If you retrace the history of economic sanctions you will question the effectiveness of those imposed today on Russia
25 March 2022 – As I wrote earlier in this series, the West must consider the overall purpose of economic sanctions imposed on Russia or they could prove counterproductive. I do not think sanction ever work. And in this case, Russia’s energy revenues will soar because the oil/gas prices soar will soar. In the world where are no real short term solutions to energy independence, war becomes its own reward.
It’s not rocket science to know that war drives up commodity prices. Nor perhaps to understand that Russia has friends and customers for whom Ukraine is not a big issue. The effectiveness of sanctions against a significant power with huge natural resources is necesarily limited.
I was reminded of all this by Nicholas Mulder’s recent book The Economic Weapon: The Rise of Sanctions as a Tool of Modern War which explores how, in the 20th century, Western states used blockades and embargoes in attempts to end conflicts and why these measures often failed.
The use of blockades against a city or a country during a conflict goes back to antiquity and was common during the Napoleonic wars. During World War I, people in the Ottoman Empire, Austria-Hungary and Germany were subjected to severe blockades. It is estimated that several hundred thousand people died of starvation.
In 1918, the victors decided to continue using this tool after the end of the conflict. In an already highly globalized economy, the traumatic memory of blockades in Central Europe would be a sufficient deterrent to avoid the need for use of direct armed force against states disrupting the international order – or so they thought. The League of Nations, created in 1919 at the instigation of the United States, was therefore equipped with this economic weapon of deterrence.
During the 20th century, economic sanctions often proved to be counterproductive. In the 1930s, sanctions that aimed to stop aggressors like Nazi Germany and Imperial Japan ended up highlighting the economic interdependence of countries. That encouraged these regimes, already ideologically inclined to be highly nationalistic, to seek self-sufficiency in order to become impervious to Anglo-American pressure. They launched territorial conquests to secure vital raw material resources. Rather than preventing the Second World War, embargoes pushed these states to radicalize themselves further and accelerated events.
After the Japanese army invaded the eastern part of China in 1937, U.S. President Roosevelt imposed several embargoes on Tokyo. First on fuel for airplanes, then on iron ore, nickel and copper. In the summer of 1941, after the Japanese invasion of Indochina, Western powers also decided on an oil embargo, which was one of the motivations for Japan’s attack on Pearl Harbor.
In 1935, the League of Nations introduced punitive measures against Mussolini’s Italy in response to the invasion of Ethiopia. They did not work. But the Nazi regime watched them closely. Aware that it would probably be subject to the same restrictions, it was consequently a bit more convinced that it had to strengthen its economic independence.
But, paradoxically, despite these failures, Western liberal states continued to use sanctions after the 1930s.
There are exceptions, of course. They were most successful in the border war between Yugoslavia and Albania in 1921 and between Bulgaria and Greece in 1925. In both cases, the mere threat of sanctions by the League of Nations, without actually applying them, helped to resolve conflicts. But these were small, relatively vulnerable countries that were very dependent on the outside world.
This illustrates that if they are not to be shown to be counterproductive, as they were for Japan and Germany in the 1930s, such measures must be precisely calibrated, which is particularly complex.
And then there is Iran.
First, that economic sanctions and the sustained threat of new measures lose their effectiveness over time. Second, that productive systems eventually adapt. After the severe crises that Tehran suffered in the wake of the embargoes, activity stabilized despite stagnation and inflation. Russia’s economic structure is relatively similar to Iran’s, with large hydrocarbon exports and some industrial capacity. After the initial recession, it is therefore likely that their means of production will reorganize itself and that the Russian economy will be resilient – even with very low or negative growth and an impoverished population – for a long time.
This is why it is important for Europe and the West to clarify the objective of sanctions against Russia. If they are seen as permanent, if there are no clear conditions for their lifting, it will no longer be possible to use them as leverage to promote de-escalation and obtain a ceasefire.
And it gets complicated because we confuse the economic effects of embargoes with their political effectiveness. What do you mean by that? The Russian economy is expected to plunge into a recession of around 15% this year. If economic damage is considered an indicator of the success of restrictive measures, then the goal is achieved. But if the goal is to establish peace and security on the European continent, we are a long way away.
Should Europe impose an embargo on Russian gas? If it wants to increase the pressure on Moscow, this would indeed seem to be the next step, as it would be very damaging for the Russian economy. But it would also require a much stronger fiscal policy in Europe and, more generally, a profound reconfiguration of economic policies – if only to protect households from the resulting sharp rise in energy prices, and to strengthen investment in renewable energy.
France, Italy and Spain have realized that it is not possible to wage an economic war of this kind without increased interventionism. But the north of Europe, the Netherlands, Germany, Sweden and Finland want to get involved, while maintaining strict fiscal policies. A choice will have to be made.
The measures taken against Moscow will severely affect Russian households. But have there been cases in history where restrictions have led to a public protest movement and contributed to regime change?
Well, yes, in a way. This was the case in South Africa in the 1960s and 1970s. The restrictive measures were not the main cause of the end of apartheid, but they contributed to it. That was because there was a large political opposition in the country organized around Nelson Mandela and the African National Congress. It played a crucial role by becoming the vessel for the hopes of the black population and the criticism of the white community.
In Russia, the opposition has been crushed. Alexei Navalny is in prison and what remains of the intelligentsia is fleeing the country. The oligarchs are subordinate to Putin. There is no political vehicle for change.