A year on from Russia’s invasion of Ukraine, the conflict promises to continue rather than abate. The peaceniks are nowhere to be seen; the warmongers and arms merchants are everywhere, lubricating the next offensive, fuelling the next campaign. The talk is not about reaching an accord but total victory, a situation that can only hold out the prospect for an even deeper, costlier conflict.
From the pro-Ukrainian side, the hope was that Russia would fold, bend at the knees, and concede error. Economics would be the vital weapon in this regard. In March 2022, US Treasury Secretary Janet Yellen expressed confidence that the increasingly hefty sanctions regime would leave a telling mark on the Russian economy. ‘The Russian economy will be devastated as a consequence of what we’ve already done, but we … continue to consider further steps we can take.’
As the Council of the European Union explains, ‘The sanctions aim at weaking Russia’s ability to finance the war and specifically target the political, military and economic elite responsible for the invasion.’ In doing so, such economic sanctions will ‘effectively thwart Russian abilities to continue the aggression.’
From Brussels to Washington, the feeling was that the Russian economy would contract so dramatically as to force President Vladimir Putin to the table and end the conflict. Russian banks would be starved of finance, excluded from the SWIFT bank clearing system. The central bank would be cut off from accessing billions of dollars’ worth in overseas assets. The cost of living would rise intolerable levels; the rouble would collapse. Discord would compel change.
A year on, the picture that emerges is rather different. The International Monetary Fund’s recent forecasts revealed that the Russian economy is set to improve this year from its -2.2 per cent contraction from 2022, increasing to 0.3 per cent. 2024 promises to be even better, with a growth rate of 2.1 per cent. European countries, in sharp contrast, cannot count themselves as fortunate. Germany’s performance figures are 0.1 per cent and 1.4 per cent respectively, while the United Kingdom promises to be one of the worst, with a 2023 growth figure of -0.6 per cent and 2024 figure of 0.9 per cent.
The sanctions regime, as it often does, produces uneven effects. In Russia’s case, the auto industry has been particularly hard hit, leading to a precipitous decline in car purchases. This has led to Chinese brands and second-hand models swamping the market.
'The sanctions regime has produced growth in different sectors of the Russian economy and a global shift in energy markets. It has encouraged Moscow to be more resourceful. But most importantly, such economic weapons have failed to achieve their purpose of ending a conflict that shows no signs of abating.'
Other areas of the economy have been spared the hardships. Unsurprisingly, the militarisation of the Russian Federation has seen defence spending rise by 23 per cent from the previous year’s figures. Military security and public administration saw an increase of 4.1 per cent last year. Guns may not put food on the table, but they can prove significant in improving a country’s economic figures.
The imposition of sanctions has also had another unintended consequence. Other countries – India, China and Turkey, for instance – have stepped in the shoes of European states in terms of purchasing Russian energy supplies. In 2022, China’s imports of Russian crude oil rose by 8 per cent, or 1.72 million barrels per day (bpd), making Russia the country’s second-biggest supplier. In December last year, India purchased an average of 1.2 barrels a day, an increase of 29 per cent from November. These figures have been helped by the discounting of Russian crude, a result of sanctions by the G-7 and EU to enforce a US$60-a-barrel price cap.
The use of sanctions and blockades has often been regarded as morally and strategically questionable. Those harmed have tended to be the general populace. The elite, for the most part, remain elusive and untouched.
It’s been argued that a failure to engage in sanctions following the invasion of Ukraine would itself be morally compromised. But when those sanctions are entered into with full knowledge that they are unlikely to undermine Putin or the war effort, the ethical waters start to muddy.
During the First World War, the use of such economic weapons spawned a lasting myth about the value of their use. With the foundation of the League of Nations, the economic blockade came to be seen as a vital tool of collective security. At a League Council meeting held in the northern Spanish town of San Sebastian in 1920, British foreign secretary Arthur Balfour confidently asserted that, ‘No nation would destroy itself in these civilized times by inviting such a penalty.’ The use of such blockades would, in any case, be rare, given that the League was unlikely to be defied.
But defied the League was, eventually leading to the Second World War that buried it. And as if that wasn’t enough, countries such as Italy, Japan and Germany came to develop what came to be known as blockade resilience (Blockadefestigkeit), with the stress on self-sufficiency. Ironically enough, it also encouraged ever greater belligerence, with Germany’s Chancellor Adolf Hitler remarking to a Swiss diplomat that German control of Ukraine was essential to avoid starvation. The use of sanctions had effectively encouraged, rather than discouraged, war and the acquisition of territory.
The similarities with the Ukraine-Russian conflict are impossible to ignore. The sanctions regime has produced growth in different sectors of the Russian economy and a global shift in energy markets. It has encouraged Moscow to be more resourceful. But most importantly, such economic weapons have failed to achieve their purpose of ending a conflict that shows no signs of abating.
Dr. Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He currently lectures at RMIT University.
Main image: President Joe Biden participates in a virtual meeting about mineral supply chains and clean energy manufacturing in the South Court Auditorium of the White House complex February 22, 2022 in Washington, DC. Earlier in the day, President Biden spoke about the Ukraine-Russia crisis and announced a first round of sanctions against Russia. (Drew Angerer/Getty Images)