What Russia Sanctions Failure Says About the Future
On December 30, 2021, Joe Biden informed Vladimir Putin in a phone call that the White House stands ready to cripple the Russian economy if the Kremlin proceeds with plans to invade Ukraine. Biden reiterated this message in a call with Putin just weeks before the February 2022 invasion. “President Biden was clear that, if Russia undertakes a further invasion of Ukraine, the United States together with our Allies and partners will respond decisively and impose swift and severe costs on Russia,” said the White House in a readout. As Russian forces poured into Ukraine later that month, the Biden administration wasted no time corralling U.S. allies behind the largest and most ambitious sanctions regime in history.
The Russian ruble, Biden triumphantly declared in March 2022, was “almost immediately reduced to rubble,” and the “Russian economy [was] on track to be cut in half.” It is widely acknowledged today that these, to put it mildly, optimistic forecasts turned out to be catastrophically wrong. Not only did the Russian economy shrink by an insubstantial amount in 2022 despite the West’s unprecedented sanctions onslaught, but its precipitous growth in 2023 has experts speculating that it is actually on the verge of “overheating.”
How did Russia, which, as often observed in Western commentary, has a smaller GDP than several individual EU states as well as both Texas and California, manage to defeat an economic blockade imposed by a coalition accounting for over one-third of the global economy? This phenomenon has been well-charted as a policy question. It is, in large part, a story of sophisticated Russian sanctions evasion and mitigation measures, including a wide array of parallel import schemes, a vast network of commercial proxies and cut-outs, alternative energy export pathways, and Russia’s success in offsetting Western pressure through deeper commercial ties with China, India, and other major players in the global south.
In some cases, Moscow has demonstrated a capacity for honing and adapting these methods faster than the U.S. and EU can come up with countermeasures against them. In others, there simply are no reasonable countermeasures. For instance, targeted sanctions against specific Turkish or Chinese entities are far too insignificant in scale to make a dent in Russia’s war effort. Meanwhile, the White House cannot impose large-scale, sweeping secondary sanctions on Beijing, New Delhi, and others for continuing to do business with Russia without inviting an avalanche of negative short and long-term diplomatic, political, and economic consequences that would leave many asking if the cure is worse than the disease.