Normally, economic sanctions are largely a symbolic criticism of a country’s actions and nothing more. This time it’s different, but they will still take time to work.
In the past, economic sanctions were largely symbolic. A personal equivalent might be that your bank cancels your credit card: it’s inconvenient, but ultimately not that painful and it likely won’t result in changed behavior. You will go to another bank and sign up for a different credit card.
Now imagine that instead of canceling your credit card, you have been cut off from every bank and the entire credit system. If you can’t get credit at all anymore, it is going to be significantly more painful and you might think harder about your choices.
The latter is a parallel for the sanctions that have been imposed on Russia as a result of it’s invasion of Ukraine. The economic sanctions that have been imposed are indeed painful and will eventually take down the Russian economy. However, it will take time. Putin and the Russian government won’t care about economic costs in the short term: they’ll think it’s a small price to pay to build their empire.
Russian sanctions will be more like a death from a thousand cuts, rather than a decisive blow. It took the Soviet Union decades of isolation and decline until it finally collapsed in 1991. What’s different now is the degree of global integration. As a boy growing up in the Soviet Union in what is now Ukraine, I never held a dollar bill in my hand. Things are much different today, and Russia’s economy is dependent on trade with other countries. Even now the Russian government forces exporters to sell in dollars in order to hedge against it’s free-falling Ruble.
Consider Russia’s bravado about Europe and the West’s reliance on its oil and gas: Putin claims others can’t survive without the Russian export. But the truth is that Russia cannot survive without exporting it, as it is a major source of income. This dependence will likely accelerate the wearing down of the Russian economy.
What’s more, Russian oil companies like Rosneft and Gazprom may become technologically crippled by western divestment, as BP and Shell have announced they have done. Once their current oil wells dry up, will they have the technology for drilling in untapped regions, like in the arctic for example? The technological decline that plagued the Soviet Union after it invaded Afghanistan may provide a foreshadowing of what is to come for Russia.
One sanction won’t do it all, and it won’t happen overnight, but the decline of the Russian economy will ultimately happen. It’s unfortunate for the Russian people, but this has been Putin’s choice. Just like with Hitler, anyone affiliated with him will have to be punished as well, because presumably they have been enabling him for some time. This is the goal of recent sanctions announced against Russia’s leading oligarchs and Putin’s allies.
The countries imposing these sanctions will suffer major costs as a result, such as rising gas prices. But it will be nothing compared to the hundreds of billions of dollars that will need to be spent on weapons, military, and defense if Ukraine falls and a new arms race starts. Remember that the cost of the Cold War was trillions of dollars, money that could have been spent on education, health care, and technology.
Read more about our disclosure policy here.
