Are Sanctions Swift Enough?

The 24^th of February 2022 came to change the course of the world and, namely, of Europe. The Russian army launched its first attacks on Ukrainian soil around 3AM (Lisbon time), days after President Vladimir Putin formally recognized the republics of Donetsk and Luhansk. As the world grew in shock, the West grasped the need for a severe response that averted any escalation of violence, resulting in unprecedented sanctioning.

Sanctions are used as a strategic and coercive tool to weaken the opponent’s position and try to pressure them into compliance of given demands. It can also serve goals on domestic politics and on the dynamics of the international system. This multiplicity of goals has caused a wide discussion between scholars around the definition of success when it comes to sanctions (Jones et al., 2020). Although it has been argued to be a limited view, most of the research findings mentioned in this article measured success according to whether the applied sanctions were able to achieve the publicly stated goals.

The support for Ukraine and condemnation of the Russian military attack have been a matter of growing consensus among the international community. In fact, Switzerland parted from its neutral status, while South Korea and Taiwan joined the Western bloc (Reuters, 2022). Technological components, Russian banks, sovereign debt, and assets of Russian oligarchs have been the main targets. To illustrate the scale at play, Bruno Le Maire, the French Minister of Finance, claimed that, as of March 1^st, the total of frozen assets is worth close to 1 trillion dollars (CNN Business, 2022). The exclusion of Russian banks from the SWIFT system was one of the most debated sanctions, coming into full effect on March 12^th (SWIFT, 2022). The Institute of International Finance estimates that sanctions could reduce Russia’s GDP by up to 15%. The final aim is to cut access to global finance markets and induce the world’s 11^th largest economy into a recession.

Moreover, economic sanctions are not a new trend. This mechanism started being widely enforced during the Cold War, with the United States as the primary user in attempts to counter Soviet influence (Cilizoglu et al., 2021). More recently, sanctions against Russia have been a long-standing policy tool of the West to protest the annexation of Crimea in 2014 and the alleged shot down of Malaysian Airlines Flight 17. Vladimir Putin prepared for the current moment by weakening the reliance of the Russian economy on the dollar, increasing reserves in other foreign currencies and gold up to a worth of 630 billion dollars (CNN Business, 2022) and asserting control on key macroeconomic indicators, namely maintaining very low levels of public debt – in 2020, Russian debt was around 19% of GDP (Statista, 2021). Nonetheless, current sanctions have already forced the Russian Central Bank to increase interest rates by 20% as the Ruble registered its biggest fall in history (CNN Business, 2022).

Given its role in international relations, the effectiveness of economic sanctions has been called into question for decades. Its use has been steadily increasing since 1950, however, studies indicate that meaningful success rates were only achieved in 1990. From that period onwards, sanctions began covering shorter periods but affecting larger portions of the target country’s GDP (Hufbauer et. al, 2009). In effect, time seems to be a significant indicator of success. In 1995, van Marrewijk and van Bergeijk estimated that most effective sanctions met their goal within three years, while most failed cases lasted outstandingly longer. Impact is also dictated by the target country’s political regime: autocratic leaders tend to care relatively less about the potential damage inflicted on their citizens, thus, sanctions on autocratic regimes are half as likely to be effective as on democracies (van Bergeijk, 2012). Furthermore, and an aspect that is particularly relevant to the Russo-Ukrainian war, it has been found that a multilateral approach to sanctions increases its probability of success (Rarick and Han, 2010). The intensity of trade is yet another factor at play which behaves proportionally to sanctions’ effectiveness, that is, the more trade there is between the two parties, the largest can be the negative effect of economic sanctions (Hufbauer et. al, 2009).

It is worth noting that, given the high complexity of international conflicts, which emerge of varying contexts and are shaped by region-specific outlines, it is difficult to generalize research results on the appliance of economic sanctions. Indeed, further research with more recent data is required to understand how the multiplicity of goals linked to sanctioning influences its success measurement, since it can change the conclusions previously obtained.

In sum, research indicates that certain factors may influence the likelihood of success of economic sanctions, although context weights significantly. Despite Russia already witnessing some consequences of unparalleled sanctioning, its effectiveness and long-run effects remain a looming question, with a high degree of uncertainty lacing the next steps of the parties involved in the conflict.

Sources:

Cilizoglu, M., & Early, B. R. (2021). Researching Modern Economic Sanctions. Oxford Research Encyclopedia of International Studies.
https://doi.org/10.1093/acrefore/9780190846626.013.599

Hufbauer, G. C., Schott, J., Elliott, K. A., & Oegg, B. (2009). Economic Sanctions Reconsidered (3rd ed.). Peterson Institute for International Economics. https://www.piie.com/bookstore/economic-sanctions-reconsidered-3rd-edition-paper

Jones, L., & Portela, C. (2020). Evaluating the success of international sanctions: a new research agenda. Revista CIDOB d’Afers Internacionals, 125, 39–60. https://doi.org/10.24241/rcai.2020.125.2.39/en

Kwon, O., Syropoulos, C., & Yotov, Y. (2022, March 4). Extraterritorial sanctions: A stick and a carrot. VOX, CEPR Policy Portal. Retrieved March 12, 2022, from https://voxeu.org/article/extraterritorial-sanctions-stick-and-carrot

Lee, Y., & Blanchard, B. (2022, February 25). Taiwan to join “democratic countries” in sanctions on Russia. Reuters. Retrieved March 12, 2022, from https://www.reuters.com/world/asia-pacific/taiwan-join-democratic-countries-sanctions-russia-2022-02-25/

Rarick, C. A., & Han, T. (2010). Economic Sanctions Revisited: Additional Insights into Why They Fail. Economic Affairs, 30(2), 68–70. https://doi.org/10.1111/j.1468-0270.2010.02007.x  

Reuters. (2022, March 10). Russia’s GDP to fall 15% this year on Ukraine-linked sanctions -IIF. Retrieved March 12, 2022, from https://www.reuters.com/markets/rates-bonds/russias-gdp-fall-15-this-year-ukraine-linked-sanctions-iif-2022-03-10/

Riley, C. (2022, March 1). The West’s $1 trillion bid to collapse Russia’s economy. CNN Business. Retrieved March 10, 2022, from https://edition.cnn.com/2022/03/01/business/russia-economy-sanctions/index.html

Russia & IMF. (2021, November 10). National debt in relation to gross domestic product (GDP) in Russia from 2016 to 2026 [Dataset]. Statista. https://www.statista.com/statistics/271357/national-debt-of-russia-in-relation-to-gross-domestic-product-gdp/

Shojai, S., & Root, P. S. (2013). Effectiveness Of Economic Sanctions: Empirical Research Revisited. International Business & Economics Research Journal (IBER), 12(11), 1479. https://doi.org/10.19030/iber.v12i11.8184

Smith, J., & Shin, H. (2022, February 24). S.Korea to join sanctions against Russia, but not considering unilateral steps. Reuters. Retrieved March 12, 2022, from https://www.reuters.com/world/asia-pacific/skorea-will-join-economic-sanctions-against-russia-yonhap-2022-02-24/

SWIFT. (2022, March 2). An update to our message for the SWIFT Community. Retrieved March 12, 2022, from https://www.swift.com/pt/node/308383

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Van Bergeijk, P. A., & van Marrewijk, C. (1995). Why do sanctions need time to work? Adjustment, learning and anticipation. Economic Modelling, 12(2), 75–86. https://doi.org/10.1016/0264-9993(94)00003-n