Have the West’s sanctions against Russia been effective?
The impact of sanctions against Russia has been far slower than anticipated
Since Russia's invasion of Ukraine in February 2022, the US, UK and EU, along with countries including Australia, Canada and Japan, have imposed more than 16,500 sanctions on Russia.
Their main target has been Russia's money.
Foreign currency reserves worth $350bn (£276bn) - about half its total reserves - were frozen.
About 70 per cent of the assets of Russian banks were also frozen, the EU says, and some were excluded from Swift, a high-speed messaging service for financial institutions.
Two years on, have these sanctions had the desired impact on slowing Russia’s economy and curbing the country’s military action in Ukraine?
London Business School’s Professor Richard Portes was recently interviewed about the impact of the West’s sanctions on the BBC World Service (Weekend, April 6 2024). Portes has met the Central Bank of Russia’s chief, Elvira Nabiullina, on several occasions and volunteered interesting comments about her, and the efficacy of the West’s sanctions programme.
Portes was asked, why haven’t the sanctions delivered the desired effect? “I think in the medium term they will be successful, successful in terms of driving the Russian economy into the ground. From an economist’s perspective that’s not such a successful idea. However, from the perspective of curbing Russia’s imperial ambitions it is important.”
With Russia’s GDP growing 3.6 per cent in 2023, are the sanctions having the impact that had been hoped for.
“Most of that growth comes from defence production. By contrast, consumer sales are down 10 per cent. What is happening is that military production is displacing the civilian economy.”
With regard to Russia’s low levels of unemployment it must be acknowledged, said Portes, that conscription into the country’s armed forces, the departure of skilled people and business leaders has had an impact on the working population. “There are many who have been absorbed into producing goods for the defence establishment,” he added.
Are more measure needed to speed up the impact of sanctions against the Russian economy? “More needs to be done,” said Portes. “The sanctions have leaked considerably and overall as a combined force the West has not prosecuted the sanctions that are in place in as tough a way as we could. And so one sees country’s like Turkey for example, supposedly a member of NATO, aiding and betting Russia, effectively going around the sanctions.”
Regarding oil sanctions there’re have been criticism that these have not been prosecuted in tough, effective way. “What has happened with oil sanctions is that Russia has diverted oil to countries that were willing to ignore the sanctions. India is a prominent example of this. What this has meant for Russia is that they have had to discount the price of their oil, and the Indians are tough negotiators, so they’ve done very well out of this. Essentially, though, the Western nations have failed to prevail and convince India not to take Russian oil. China is also taking Russian oil, and there are others too, so it goes into a world market and it all just gets lost because it is hard to identify which tankers are transporting Russian oil. That said, sanction evasion is costly and Russia has failed to secure the top end of market prices for oil.”
With regard to judging the abilities of the Bank of Russia’s governor, Elvira Nabiullina, and her team, many of whom are known to Professor Portes, he described them as “extremely able, very competent people”. “They have done their best to keep the Russian economy going, to stop inflation and to keep the macroeconomic situation under control. I think that this is very sad, I know that people have to make compromises in life and I have no idea what personal reasons might underly their willingness to cooperate with Putin. In the final analysis they are doing a very good job at managing the economy by, for example raising interest rates to control inflation and by controlling capital outflow.”
For other interviews with Professor Portes on the impacts of sanctions against the Russian economy, read Meet the woman who engineered Russia's wartime economy and helped secure another term for Putin, and Steering an economy through treacherous waters
