As Russia wages war against Ukraine, the U.S. and its allies scramble to respond to the invasion. Sanctions are the weapon of choice; the United States, the United Kingdom and the European Union announced new sanctions this week. These measures target Russian capital in the West, the country’s banks, state officials, and might go as far as stopping the import of semiconductor chips. Even more drastic measures are on the table.
Russian aggression must be punished, but the current policy is counterproductive. By imposing sanctions, the West plays into Russian President Vladimir Putin’s hands. Rather than being deterred by what the U.S. describes “severe and overwhelming costs on Russia’s economy,” the Kremlin views sanctions on individuals, capital and imports as a blessing in disguise. To seriously harm Russia, the U.S. and its allies instead should target Russian exports, especially oil and gas, and symbols of the country’s prestige, such as access to international cultural and sport venues.
“We must thank the Europeans for their agricultural sanctions. Well done. Thank you for all your sanctions,” Putin proclaimed on Oct. 21, 2021. Russia “doesn’t give a s–t about sanctions,” a senior Russian diplomat recently stated. These are not empty boasts. Western sanctions against Russia have a long, failed history.
When in 1979 the Soviet Union invaded Afghanistan, President Jimmy Carter responded by imposing a grain embargo. The Soviet Union depended on food imports and the U.S. believed that limiting Soviet access to American grain would cause significant harm. The decision was controversial, and the CIA warned that the impact of sanctions might be minimal because the Soviets would switch to other suppliers, and that is what happened. In 1981, President Ronald Reagan quietly scrapped the grain sanctions.
In 2014, in response to Russia’s annexation of Crimea and involvement in the conflict in Donbass, the U.S., EU and several Western governments sanctioned several Russian politicians, media personalities, military commanders and oligarchs close to Putin and Russian state-owned companies. In response, the Kremlin introduced counter-sanctions that banned the import of most Western food into Russia.
According to a view popular among Russian elites, instead of harming Russia, Western sanctions make it stronger. First, they believe that sanctions harm the West more than they damage Russia. According to the Russian government’s newspaper, Rossiyskaya Gazeta, the EU, U.S., Australia, Norway and Canada lost up to $8.6 billion a year because of the sanctions war. By 2019, the EU alone lost $240 billion from the sanctions war, almost five times more than Russia did, Putin bragged.
More crucially, the sanctions forced Russia to heavily invest in domestic production. Western sanctions finally gave the Kremlin the pretext to self-isolate from global markets in strategically important economic areas and nurture Russian producers. Import substitution became the regime’s stated goal. The policy is economically inefficient but is crucial for Putin’s regime survival. Domestically, it allows Putin to create economic elites who owe the Kremlin their fortunes and are beholden to the regime. Not competitive internationally, their prosperity rests on Putin’s decision to disengage from international trade. Internationally, sanctions eventually reduce Russia’s reliance on, and thus vulnerability to, Western pressure and potential interference.
Counter-sanctions and import substitution policies also increase Putin’s hold on power. Sanctioned officials and oligarchs become even more loyal to and dependent on the regime. Russian counter-sanctions are genuinely popular and boost Putin’s domestic legitimacy. In 2014, 83 percent of Russians reportedly supported the Kremlin’s counter-sanctions. The levels of popular support declined over time, but a majority of Russians still approve of these measures. Consuming domestic production is also presented as a way to show one’s patriotism, the item’s quality be damned.
Thus, instead of fearing sanctions, Putin welcomes them. Russia, he believes, has the intellectual and industrial capacity to wean itself from dependence on Western technology. Additional sanctions on technology imports will give the Kremlin incentive and opportunity to heavily invest in domestic production and introduce measures shielding Russian producers from competition. Sanctions on Russian capital in the West will bring it home to finance domestic industries. In the long term, import substation is economically unsustainable, but its short-term results will embolden Putin’s aggression.
If the U.S. and its allies are serious about confronting Russia, the focus should be on limiting Russia’s ability to earn money from exports — first and foremost, from oil and gas. Sanctions should target Russia’s status and prestige, something Russians care deeply about. Symbolic measures, such as excluding Russia from international sport competitions or cultural events, would do more to harm’s Putin’s domestic popularity than limiting access to technology on target banks. More than anything else, Russia and Russians seek recognition and status. Thus, the West should hit where it really hurts.
Eugene Finkel is an associate professor of international affairs at Johns Hopkins University. Born in Ukraine, he grew up in Israel.
Janetta Azarieva is a researcher at the Hebrew University of Jerusalem.
Yitzhak Brudny is the Jay and Leonie Darwin chair in Russian studies at the Hebrew University of Jerusalem.