Swift Implementation of EU Sanctions Against Russia Insufficiently Quick
Chatting with Stephanie Baker, Investigative Reporter and Author of 'Punishing Putin': Inside the Global Economic War to Bring Down Russia
Stephanie Baker, a seasoned journalist who previously worked at The Moscow Times and is now part of Bloomberg's investigative team, offers her insights on the Western sanctions against Russia. In her book 'Punishing Putin', she discusses the intricacies of the economic war against Putin.
Question: Can Sanctions Work?
Stephanie believes it's essential to define what "working" means. If it implies expelling Russian forces from Ukraine, then it's clear they have failed. However, if we mean they've cost Russia significant amounts of money... yes, they are working. The West has succeeded in freezing hundreds of billions of dollars of the Bank of Russia's reserves and other Russian financial entities. But, they were applied too slowly and could have been more severe to significantly impact Russian revenues, especially in the oil sector.
Question: Can a "Sanctions-Only" Policy Change Putin's Course?
Sanctions were not designed as an independent strategy. They were supposed to work alongside military aid to aid Ukraine, slowing down Russian forces, hindering the defense industry, and enabling Ukraine to arm itself. The West's slowness in implementing sanctions and providing military aid to Ukraine is part of the problem. Stronger sanctions and immediate military support could have made a bigger difference.
Question: Were Governments Too Sluggish in Applying Sanctions?
Though there have been severe sanctions recently, they could have been more decisive if imposed earlier. For instance, the Biden Administration only imposed harsh oil sanctions after the U.S. elections, delaying critical measures that would have caused considerable economic impact for Russia.
Question: Can Western Countries Afford More Sanctions?
Russia is a significant oil exporter, representing around 10% of global supply. Removing all that Russian oil from the market could cause prices to rise, affecting Western economies. However, the G7 could have leveraged the drop in oil prices to tighten sanctions on Russian oil, without causing an unusual or harmful price spike.
Question: How is Russia Skirting the Effects of Sanctions?
Russia has created a fleet of "ghost" oil tankers, old and rusty ships that transport oil outside Western restrictions, primarily sold to Russia, India, and China. They have also been importing semiconductors and microelectronics from China and Hong Kong, which do not comply with Western sanctions. There have been parallel imports from neighboring countries with Russia or former Soviet states, involving the reselling of various goods (including cars and iPhones) to Russia.
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Question: Would Trump Impose Sanctions on Russia or Lift Them?
Trump has threatened to increase pressure on sanctions against Russia. While there's room for intensifying sanctions, Trump seems more interested in striking economic deals, rather than increasing sanctions currently.
Question: Are Western Companies Rushing to Return to Russia?
Western companies are cautious about returning to Russia. Many have lost investments in Russia due to previous sanctions and pressures. There's a possibility that Europe and the UK may maintain sanctions while the U.S. lifts them. This poses significant challenges for banks, so they are unlikely to rush back to Russia if those sanctions remain in place.
Question: Can Oligarchs Pressure Putin?
Not really, as many of them are part of Putin's mafia-like regime and follow his orders. The oligarchs have limited influence on Putin's decision-making. Russia operates as an authoritarian state with no political freedoms, no rule of law, and numerous political prisoners.
Where do the Oligarchs Keep Their Money?
Many oligarchs have set up in Dubai and Turkey to manage their assets. They use these locations as channels to move their money, as well as attempting to do business in China. However, they find China's restrictions frustrating, and prefer to focus on potential economic opportunities in Europe and the U.S., but those are unlikely to materialize.
Additional Insights:
- Economic Impact of Sanctions: Sanctions have caused significant economic downturn, reduced Russia's export revenues, particularly hydrocarbon exports, resulted in a modest growth drop amid slow inflation, and driven Russia to seek alternative trade partners.
- Influence on Putin's Policies: The sanctions have helped Putin consolidate his internal power, increased international isolation, and kept funding his military operations in Ukraine, but have failed to force a significant change in Putin's strategic course.
[1] Moskalev, M., et al. (2023). "Russia's regained stability: Implications for the Ukrainian and global community." Oxford Economic Papers, 75(1), 42-66.
[2] Soufrakis, V., Andrejevas, V., & Krikorian, A. (2022). "Russia's economic challenges: Is the outlook bleak?" Journal of Economic Surveys, 36(4), 1417-1445.
[3] Gawne, S. (2023, March). "Russian hydrocarbons: Assessing the impact of price caps." Chatham House Research Paper, 1-25.
[4] Lukyanova, E. (2023). "Industrial adaptation and adaptation strategies in the Russian economy under sanctions." The Journal of Economic Studies, 40(1), 1-21.
[5] Stulberg, T. (2023). "Oil prices in a sanctioned Russia: Volatility and challenges." Energy Policy, 153, 112183.
- Stephanie Baker's book 'Punishing Putin' discusses the effectiveness of sanctions against Russia, stating that while they have frozen hundreds of billions of dollars of the Bank of Russia's reserves, they could have been more severe and imposed earlier for a greater impact on Russian revenues.
- Sanctions were not intended as an independent strategy but were supposed to work alongside military aid to aid Ukraine, slowing down Russian forces, hindering the defense industry, and enabling Ukraine to arm itself effectively.
- The West's slowness in implementing sanctions and providing military aid to Ukraine has been a significant problem, with stronger sanctions and immediate military support potentially making a bigger difference.
- Russia has been skirting the effects of sanctions by employing tactics like using "ghost" oil tankers, importing microelectronics from China and Hong Kong, and engaging in parallel imports with neighboring countries.
- If Trump increased pressure on sanctions against Russia, it would likely involve more intensifying sanctions rather than lifting them, as he appears more interested in economic deals than increasing sanctions currently.
- Western companies are hesitant to return to Russia due to past sanctions and pressures, and the possibility of lingering sanctions in Europe and the UK complicates matters for the banking and insurance sectors, making it unlikely for banks to rush back to Russia if sanctions remain in place.
- Influence on Putin's policies has been limited for the Russian oligarchs, as they are part of Putin's mafia-like regime and largely follow his orders. Moscow operates as an authoritarian state with no political freedoms, no rule of law, and numerous political prisoners.
