January 21, 2022

The Russia Sanctions That Could Actually Stop Putin

By: Edward Fishman and Chris Miller

This week, Secretary of State Antony Blinken traveled to Kyiv in what seemed to be a last-ditch diplomatic effort to avert a Russian attack on Ukraine. Days of failed talks have made clear that the Kremlin-manufactured crisis is unlikely to be resolved by a diplomatic grand bargain. So the U.S. will have to rely, once again, on the threat of economic sanctions to convince President Vladimir Putin to back down.

The Biden administration has warned Moscow of “severe economic costs” if Russia invades. But skepticism is growing about whether sanctions can really deter the Kremlin. The U.S. and Europe have maintained sanctions against Russia since its initial invasion of Crimea in 2014, yet these have always been modest, far from the sweeping penalties enforced on Iran, North Korea or Venezuela. Arguably, sanctions helped rein in Moscow’s ambitions in Ukraine early on, but since then, they have failed to stop Russian adventurism. Sanctions are the go-to tool when leaders want to “do something” about Russia, but most of the penalties over the past decade have been economically minor and ineffective at changing Russian policy.

Bending Russia’s macroeconomic fortunes — and Putin’s calculus — will require targeting the country’s financial system as well as key exports such as oil.

Why is it so difficult to convert America’s economic heft into geopolitical power? When it comes to sanctioning Russia, the U.S. faces three recurring challenges: The sanctions tend to be imposed gradually; they are negotiated with reluctant allies; and the most impactful ones would also be economically costly to the West. As a result, the Russia sanctions in place today are a watered-down compromise, designed to placate allies and minimize domestic costs.

Such sanctions would have significant effects on Russia’s economy and perhaps on the global financial system, which is why U.S. officials have been hesitant to go this far. But averting a war is a tall order and, unfortunately, won’t be cost-free. “Smart” or “targeted” sanctions won’t work. To really impose pain on Russia, the U.S. and Europe will have to bear some burden, too — although, fortunately, there are ways to minimize the fallout for Western economies.

Read the full article from Politico.

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