Sanctions and their Limits

Over the past decade, economic sanctions emerged as Washington’s preferred foreign policy to deal with a range of concerns, from adversarial governments in Iran and Venezuela to international drug trafficking. Sanctions became popular because officials saw them as a low-cost tool to punish the adversaries. The 2015 Iran nuclear deal, which Iran agreed to after years of devastating sanctions, seemed to vindicate policymakers’ view that sanctions could force adversaries into strategic concessions. Under US President Donald Trump, renewed sanctions against Iran and sanctions targeting Venezuela were widely seen as effective in debilitating those countries’ economies.

When Russian President Vladimir Putin launched special military operation in Ukraine in February 2022, the Western response was immediate: the United States and its allies slammed Russia with a raft of sanctions and other economic restrictions. But a year later, the effectiveness of these measures offers important lessons on their limits. Sanctions and export controls have been useful in undermining Russia’s financial resources and industrial base, but they have done little to change the Kremlin’s strategic calculus.

With the start of Ukraine-Russia war the United States and its allies moved swiftly to impose economic costs, both to signal resolve and, in anticipation of a protracted conflict, to begin to degrade Russia’s financial reserves and military might. Within a week of Russian tanks crossing into Ukraine, the United States and its G-7 partners had leveled sweeping sanctions on Russia’s central bank and on several of Russia’s most significant commercial banks, oligarchs, and political operatives, as well as on the country’s military-industrial complex. Moreover, the West instituted sweeping export controls to cut off Russian access to semiconductors and other key high-tech products.

Sanctions initially rattled markets, with the ruble plunging and Russia forced to double domestic interest rates to stem capital flight. Export controls had a compounding effect on Russian military-industrial production over the course of last year, with Moscow forced to turn to Iran and North Korea for ammunition and weapons, and with other metrics of industrial production, such as the manufacture of cars, slumping. But by late 2022, it was increasingly apparent that Russia had weathered the initial economic storm better than many Western officials and experts had expected: Russia’s economy contracted by more than two percent in 2022, a sharp reversal from the five percent growth in 2021, but a dip not nearly as severe as some initial estimates of a ten percent or greater decline in GDP. Sanctions rarely succeed in forcing changes of strategy.

Unlike the “maximum pressure” economic warfare that the United States has waged in recent years against Iran, North Korea, and Venezuela, sanctions on Russia have been somewhat more limited in scope. Consumer goods have generally been exempt. Dozens of Russian banks remain connected to the international financial system, providing a financial conduit for trade that has not fallen under sanctions. The West has broadly refrained from introducing secondary sanctions that seek to prevent countries such as China and the United Arab Emirates from trading with Russia. Finally, even if sanctions will not alter Putin’s war strategy in the near term, history suggests that the prospect of lifting of sanctions can be a useful incentive over the long term. Years from now, after the Ukraine war is resolved on the battlefield, sanctions relief can still be a useful chip in broader negotiations aimed at reintegrating Russia into the West.

Sanctions are a valuable supporting tool but are rarely going to be a magic bullet or radically alter the decision calculus of an adversary in the short term.


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Vol 55, No. 43, April 23 - 29, 2023