Russian President Vladimir Putin’s nearly two-month war of choice in Ukraine has bestowed a special status upon Russia: the most sanctioned country on the planet. The U.S.-led sanctions campaign against Moscow is an impressive display of weaponizing the U.S.-led financial system. It’s also an unprecedented effort, coordinated with Washington’s allies and partners in Europe and Asia, against a $1.5 trillion economy.
Yet as the Biden administration continues to ratchet up the economic pressure on Russia, it remains relatively blase in explaining what exactly the U.S. seeks to achieve. The act of holding Russia accountable for its war of aggression in Ukraine is quickly surpassing the long-term goal of actually ending the war. Over time, this could be a big mistake; while sanctions can be extraordinarily effective economically, history demonstrates they only work if attached to clear, specific and realistic policy objectives.
In terms of blunt economic impact, there is no question the sanctions imposed by the U.S and Europe are doing significant damage to Russia’s pocketbook. There have been at least 6,445 sanctions designations since Russia’s war in Ukraine began, encompassing everything from export restrictions of high-end technology to a U.S. ban on Russian oil and natural gas. At least half of Russia’s $630 billion in foreign reserves are now inaccessible. Russian government funds parked in U.S. bank accounts can no longer be used to pay down debt, forcing Moscow to dip into its remaining reserves to stave off potential default. While Russia can still freely sell its energy products, Moscow is forced to seduce buyers with discounts in order to offload product.
The U.S. and Europe are going after Russian oligarchs aggressively, seizing their property in an attempt to sow discord within the Russian elite. Last week, the European Union took its first action against Russian energy since the conflict began, phasing in a ban on Russian coal imports while cutting off other Russian exports such as wood and seafood.
As expected, these sanctions are having a massive effect on Russia’s economic climate. According to the Institute of International Finance, the last month and a half of sanctions have wiped out 15 years of Russian economic growth. Due in part to the lack of opportunities, hundreds of thousands of Russians, many of them high-skilled workers in science and technology, are now leaving the country. More than 600 multinational companies have fled the Russian marketplace, and some economists believe Russia could see a 15% contraction by the end of the year — the worst dip since the collapse of the Soviet Union.
Yet in focusing exclusively on economic outputs, we miss the forest for the trees. Indeed, the sanctions campaign against Russia isn’t designed to simply create a recession or force the widespread emigration of highly educated Russians. Rather, sanctions in general are crafted to meet a specific policy goal. The problem, however, is the Biden administration has yet to articulate what exactly it is trying to accomplish. In other words, what does Russia have to do in order to see a relaxation of the economic restrictions?
This is an extremely important question to ask, because if the answer is muddled, Putin will have less of an incentive to even think about winding down military operations. To date, the West remains divided
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on the issue. On the one hand, Secretary of State Antony Blinken suggested on April 3 that the U.S. would be prepared to offer Russia sanctions relief if doing so helped consummate a peace deal between Moscow and Kyiv. But there is growing sentiment in Washington that sanctions imposed over the last weeks should continue for as long as Putin is in the Kremlin. The former approach has a chance of improving (or at the very least, preserving) whatever prospects exist for a negotiated settlement; the latter would undermine that very same process and feed into Putin’s worst instincts.Over the last two decades, the U.S. has increasingly turned to the sanctions lever as a tool of first resort. In that time, U.S. designations have risen by an astounding 933%. But in cases where the U.S. sought to use those sanctions to achieve maximalist policy objectives, the campaign has failed. No amount of sanctions in the world has pressured North Korea into abandoning its nuclear and missile programs. Syrian dictator Bashar Assad, who destroyed his country in order to save himself, is still sitting in the presidential palace. Iran’s nuclear program became more sophisticated after Washington implemented a strategy of maximum pressure against the Iranian economy, not less so.
The lesson is clear: When Washington uses sanctions in the hope the targeted country surrenders to unrealistic U.S. demands, it usually ends up disappointed. On Russia, the U.S. is flirting with making a similar mistake.
The Russian military’s behavior during the war in Ukraine is the epitome of ruthlessness. But the most effective way of averting more horrific conduct is to end the war through conflict-ending negotiations, sooner rather than later. Such a negotiation will entail significant political will in both Russia and Ukraine, assuming such diplomacy is possible — given the looming, large-scale Russian military assault set to occur in Ukraine’s Donbas region, a peace settlement may not be likely for quite some time.
In the course of those talks, however, the U.S. will need to be far more specific about what Moscow needs to do if it wants to save itself from further economic disaster.
Daniel DePetris is a fellow at Defense Priorities and a foreign affairs columnist at Newsweek.
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