Why Sanctions on Russia Don’t Work

Dmitry Orlov

So far, the West has imposed on Russia around 30 thousand sanctions. This is twice as many as all the sanctions imposed against other countries on the entire planet. But they didn’t work; and so now Trump is threatening to impose sanctions on Russia’s trading partners. China, India and Turkey would be the ones most affected — or not.

The sanctions imposed so far perhaps slowed the development of the Russian economy somewhat, but not enough to make sanction avoidance worth considering. On the other hand, they certainly boomeranged back on the Europeans, severely hampering industrial activity, producing record-high rates of bankruptcy, virtually killing the chemical and automobile industries, raising unemployment and causing public discontent and political instability.

The sanctions attempted to disconnect Russia from international (dollar and euro-based) payment infrastructure, to disrupt supply chains, and strike at key sectors of the economy. But something clearly went wrong with these plans. Russia’s economy has remained stable and has continued to grow while Russia’s trade relations with the rest of the world (other than the West) have continued to develop. This result may have befuddled the West’s intrepid sanctioneers, but it came as no surprise to careful Russia-watchers.

The reason the 30 thousand sanctions have failed, and the reason the next 30 thousand would fail just the same, is simple: Russia was ready for them. Starting around 2014, when the first sanctions, related to the the events around Crimea, were imposed, Russia has been working steadily to get rid of all the more important vulnerabilities and to achieve a remarkable level of self-sufficiency in all of the key indicators of state sustainability, including the following:

• Energy
• Nuclear energy (separately)
• Natural resources of every kind
• Education
• Fundamental science
• Industry
• Military-industrial complex
• The military
• Agriculture
• Health care

Although much of this basis is provided by Russia’s rich patrimony, including Soviet traditions of excellence in education, science and technology, the impetus for its development, in no small measure, came from the disciplining effect of the 30 thousand sanctions. Of course, Russia’s huge territory, holding a treasure trove of natural resources of every kind, is what made it all possible. No other country in the world has such a basis for self-sufficient development.

• China has severe international dependencies with regard to energy and natural resources.
• The US has many unsolved problems with nuclear energy, natural resources (it has, essentially, no oil left — just condensate from fracked wells) and there are many unanswered questions for its military-industrial complex and industrial base.
• Japan has problems with resources, energy, army, military-industrial complex and agriculture.
• Most other countries are even worse off.

Thus, Russia has the most stable economy on the entire planet and has all of the resources it needs to develop them independently.

Russia’s Achilles’ heel (or so Western sanctionistas like to imagine) is its dependence on revenues from oil and gas exports. They imagine that, deprived of hydrocarbon revenues, Russia would be unable to finance its military. In fact, as Russia’s economy continues to develop, this dependence becomes less and less severe. Currently, a quarter of government revenues comes from hydrocarbon exports. Thus, if hydrocarbon exports were shut down, Russia would lose this revenue and would be forced to raise the flat income tax rate from 13% to 16% — and that certainly wouldn’t be fatal.

But would this ever be necessary? The three largest buyers of Russian oil are China, India and Brazil, and none of them are at all likely to abandon this trade because of Western pressure. If the West imposed sanctions on the buyers of Russian energy, this energy would (on paper) stop being Russian. There is now an entire technology suite for circumventing Western sanctions. The most that happens is a temporary slowdown in trade following the imposition of new sanctions, while new ways of doing business are being worked out.

It turns out that imposing sanctions is the easy part while enforcing them is either difficult or impossible. The difficulty has to do with the inability to track transactions by which products move to and from Russia through third parties, especially if the intermediaries do not use dollars or euros for transacting with Russia. And the impossibility has to do with the West’s dwindling clout in imposing its will on large, powerful countries. China has already demonstrated its ability to fight and win trade wars with the US; India and Brazil are next.

It would make sense that at some point it will dawn on Western officials that anti-Russian sanctions are ineffective and self-defeating, but it is by no means certain that they would then find it in their power to lift these sanctions.

Since these sanctions have been beneficial to Russia in helping it achieve higher levels of self-sufficiency and in prompting it to cultivate fair trade relationships with non-Western partners around the world, wouldn’t Russia be interested in making sure that the sanctions remain in place — perhaps through a series of minor, judiciously chosen anti-Western escalations and provocations with the goal of making the lifting of sanctions politically impossible? It would seem that a new Berlin Wall has been built, except that this time it is the West that has built it.

Via https://boosty.to/cluborlov/posts/b280f785-6e9f-42cb-b2bf-69557e8724fa