Russia - are Western sanctions working?

I spoke this week at Chatham House’s annual conference in a breakout session asking if sanctions have worked. I took the remit to focus just on sanctions on Russia for its annexation of Crimea, earlier invasion of Donbas from 2014 and then the full scale invasion of Ukraine in February 2022.

I thought it useful here just to write up, and send out my notes.

Have sanctions worked?

Well I guess we need to rate their success relative to what they aimed to achieve. And therein I would identify two distinct and separate periods to discuss of sanctions before and then after February 24, 2022, and then full scale invasion as I think the reason for sanctions has kind of evolved.

In the period from the annexation of Crimea to the full scale invasion on February 24, 2022, Western sanctions on Russia were aimed at initially getting Russia to return Crimea to Ukraine and withdraw its troops from Donbas, and then to discourage further invasion of Ukraine.

I think after the full scale invasion in February 2022, the focus changed not only to trying to encourage Russia to withdraw from Ukraine, but to weaken the Russian economy sufficient to hasten its military defeat in Ukraine and beyond that to prevent Russia from regenerating lost military capacity in Ukraine and therein to erode or downgrade its military capability and on-going and future threat to Ukraine and the West.

On the first of these missions for sanctions, one has to conclude that Western sanctions failed as Russia did not rescind its annexation of Crimea, did not withdraw from Donbas and went further and launched a full scale invasion.

Sanctions lodged on Russia between April 2014 and to February 2022 were clearly insufficient.

Russia did not see sanctions up to that point as that severe, and as sanctions lodged to that date were moderate, did not assume significantly more aggressive sanctions by the West should it go for a full scale invasion.

The deterrent failed, and while the Biden administration had threatened brutal sanctions in response to any full scale invasion, Russia looked at the track record and did not take these threats seriously. It launched a full scale invasion despite these threats.

But was it sanctions that failed here or broader statecraft, and our political class, who made the decision that the sanctions as placed on Russia in the run up the full scale invasion were a sufficient deterrent?

I would argue that it was not sanctions that failed, but our political and policy making process which failed to gauge the risk from Russia, going back fifteen years or more to Putin’s famed address at the Munich Security Conference in 2007, and the year after with the invasion of Georgia. Putin’s intent was clear, our leaders failed to take note, and time after time failed to make appropriate policy choices. In this case sanctions imposed were too weak.

Sanctions were set too low/weak and we have to ask why?

I would argue it was a combination of a range of factors:

First, as noted above, a persistent failure of the Western political class to understand and read Russia and President Putin in particular. There was a desire always to see best case outcomes/perspectives, to constantly give Putin the benefit of the doubt, see the glass half full and sweep uncomfortable facts - like a track record of foreign interventions in Georgia, Transdniestr, Syria, Montenegro, Litvinenko, Salsbery, US elections, Brexit, Crimea and Donbas - under the carpet. Either this was wishful thinking, incompetence or capture by Russian interests and let’s say it openly - corruption. Too many in our political and business class were corrupted by Russian money.

We can launch investigations as to why sanctions failed, but a more pertinent question - surely important enough to warrant a public inquiry - is why our leaders and establishment got Russia so wrong.

Second, aggressive lobbying by Western business interests to moderate sanctions imposed. Business interests trumped security and strategic interests. Our politicians listened to business not the many Russia watchers like Chatham House but also the likes of Fiona Hill, Andrew Weiss, Bill Browder and Gary Kasparov.

I would add here the huge effort made by Russia to lobby against sanctions - successfully I would argue - albeit the mere fact that Russia spent such effort lobbying against sanctions suggests they feared and hated their impact. The Russians clearly thought that sanctions could have had  an effect even though our policy makers failed to understand this, or gauge the risk and need for much more aggressive sanctions actions, which might have had a chance to change Russian actions.

On this issue of gauging the level of sanctions to deploy, an abundance of caution was always deployed. Yes, sanctions are complicated and the desire is always to hurt the target more than those deploying the sanctions, but in the end for sanctions to be successful we have to accept some pain. The reality is the West underestimated the threat from Russia and overestimated the economic backdraft to Western economies, or was unwilling to take the pain.

We pulled our sanctions punches in effect, making it almost inevitable that they would fail in encouraging a change in actions/behaviour by Russia.

It’s not that sanctions failed, but broader policy towards Russia failed.

One additional comment here. Some of my fellow panelist’s disputed my assertion that business interests lobbied hard for sanctions moderation and are partly responsible for where we are. I find such comments remarkable and some distance from reality. Business’ priority is profit, not security. Sanctions reduce business’ opportunities for profit, of course business hates sanctions, and massive lobbying efforts were deployed to dull the severity of sanctions. I observed it in practice, and was subject myself to such lobbying actions. I would also highlight the opposition to the recent oil price cap which was universally greeted with derision by industry experts as part of this same lobbying effort, but actually has worked quite well.

In the end we put business interests and profit before our own national security interests. We got the balance wrong.

Now while I generally conclude that sanctions failed to oust Russia from Crimea, or Donbas and to deter the eventual full scale invasion, the one point where I think sanctions did have effect was in the first few weeks after Russia’s annexation of Crimea. At that point Ukraine was at peak vulnerability with very limited military capability and indeed it was possible at that point had Russia gone for a full scale invasion that it could have been much more successful than it was 8 years later. The Obama administration surprised Russia by first imposing sanctions and there is much to suggest that this made Putin err towards caution, wait, ponder, and it gave the Ukrainian military critical weeks to buoy its defences to then push back the assault later that year in Donbas. They bought Ukraine critical time to build its defences, as did the Minsk 1 and Minsk 2 peace deals. Without these I doubt Ukraine would have been as successful from February 2022 in repulsing the eventual full scale invasion.

Now while I would argue that sanctions imposed prior to the full scale invasion in February 2022, generally failed (with the one exception as above), those imposed after the full scale invasion I think are having much greater effect. The West finally woke up the threat from Russia after the invasion and I think the scope and scale of sanctions against Russia has been much more significant. Sanctions imposed have gone much further than expected with CBR assets frozen, Russian banks kicked out of SWIFT, the oil price cap imposed, and restrictions on energy sales to Europe, plus a plethora of entities and individuals sanctioned. The messaging to Western business is I think clear that you should not, wherever possible, be doing business with Russia. And that message seems to have got thru with significant self sanctioning actions where Western business has pulled out of Russian even in non sanctioned business. The decision has been that business with Russia is just not worth the reputational risk. And we are beginning to see an impact therein on Russian fiscal and balance of payments series. Growth is lower, inflation higher and the ruble weaker. Policy makers are now having to make difficult choices between guns and butter. Resources available to the Russian state to replace military capacity lost in Ukraine are being eroded. But more needs to be done and, as ever, with sanctions regimes, the target of sanctions is always trying to circumvent these sanctions. So sanctions maintenance/policing and implementation is key.

How can we make sanctions more effective - well more sanctions, better targeting, use of secondary sanctions to discourage third parties from trying to help Russia circumvent sanctions.

And I think we also need to look at new innovative ideas. Therein Nigel Gould Davis at IISS has proposed an innovative idea that we go to a maximum sanctions regime - plan to ban all trade with Russia by a certain date, and then work backwards in terms of providing licensing. To get around the exploitation of dual use products to help rebuild the

Russian military international business should be made to apply to trade particular products with Russia. They should be made to plead the case via licensing to continue trade with Russia - to be made to make the case, to argue, why a particular product has to be bought or sold with Russia. The default should not be that’s it’s fine to trade with Russia unless an activity is specifically sanctioned but the default should be don’t trade with Russia, a fascist regime conducting war crimes and genocide with Ukraine. Maybe if Russia saw the direction of travel here it would realise an economic reckoning is really coming and adjust accordingly. Let’s see how Russia will replenish its military capability with a war total ban on Western technology.

A final point here about prospects for sanctions moderation. I guess the question is what does Russia now have to do to secure significant sanctions moderation? Is Russia’s withdrawal from Ukraine enough? I would argue not as thru it’s invasion of Ukraine Russia has proven its aggressive and expansionist intent and threat to the European security order. The West surely now has an interest in continuing to keep Russia economically weak so as not to allow it to regenerate its lost military capability. Only when it shows changes in it’s behaviour - and proves a change in intent - should the West significantly ease up on sanctions. There should be no return to business as usual until we see a proven and verified change of behaviour by Moscow. And in reality it’s very hard to believe that any such change in behaviour can be delivered under the current management in the Kremlin.