January 18, 2019

The Goals of Sanctioning Russia

By Peter Harrell:

Ever since Russia invaded Ukraine in 2014, U.S. sanctions have been designed to change Russia’s behavior. Sanctions on lending to large Russian banks and energy companies enacted in 2014, for example, were intended to pressure Russia to comply with its obligations under the Minsk ceasefire agreement between Russia and Ukraine and to deter further Russian aggression in Ukraine. More recent sanctions on Russian intelligence services and operatives involved in Russia’s interference in the U.S. 2016 elections punished Russia for meddling and attempted to deter future Russian interference in democratic processes.

However, it’s time for American policymakers to recognize that sanctions have broadly failed to deter Russia’s attacks on U.S. interests and its assault on global values—and to recalibrate America’s economic strategy against Moscow.

American policymakers should focus on ways to erode Russia’s economy and federal budget over time.

Sanctions have broadly failed to stop Russia’s intervention in Ukraine. In late 2018, Russia escalated tensions by seizing Ukrainian naval ships. Russia tried to interfere in America’s 2018 midterm elections. Russia continues to facilitate North Korean trade and has proudly backed Syria’s murderous dictator Bashar al-Assad. Part of the reason that sanctions have not achieved their goals is that they have not had much actual economic impact. Although the initial sanctions in 2014 cut Russian GDP by between 1 and 2 percent, and forced the Russian government to bail out a number of important companies, in 2017 and 2018 Russia’s economy experienced modest growth. But on a deeper level, Russia sees itself as having achieved considerable foreign policy success over the last several years and is simply unlikely to alter its strategic calculus in the near- or mid-term.

It’s time to shift toward an alternative goal for economic pressure: containing Russia economically. Coercive economic measures are unlikely to change Russia’s strategic calculus, but the United States and its allies can use sanctions and other measures to weaken Russia’s capacity to pursue its malign agenda.

How would such a shift in goals work in practice? A strategy aimed at containing Russia’s economy would focus much more heavily on Russia’s macroeconomics, cash-generating commodities exports, and federal budget, and relatively less on targeted sanctions against specific individuals, companies, and government agencies directly responsible for Russia’s malign activities. It would focus on long-term impacts, rather than on actions that may rattle markets that impose few long-term economic costs. It would also aggressively contain Russia’s outward economic expansion by sharply limiting Russia’s ability to buy assets overseas and to park dirty money in the United States and other Western countries.

Of course, the United States should not abandon targeted sanctions against specific malign activities. Such measures play an important role in exposing the networks directly involved in Russia’s attacks on U.S. interest and global values. But such measures should not be the central thrust of U.S. policy. Instead, American policymakers should focus on ways to erode Russia’s economy and federal budget over time.

The United States should also not foreclose the possibility that Russia might change course and should always be prepared to reduce sanctions if Russia unexpectedly ceases its attacks on Western interests and global values. But much like President Reagan’s successful economic campaign against the Soviets, the United States and allied governments should plan to steadily erode the sources of Russia’s economic strength, rather than letting hope triumph over experience and overestimating the U.S. ability to alter Russia’s strategic objectives.

Peter Harrell is an adjunct senior fellow at the Center for a New American Security, where he focuses on the intersection of economics and national security. Research interests include economic statecraft, sanctions and energy.

Read more in the CNAS "U.S. Strategies to Counter Russia" commentary series.

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