Russia invading Ukraine back in February certainly has had multiple implications for foreign policy and international affairs. Multiple countries, especially those in the West, take issue with Russia's unprovoked attack on Ukraine. At the same time, they do not want to anger the nuclear power or do something that will also harm them in the process. It is because Russia is a regional power with a sizable economy and nuclear weapons that makes the response all the more limited. I have already covered why military intervention is ill-advised, why a no-fly zone should not be implemented, and the limits of the United States banning oil and natural gas. One policy idea seems to have received a fair bit of traction: economic sanctions.
What are economic sanctions exactly? Per the definition from the Council on Foreign Relations, economic sanctions are "the withdrawal of customary trade and financial relations for foreign- and security-policy purposes. Sanctions may be comprehensive, prohibiting commercial activity with regard to an entire country, like the long-standing U.S. embargo of Cuba, or they may be targeted, blocking transaction by and with particular businesses, groups, or individuals." We can be looking at anything from travel bans and export restrictions to trade embargoes and asset seizures.
In the context of the Russo-Ukrainian War, we are seeing multiple types of economic sanctions. Aside from the United States' import ban on oil (see my analysis here), there have been banking sanctions. The United Kingdom announced that they were freezing assets of Russian banks. The United States announced restrictions on Russian banks. Two Chinese state banks were limiting financing to purchasing Russian raw materials. The European Union implemented sanctions targeting technological transfers, Russian assets, and Russian banks. The United States, European Union, and Canada have banned air travel from Russia. It can be argued that we are seeing an unusually high amount of economic sanctions in response to Russia's decision to invade Ukraine. This is to name but a few of the economic sanctions imposed upon Russia. If you want a full list of the sanctions imposed on Russia, please view the timeline from the Peterson Institute for International Economics here.
There is some appeal to economic sanctions. It is a way to stick it to Russia without partaking in something as problematic as conventional war with a nuclear power. Also, given the current nature of globalization, much of the global economy is conducted in U.S. dollars, which gives the Western powers an upper hand. It would not be much of an exaggeration to say that the rules of the U.S. financial system are the rules of the global financial system. Whether or not economic sanctions are a good idea really depends on what your goal is. Are you trying to encourage Russia to exit Ukraine? Are these sanctions to cripple Russia's ability to fund its military actions in Ukraine? Are you trying to encourage regime change in Russia? Or are these sanctions simply punitive in nature?
Historically, economic sanctions have mixed results for bringing about policy change, regime change, or cause military impairment (Hufbauer et al., 2009). One study put the likelihood of success at about 40 percent (Morgan et al., 2014).
It is more than citing examples of how Cuba, Iran, North Korea, Venezuela, and Syria went about their foreign policy in spite of economic sanctions. We already see a lack of efficacy, at least in the immediate term, in the context of the Russo-Ukrainian War. Previous economic sanctions did not deter Russia from attacking Ukraine in February, although they could potentially deter Russia from invading other nations in the future (or could even deter China from invading Taiwan).
The latest round of economic sanctions being implemented will need time to take into effect, which is worth mentioning since we are talking about the immediacy of war. This is shown by the fact that Russian military forces remain in Ukraine. Plus, Russia has one of the lowest debt-to-GDP ratios (at 17 percent) and is sitting on $600 billion in currency reserves, which is the fourth-largest reserves in the world. There is also the possibility that neutral countries (e.g., China, India, Pakistan, much of Latin America) could help provide sanctions-busting transactions as a workaround.
Conversely, this latest round of economic sanctions has been massive, multilateral, and swift. In terms of determining success, one should ask what the ultimate goals are. Getting Putin to retreat in the short-run is not going to happen. We are past the point of deterrence since Russia has already attacked Ukraine. Punishment in the medium-term is more feasible, even in spite of the Russian ruble making a comeback from a previous crash in recent weeks. Standard & Poor's is estimating an 11 percent contraction of GDP in 2022 primarily due to the war. Russia is also looking at double-digit inflation. There is a case to be made that the economic sanctions will have medium-to-long-term implications for weakening the Russian economy. As for changing Putin's behavior (i.e., rehabilitation), it will be difficult to get Putin to remove Russian troops from Ukrainian territory since he is staking his political future on Ukrainian annexation (or at least having a Russian rule Ukraine on Putin's behalf).
One of the arguments against such broad-based economic sanctions is that they disproportionately impact individuals or groups of people who are not responsible for the government's decisions. Economic sanctions would make sense if ordinary Russian citizens were responsible for its government's foreign policy decisions, but they are not. Even if the goal is to inflict pain on the Russian oligarchs and their interests in the West, the results will be less predictable than it will be for the general populace.
Perhaps regime change is a desirable outcome of these sanctions. But let me re-iterate how these sanctions take time to take hold. It could be a few months or a few years before the effects are fully felt by the Russian people, particularly the oligarchs and others in power. The Director of Harvard University's Growth Lab, Ricardo Haussmann brings up why economic sanctions rarely result in regime change. Haussmann's explanation is that although the sanctions weaken the regime, they tend to weaken society even more so. Harold James, who is a history professor at Princeton University, also mentions that domestic discontent could increase in Russia, but so could nationalistic fervor and support for Putin. Looking both at nationalism in Russian history and the mechanisms that Putin has in place to silence dissidents, these sanctions have the potential to strengthen Putin's popularity within his own country. The sanctions could also backfire by putting Putin in a corner and taking greater risks by escalating either to war or more belligerent actions (e.g., cyber warfare).
There will be spillover effects beyond Russia. We are talking about trying to shut down or severely limit large swathes of one of the world's largest economies in an increasingly globalized world. While there have been other economic sanctions in human history, the sheer magnitude of what is being attempted leaves us in a situation without parallel. We are already seeing increasing prices in oil and natural gas, stock market volatility, and other negative demand shocks, not to mention an impending food shortage throughout Africa. Much like with other restrictions on trade openness, economic sanctions will in all likelihood make the poorer and less free.
A 2019 report from the Government Accountability Office (GAO) echoed concerns about unintended consequences of economic sanctions: "Some studies [on economic sanctions] suggest that sanctions had a negative impact on human rights, the status of women, public health, or democratic freedom in target countries. In addition, more frequent and comprehensive use of sanctions could encourage sanctions targets, potential targets, and their commercial partners to develop trade and financial ties that are less dependent not he United States (GAO, p. 25-26)."
Will these economic sanctions result in the outcomes desired by Western governments? That remains to be seen, although historic precedence gives us mixed results. I can say with fair certainty that they will dole out a fair bit of pain for the people of Russia and the Russian economy, as well as make goods and services more expensive for people throughout the world. Whether these sanctions will deter future Russian military action or if it will engender political change from Moscow is much less certain. At best, these sanctions would need to be one tool in the toolkit to bring about peace in eastern Europe. At worst, it will be all pain for little to no gain. Only time will tell to let us know whether or not these sanctions were worth it.
No comments:
Post a Comment