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‘It won’t be a collapse’: Why the West has to be realistic about economic sanctions on Russia


Russian President Vladimir Putin badly miscalculated when he assumed the West wouldn’t show a united front on sanctions, but they’re still a tricky tool to use against authoritarian regimes, argued Agathe Demarais, a leading expert on economic sanctions.

“Sanctions are a bit like antibiotics…they are a critical tool,” said Demarais. “But if you use them too much, then you have ripple effects…I sometimes fear that these ripple effects are a bit neglected in the American debate.” 

On Tuesday, Demarais discussed her new book, Backfire: How Sanctions Reshape the World Against U.S. Interests, with the Carnegie Endowment for International Peace, which she said is not against sanctions but promotes a fuller understanding of their consequences.

A surprising forecast recently from the International Monetary Fund shows the sanctions against Russia are less effective than even Russian government officials predicted. The IMF projects the Russian economy will grow by 0.3 percent, partly fuelled by a war economy and partly by increased exports to countries that are bucking the sanctions, such as India, an economic powerhouse.

Since its annexation of Crimea in 2014, the Russian Federation has faced various sanctions from the West, with historically punitive measures added since its full-scale invasion of Ukraine in February of last year. 

Demarais said the U.S. has not always worked collaboratively with its allies on sanctions, and this trend likely resulted in Putin miscalculating. 

“I would bet that Putin expected that both sides of the Atlantic would fail to collaborate on sanctions after he invaded Ukraine on February 24,” said Demarais. “I think he’s been very surprised at transatlantic unity. And to me, this is a very, very positive trend.”

Although they haven’t lived up to the darkest forecasts, the impact of the sanctions on the Russian economy has been extensive. In the past year, many foreign companies have pulled out of Russia, and the country has been expelled from international banking systems.

In 2019, two years before the invasion of Ukraine, the United States and Russia conducted trade in goods and services worth nearly $35 billion. In 2020, the value of trade in services alone between the EU and Russia was worth €29.4 billion, while trade in goods was worth €257.5 billion in 2021. Energy alone accounted for 62 percent of the EU’s imports from Russia.

The EU’s largest importers of Russian oil and gas have diversified their energy sources, and as a result, Russia’s share of external EU imports in various significant categories has declined. For example, imports of Russian coal have collapsed from 45 percent to 13 percent, while natural gas imports halved from 36 percent to 18 percent.

Nevertheless, Russia’s economy has not collapsed despite last year’s sanctions, though it did enter a punishing recession. 

“We’ve seen that the Russian economy has recorded a recession last year, it will probably record a recession again this year,” said Demarais, who notes technological sanctions will hamper the Russian military. “I think we still need to be realistic. It won’t be a collapse of the Russian economy, it’s the ninth largest in the world, but it will be a slow asphyxiation. ” 

Last August, Russia’s trade with China had skyrocketed by 31 percent and reached $190 billion in total value by 2023. Demarais warned about the rise of “de-dollarized” world trade, pointing out that Russian-Chinese trade is conducted with roubles and renminbi. In the past year, even ostensible U.S. allies like Saudi Arabia have been publicly open about trading with China in non-US currencies. 

“If one has a clearer view of this, it will ensure that sanctions remain an effective tool in the long run because I would be very worried about living in a world whereby sanctions become completely ineffective,” said Demarais. 

Demarais referred to U.S. sanctions imposed on Muammar Gaddafi’s former dictatorial regime in Libya as an example of unilateral sanctions failing to fully accomplish their intended results. 

“The only thing that it did was that Libya reoriented its exports towards Europe,” said Demarais. “After the sanctions became multilateral, which is, in my view, the way to make sanctions more powerful…the arsenal of weapons of the regime of Gaddafi was dismantled.” 

Demarais said sanctions can be effective in countries where the population has a say in the direction of the government, such as Iran, a regime heavily sanctioned by the United States, while noting that Iran is a theocracy with a dismal human rights record. 

Within Iran’s limited democratic institutions, Demarais pointed out that it was able to elect reformist Hassan Rouhani as president in 2013, who pledged to get those sanctions lifted. 

The war in Ukraine may not go nuclear, but don’t expect it to end soon


On the one-year anniversary of the Russian invasion of Ukraine, the most urgent questions remain whether the conflict will go nuclear and when it will end.

According to experts, the chances of a nuclear exchange have gone down, but the prospect of a long, grueling war remains high.

With NATO members recently agreeing to provide modern battle tanks to Ukraine’s armed forces, Vladimir Putin and other high-ranking members of the Russian government have hinted at nuclear conflict in response. 

With a new mobilization announced by Russia to continue the war effort, Elbridge Colby, the former U.S. Deputy Assistant Secretary of d for Strategy and Force Development, says he is less concerned about nuclear conflict than he was in recent months. 

“The Russian mobilization effort is a downside. It’s bad,” says Colby. “But one of the silver linings to it is that it appears to indicate that the Russians don’t think they need to use nuclear weapons that much.” 

Despite the rhetoric from Putin and others in his government, a November statement from the Russian Ministry of Foreign Affairs publicly stated that Russia remained opposed to escalating nuclear threats. 

“We are strongly convinced that in the current complicated and turbulent situation, caused by irresponsible and impudent actions aimed at undermining our national security, the most immediate task is to avoid any military clash of nuclear powers,” read the statement from the ministry. 

Colby says that if Putin was serious about using nuclear weapons, he probably would not continue to conduct large-scale mobilizations and conventional offensives. However, Colby cautions against completely writing off the potential use of nuclear weapons. 

“I think the nuclear dimension is very real and serious,” says Colby. “It’s something we should take seriously. But right now, I’m a little less worried than I was, but that could change again.” 

On Tuesday, Putin suspended Russian participation in the New START treaty, a U.S.-Russia nuclear arms control treaty signed in 2010. 

“Our relations have degraded, and that’s completely and utterly the U.S.’s fault,” said Putin during Russia’s annual state of the nation address. “If the U.S. conducts tests, then so will we. Nobody should have any illusions that global strategic parity can be destroyed.”

As for the war in Ukraine itself, Colby says its course will ultimately be determined on the battlefield.

Balkan Devlen, a senior fellow at the Macdonald-Laurier Institute, is of the same opinion and expects a Russian defeat if the Kremlin eventually decides the cost of prosecuting the war is too high. 

“When we get there, and how we get there, is a big question,” says Devlen. “As long as the Western support for Ukraine continues, Ukrainians will continue to fight, and, therefore, the end of the war will be determined on the battlefield in a way, if and when the Russians decide that the cost is too high.” 

That cost to Russia may occur from damage to its economy, especially through Western Europe’s attempts to wean itself off cheap Russian oil and gas, which, prior to the invasion, had created a mutually beneficial relationship between the EU and the Russian Federation. 

Despite opposition from some EU member states like Hungary, the EU’s economic leaders like Germany and the Netherlands have curtailed Russian energy imports and attempted to diversify their natural gas sources. 

“I cannot see them (EU) going back to being dependent on Russian energy as well,” says Devlen. “That also radically decreases Russia’s ability to restructure its economy and rely on (that) particular set of revenues.” 

In 2020, energy exports accounted for the majority of Russian exports, while nearly half of Russia’s GDP was dependent on trade. By comparison, trade accounted for 25 percent of the American GDP and 37 percent of Japan’s GDP in 2021, according to the World Bank. 

However, Russia’s economy defied numerous predictions in 2022 that an economic collapse was coming due to sanctions. Colby says Russia’s economy has proved remarkably stable and is transitioning to a wartime economy. 

“The Russian economy is expected to grow faster than the British economy next year,” says Colby, while also citing a Wall Street Journal article reporting that shops in Russia’s largest cities are, on the surface, operating normally. 

Both Devlen and Colby say people should expect a long war in Ukraine that will not end in 2023.