Evaluating the Costs and Consequences of Sanctions

The joint US, EU, and G7 allies sanctions regime against Russia is unprecedented in scope, magnitude, and timing. The ‘Western’ alliance has targeted a broad range of Russian institutions, entities, and domestic industries.  Additional sanctions have been directly levied on Russian elites and their fancy toys. As a senior Biden administration official told Nahal Toosi of Politico, “We’ll go after their yachts, their luxury apartments, their money, and their ability to send their kids to fancy colleges in the West.”

At the same time, countless private actors have joined the effort to cripple the Kremlin. As of April 6, a fresh round of sanctions were instituted in light of allegations that Russian forces are guilty of “major war crimes” in Bucha, Ukraine.  As Mark Episkopos argues in The National Interest, “Spurred by fresh allegations of wartime atrocities, the West is gearing up for what could be a years-long maximum-pressure campaign against Russia.”

Putin and his cronies deserve to be left out in the brutal cold. Russia’s belligerent adventurism is an affront to the most fundamental norm of interstate relations: state sovereignty. For many complex reasons, diplomacy and deterrence ultimately failed. Sanctions, and billions of dollars in security assistance to Ukraine, became the moral and strategic imperative to counter Russian aggression. However, analysts are beginning to speculate on the unintended consequences of dropping a “financial nuclear bomb” on Moscow.

The long-run consequences of this maximum pressure campaign remain unclear. Concerns about this new age of weaponized interdependence range from the impact of sanctions on commodities export markets to the consolidation of a Russo-Chinese ‘axis of autocracy.’ David Brooks has dramatically claimed that in the wake of Russian decoupling, “globalization is over.” US Treasury Secretary Janet Yellen warns of “enormous economic repercussions” from the war and the sanctions regime. In short, as a recent article in Lawfare suggests, “even if the United States and its allies are successful in bringing peace to Ukraine, the steps they have had to take to do so may deepen cleavages in the global system of economic interdependence that ha[ve] helped to promote stability for much of the past century.”

What do we know about sanctions? An exhaustive academic literature is dedicated to the subject. Scholars have referred to sanctions as a “blunt instrument,” an “imprecise tool” of economic statecraft, linked to corruption, institutional decay, and humanitarian disaster. Drawing on this literature, business reporter for The New York Times, Ella Kooze, makes a few observations worth considering. First, Russia is expected to go into default, which would have devastating ripple effects on the global economy. Indeed, as of April 11, Russia has defaulted on its foreign debt. Second, Kooze notes that sanctions often have “the counterintuitive effect of consolidating the power of an authoritarian government.” As is the case in Iran, sanctions can enhance autocratic state authority and fan the flames of nationalist fervor.

In an academic article for the Texas National Security Review, US Naval War College professor Erik Sand reflects on the effects of economic isolation — specifically on warring powers. With reference to German decision-making during both world wars, Sand argues that “[e]conomically isolated states are frequently defeated because they respond to economic isolation with escalation,” and that “this effect holds even when states have low prewar levels of integration into the global economy.” If Russia was a largely autarkic state inclined to escalation before, it is more so now.

Today, wartime escalation dynamics are compounded by the notion of “nuclear entanglement” – distinguishing between nuclear and conventional weapons is difficult. Making matters more blurry, in an article aptly titled “The Russian Sanctions Regime and the Risk of Catastrophic Success,” Sand and Suzanne Freeman, a Ph.D. Candidate in Political Science at M.I.T., note that Russia’s 2020 nuclear doctrine “specifically states Russia would consider the use of nuclear weapons in situations where ‘conventional aggression’ threatens ‘the very existence of the state.’”

Putin has denounced the sanctions as “akin to a declaration of war.” Without legitimizing Putin’s claim, it is worth considering if severe sanctions do, in fact, pose an existential threat to the Russian state, seeing as they are designed to “suppress Russia’s economic growth, increase its borrowing costs, raise inflation, intensify capital outflows, and erode its industrial base.” One theoretical question to ask is: In a hyper-globalized world, does all-out economic warfare constitute a form of ‘conventional aggression’?

Some analysts question the true goal of the sanction’s strategy. All indications suggest that even if Russia changes course, it is to remain “a pariah on the international stage.” Secretary of State Antony Blinken has stated that “We will want to make sure … that anything that’s done is, in effect, irreversible.” Indeed, sustained sanctions could spell irreversible economic ruination for Russia. This is why veteran national security correspondent for The New York Times, David Sanger, speculates that the Biden administration “seeks to help Ukraine lock Russia in a quagmire without inciting a broader conflict with a nuclear-armed adversary.” On this basis, it is fair to speculate on the ulterior motives of “the blob,” given that a recent RAND Corporation blog post eagerly entertains the prospect of sanctions-induced regime change in Moscow.

To be clear, Putin deserves to be shamed, punished, and isolated. Speculative armchair critiques of the sanction’s regime are ultimately a luxury, considering the devastating brutality of Russia’s incursion. But there is reason to remain sensitive to the unintended consequences of sustained, zero-sum Russian containment. As Liana Fix and Michael Kimmage conclude in a compelling article in Foreign Affairs, “History has shown that it is immensely difficult to build a stable international order with a revanchist, humiliated power near its center.” Thus, at a minimum, leaders in the West should emphasize that, in this instance, the strategic rationale of coercive bargaining is to facilitate a negotiated settlement, not to send Russia back to the Stone Age.