Sanctions on Russia Are Too Weak/Ineffective

The UK has just published a summary sanctions strategy document, see link below. It includes a review/explainer on a range of sanctions regimes ranging from Russia, to Iran to North Korea.

While it is obviously good to have such a concise document/explainer, in respect to sanctions on Russia for its invasion of Ukraine, the prior annexation of Crimea a decade back, but also a long track record of Russian malign action against the West, the reality is that Putin continues his attacks and aggression against Ukraine, and the West.

Indeed, two years after Russia’s full scale invasion of Ukraine, Russia’s brutal war on Ukraine has continued unabated and this is against the backdrop of what the West has described as the toughest/most far reaching Western sanctions package against any regime.

The obvious conclusion is that the West is failing to arm and finance Ukraine sufficiently to win the war, and to sanction Russia sufficiently to halt its war on Ukraine. Sanctions are therefore failing.

Herein I would link in here arming and financing Ukraine to win the war and sanctions, as clearly the West is unable to adequately finance Ukraine to win - evidence being the $61 billion U.S. financing package stuck in the US Congress - and it must be clear now that the only way to adequately finance and arm Ukraine is for the West to cross the rubicon it has itself constructed and allocate the $300 billion plus in immobilised CBR assets in Western jurisdictions to Ukraine. Needs must.

Other Topics of Interest

EXPLAINER: Will Sanctions Stop Russian Banker From Working in Washington’s IMF HQ?

Ksenia Yudaeva, a sanctioned Russian central banker advisor, has been appointed by Moscow as its executive director for Russia. How will the IMF and the US respond?

Change laws where required, but just do it, or prepare for the consequences of a Russian victory in Ukraine and what the costs therein will be.

On the specific sanctions front, however one views their current severity, the reality is that the West has simply not done enough. Sanctions have tended to be too little, too late, which is also unfortunately the story also with Western arms supplies to Ukraine. As with arms the West fails in always showing an abundance of caution and timidity on the sanctions front and dealing with Putin.

Partly I think the problem is the way the West has gone about putting sanctions packages together, and attempting to maintain a united Western front, to present what is supposed to be a “political win” against Putin. The reality is this creates sanctions by the highest common denominator, where to get group agreement across the West for any sanction, any objection/interest from a single country or business (Greek oligarchic ship owners, or Belgian depositories) is heavily weighed and often sanctions delayed, watered down or even vetoed. It means any interest in the West which feels a loss as a result of sanctions can veto or water down sanctions. And herein a lot is made of the fear over backdraft, losses to Western economies or business, or the unintended consequences of sanctions. But the harsh reality is that sanctions cause damage to Russia, but also obviously to Western businesses constrained from doing business as usual. It is inevitable. Sanctions will inevitably have a cost to the West (otherwise the trade would not be happening anyway) and the West has to be prepared to pay the cost. Unfortunately, the sense at present is that the West is not really willing to pay the cost of what could be a really effective sanctions regime on Russia - sanctions impact should be asymmetrical given the collective West with a $40 trillion combined GDP is taking on Russia, with a GDP of just $1.8 trillion. I think this unwillingness to pay a cost reflects a failure from the collective West to  understand the nature and scale of the threat from Russia, and the cost of losing the war in Ukraine. Perhaps this is arrogance, or wishful thinking or just a continuation of the mistakes in managing Russia over the past decade or more - an unwillingness to do what it takes, to pay the price to stop Russia. And obviously Ukraine presents the best means to stop Russia - and the lowest long term cost to the West.

It’s a trade off here, yes sanctions will cost the West, but the longer term costs of not imposing sufficiently tight and effective sanctions now will be much higher on Western economies over the long term.

Read my lips, Russia is an existential threat to Western liberal market democracy. Putin sees Russia at war with the West. We need to wake up to this reality, and if it is a war, we surely have to play to win. That means taking the gloves off, as Putin has already.

That all might suggest that we need to be more ambitious, think more outside the box, and be prepared to damage our own economic interests, in the longer term public good of stopping Putin. It might also mean less uninamity and more leadership from individual Western nations, from OFAC in the US, or even the UK or EU sanctions administration. In OFAC we trust should be the matra of the Western financial system - whatever OFAC does, Western business has to comply, so perhaps OFAC need to take the lead.

And an idea here - not mine, but Nigel Gould Davis, of IISS, ex UK ambassador to Belarus who has suggested that we change default settings on Russian sanctions - actually reverse them. At present it is business with Russia is allowed unless sanctioned. He has argued we should move to a state where business with Russia is prohibited unless a special license is secured. Businesses need to prove why exactly they need to export yoghurts or beer to Russia. What is it about a particular product that is strategic to the West or to the global economy that requires trade with Russia? Now this would be disruptive if imposed immediately, but a long lead time could be allowed, three or five years hence, but giving business ample time to secure the required licences for critical products. But the overall message to international business would be clear that Western governments do not want you to do business with Russia, which is now a fascist state, headed by Putin the dictator, who is conducting war crimes and genocide in Ukraine. Western business should not be doing business with a fascist regime, much as they should not have been doing business with Nazi Germany. History, and OFAC, should judge these businesses brutally.

Reprinted from @tashecon blog. See the original here. 

The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.