Economic Sanctions On Russia Would Be Worse Than Futile

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President Obama is naturally distressed about Russia's reprehensible behavior in Ukraine, and would like to punish Russia and nudge President Vladimir Putin to de-escalate the situation. Most of Congress shares his distress.

But there is little the United States -- despite its economic hegemony -- can do by itself that would meaningfully impact Russia. Unilateral sanctions simply don't work: the economic pain they inflict is borne mainly by the domestic businesses transacting commerce with the country ostensibly being punished. They constitute little more than a temporary inconvenience to the country being sanctioned.

In a big world like our own, there are few monopolists: a country cut off from goods or services provided by companies in one country can find reasonable substitutes elsewhere. And they will: companies in Western European nations have been quietly (or in some cases, not so quietly) pressuring their governments to refrain from going along with the U.S. in imposing broad sanctions in order to pick up business that U.S. corporations may be forced to forego. The German company Siemens has already let Russia know that they would be more than willing to replace Caterpillar should U.S. sanctions prevent it from operating in Russia.

The problem with multilateral sanctions is the same as dating: the least interested party dictates the nature of the relationship. If the U.S. is ready to quarantine Russia but Japan won't do anything but keep the five richest men of Moscow from visiting Tokyo, that's going to be the limit of the sanctions.

Getting other countries to acquiesce to more stringent sanctions requires a modicum of diplomacy, of course, but we have an entire department of the government devoted to such matters. Under the "What have we got to lose?" standard, they might appeal to moral principle in this effort. Europe, after all, is known to have the highest possible standard of morality, and, conveniently, it buys most of Russia's oil and gas. Without these sales, Russia would be just another former Soviet Socialist Republic, a -stan. The ongoing negotiations with Iran are evidence of the persuasive powers of a multinational refusal to buy oil from a nation whose primary export it is. Iran is, at a minimum, working hard to present a plausible pretense that it has not and will not get the bomb, due clearly to the widely enforced economic boycott. Might the same remedy, applied to Russia, obtain the same result, or at least caution? Perhaps we might help the cause if we agreed to make more of an effort to export our own natural gas.

Even mere moral suasion works better en masse. When America chides Russia for its actions, the Russian tendency is to pay little heed. But if the entire world rose up in wrath and pointed out that inciting conflict within and seizing a portion of a neighbor, shortly after making a treaty promising to do no such thing, it would have serious repercussions.

It is also worth pondering Putin's overarching strategic goals: He has already seized the only part of the Ukraine where Russians are the majority, and it's doubtful he wants to annex a portion that is replete with unfriendly natives. It's more likely that he wants to keep Ukraine out of NATO and made fully aware that it is small and weak compared to its neighbor. Russia's actions are not dissimilar from China's attitude toward various island nations that lay claim various uninhabited islands in their environs, none of which has risen up to the level of any contemplation of sanctions.

While applying stringent multinational sanctions against Russia may be impossible to achieve, they are the only sanctions worth pursuing. Unilateral sanctions imposed by the U.S. in this realm would be worse than symbolic, a merely pyrrhic gesture that would impose more of a cost on U.S. companies than on the Russian economy. The matters in dispute in Ukraine matter more to Russia, or at least to Putin, than to the United States, and no amount of blunder will change that truth. This unfortunate fact dictates a collective response to Putin's odious actions.


Ike Brannon is President of Capital Policy Analytics, a consulting firm based in Washington, D.C. 

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