Western banks froze more than $US300 billion in Russian assets. Governments prohibited the purchase and sale of a wide range of services and goods, including some advanced technology weapons.
Ukrainians soldiers drive captured Russian tanks near the Ukraine-Belarus border in 2022.Credit: AP
Europe, which had previously received 40 per cent of its imported gas from Russia, moved to wean itself off its dependence. Russia could start selling even less energy to Europe after Ukraine on Wednesday refused to renew an agreement that allowed for the transit of Russian gas via a pipeline that runs through its territory.
“Imagine a world where sanctions were not introduced,” Guriev said. A world where Russia’s foreign commerce was not severely limited, and it had access to all of its frozen foreign reserves.
“It’s clear that sanctions did cause problems for Putin, did reduce the amount of resources in his pocket and, therefore, saved lives in Ukraine,” he said. Without them, he added, Russia might have even won the war by now.
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Russia’s economy has felt the squeeze. Spiralling inflation has prompted the country’s central bank to raise benchmark interest rates to 21 per cent. Despite enormous expenditures by the government to finance the war, overall economic growth is slowing. Many products and parts are either unavailable, more expensive or replaced by substandard substitutes.
When Trump sits down to negotiate with Putin, sanctions will be “an extraordinarily valuable chip”, said Elina Ribakova, vice president for foreign policy at the Kyiv School of Economics and a nonresident scholar at the Peterson Institute for International Economics, a Washington think tank.
There is widespread agreement that the most effective sanctions have been those involving the global financial system, an arena where the United States can exert unique power.
The US dollar is the closest thing the world has to a universal currency. And only American banks can handle transactions in dollars. The result is that many of the world’s financial assets – including any dollar accounts owned by foreign countries, enterprises and individuals – are under America’s digital thumb.
Washington not only cut off most of Russia’s access to this system but also threatened to cut off any banks around the world that run afoul of its rules. That is a risk that even many institutions in China, which has aligned itself with Russia, do not want to take.
Over time, Russia, with enormous help from China, found several ways to blunt their impact by expanding trade with other countries, exploiting loopholes and evading the law.
Russia’s banishment from SWIFT, the messaging system that enables international payments, has also significantly increased the cost, complexity and time of every international exchange, whether for the purchase of pharmaceuticals and electrical machinery or the sale of oil and fertiliser.
“It really removes the capacity for any effective payment system,” said Andrew Shoyer, a partner at the law firm Sidley Austin who advises companies on compliance with sanctions.
Yet if sanctions have achieved more than some might have imagined, they have had less impact than many people had hoped.
Over time, Russia, with enormous help from China, found several ways to blunt their impact by expanding trade with other countries, exploiting loopholes and evading the law.
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China and India, for example, refilled Moscow’s money chest by snapping up a lot of Russian oil. China has also provided Russia access to weapons parts, semiconductors and other essential materials needed for the war.
A lot of Western goods that can be used for both civilian and military purposes have made their way to Russia through countries that don’t participate in sanctions, like Turkey and the United Arab Emirates.
Those who downplay the value of sanctions as a bargaining chip also argue that Western nations did not go far enough or respond fast enough to changing conditions to tighten the squeeze on Russia.
Worries about reducing energy supplies when the price of oil was soaring and inflation was spiralling led the United States and Europe to weaken restrictions on the export of Russian fuel.
The decision to replace more comprehensive European sanctions on Russian oil transactions with a price cap meant that Russia was able to continue to earn enormous revenues from energy exports. That money has helped finance its war against Ukraine.
Russian steel-making coal is finding a market in China and India despite sanctions.Credit: Bloomberg
Over time, Russia developed further ways to circumvent the sanctions, like developing its own shadow fleet of vessels to transport oil after restrictions were put on Russia’s use of Western oil tankers and oil spill insurance.
And the European Union is still buying nearly 50 per cent of the liquefied natural gas that Russia exports.
Jeffrey Schott, a senior fellow at the Peterson Institute, said Moscow was able to sell too much gas and oil at too high a price. “Sanctions have been applied with one arm tied behind your back,” he said.
Piecemeal sanctions and the often listless enforcement of them have also made the economic noose around Russia’s neck looser than it could have been, Schott and other critics say.
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Yet even the most valuable bargaining chips that may derive from sanctions may not be enough to persuade Putin to agree to a settlement that is also acceptable to Ukraine and its neighbouring European allies.
Some political and military analysts argue that the fall of President Bashar Assad of Syria, Russia’s ally, may cause Putin to take an even tougher stance in Ukraine.
In the end, the only valuation of sanctions as a bargaining chip that really counts is Putin’s.
This article originally appeared in The New York Times.
