Ian Bond and Zach Meyers / Mar 2022
The West surprised many with its decisive response to Russia’s invasion of Ukraine, imposing an unprecedented set of economic sanctions on Russia. In recent days, Western countries almost seem to be competing to confiscate the most oligarchs’ yachts, or sanction the largest number of members of the Russian parliament. But rather than throwing everything at the wall to see what sticks, the West now needs a strategy.
The West’s sanctions packages are impressive – but it is not always clear what they aim to do. Sanctions can be most effective when they serve to deter. But many Western leaders apparently did not believe Putin would attack Ukraine, or were initially more concerned with protecting their economic ties to Russia. The West missed its chance to dissuade Putin from military action, or at least to persuade him that a full-scale invasion of Ukraine would be too costly.
Now, the West’s sanctions seem intended to coerce Putin into changing course. The strength of these sanctions is unprecedented for such a large economy – not least, freezing almost half of the Central Bank of Russia’s $640bn in foreign reserves. But, unless they precipitate a revolution or a palace coup in Moscow, these sanctions have little chance of securing Russia’s withdrawal from Ukraine. Putin seems hell-bent on seeking military victory, prepared to see Russia’s population suffer, and is repressing dissent increasingly harshly. Some European countries belatedly accept the need to end imports of Russian gas, which can be worth up to nearly €700 million per day – but they are unwilling to contemplate the economic damage of doing so quickly.
After the European Council meeting on March 10th, European Commission President Ursula von der Leyen said that the Commission would put forward a plan to end imports of Russian fossil fuels by 2027 – a timescale that won’t have Putin quaking in his boots. And in the meantime, coercive sanctions will become less effective – for example, Russian trade with less scrupulous countries will increase, and Chinese and Russian banks will find ways to facilitate cross-border trade and finance outside the purview of the US. Unity among those countries implementing sanctions may also start to fray.
The West therefore needs to move beyond the present phase of sanctioning anything with a Russian connection, in an enthusiastic but somewhat haphazard manner: its sanctions strategy must focus on constraining Russia’s military and industrial capacity over the long term, for example by limiting Russia’s access to Western technology and capital markets. The goal of such sanctions should be to limit Putin’s ability to threaten others in future. Western governments must explain this goal to their own citizens and businesses. Otherwise, once media headlines move on from the Russian military’s atrocities, Western businesses may start to complain they are being needlessly shut out of the Russian market. Russia will then try to blur the difference between coercive and constraining sanctions, and convince Western politicians that sanctions have failed because Russia has not changed tack.
A sanctions strategy also requires the West to explain – to Russians as well as domestic public opinion – how its approach will evolve. It needs to communicate to Russians who can still hear its message that the West is not anti-Russian, and that there is a way back to more normal relations. It should explain which sanctions could be lifted and under what circumstances. It should signal now which further steps it will take if Russia’s behaviour deteriorates further, for example with use of chemical weapons. The West should also explain how it will respond to Russian countermeasures: for example, the EU’s plan to phase out Russian gas over several years will be of limited use if Putin cuts European gas supply without notice.
The West – and especially the EU – must learn important lessons from this conflict. Some policy measures, like cracking down on illicit finance, should have been implemented long ago. And for Europeans, industrial policy has been too focused on vanity projects – like competing with the US to build the latest computer chips and cloud computing services – and insufficiently attentive to Europe’s more urgent vulnerabilities like energy security. Had the EU been less dependent on Russian trade, it might have been more willing to sanction Russia earlier. That could have minimised the economic costs that coercive and constraining sanctions will impose on Western businesses and consumers. More importantly, it could have dissuaded Putin from inflicting such brutality on Ukrainians.