves why sanctions have not lived up to their expectations and what lessons we should learn.
One simple reason stands out among many complex ones: Over 120 countries that represent almost 40% of the world’s GDP do not care about the sanctions. India and China happily buy Russian energy, thwarting import bans. The other way round, European exports to Central Asia suddenly doubled since 2021. Concurrently, Central Asia’s logistics industry grew by 20% in 2023 alone. Who could they possibly ship these goods to? Further, financial sanctions are less constraining in a world relying ever less on the US dollar and offering ever more alternatives. Moving towards multipolarity, the relative economic power of the West is decreasing.
This results in two realities that Western countries must recognise. First, their sanctions are more limited than previously thought. Calls to push them further (e.g. secondary sanctions) should be treated cautiously, as many of them would necessarily affect and offend fence-sitting countries. That would only further isolate the West and motivate countries to move away from its economic institutions on which its power rests. Second, having failed to impede Russia’s warmongering, sanctions cannot substitute weapons. For European security, there is unfortunately no alternative to the required expansion of military capabilities and significant increase in arms production.
Alvin Karl Bürck is a German-Estonian political scientist who received his B.A. from the University of Konstanz and is currently doing a gap year prior to his graduate studies. He focuses mainly on international political economy (IPE), i.e. how politics and the global economy affect each other. Within IPE, Alvin is interested in how states cooperate and compete with one another via trade and industrial policy.