“Oh, the sanctions aren’t helping!” friends of the Russian regime in Europe like to say. And not just that. The doubt as to whether the sanctions policy against Russia might be ineffective has been nagging for years. Vladimir Putin sows this doubt. He regularly claims that Western punitive measures are… Russia Attacks on Ukraine were “completely ineffective”. He also likes to take advantage of this Western myth: that sanctions can stop wars. “You see,” laughs Putin when he rejects every offer of talks and lets the fighting continue in the fourth year of the war, “it’s all pointless!”
We hear that from him suspiciously often. It’s part of his bluff EU and should prevent Donald Trump’s USA from further sanctions. In fact, the mere continuation of the war says very little about the effectiveness of sanctions. They affect pain points other than those directly at the front. So let’s take a close look at what sanctions bring, where Russia suffers losses and where they don’t.
Let’s start with a failure. Anything that falls within the scope of more or less clearly defined “consumer sanctions” has had minimal to no effect. Stopping supplying Russia with Western goods had no influence on the government, the population or the army. The idea, if it was ever clearly thought through, that the population would go to the barricades if Mercedes limousines, Hermes bags or even German chocolate were confiscated from them, was absurd from the start.
Effective measures
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Targeted measures against the regime’s arsonists make more sense. Against politicians and propagandists who vow on social channels or in talk shows, Europa to destroy with atomic bombs. Who threaten the EU with war every day. Many of them have villas on northern Italian and Upper Bavarian lakes, in Provence, in Paris, Berlin and Nice. You simply never want to see them again: so entry bans.
Putin’s self-sanctions have proven to be extremely effective. Its full gas embargo against Germany and Europe from August 2022 has cut off Russia from the world’s largest gas market. His attempt to plunge the Germans into a supply crisis with freezing cold apartments failed. Germany, the world’s largest gas importer to date, has made a permanent change. As a result, the proud flagship of Russian industry, the Gazprom Group, has become a debtor and a subsidy case.
Western oil sanctions are hitting Russia somewhat less efficiently, but still painfully. The introduction of price caps, the end of insurance for tankers, and sanctions against Russian oil companies have noticeably limited Russian income. The large-scale purchases of Russian oil by China and India were only able to partially offset this. Because Russia has to sell its oil at dumping rates. At the same time, global overproduction continues to lower prices.
The sanctions have a limited effect on industrial goods, high technology, semiconductors and goods that can be used in both the civil and defense industries (dual use). Russia has developed a multi-pronged system of sanctions evasion and is implementing it through neighboring countries to the south and east. Most of this is offset by China, Russia’s main supplier and ally in the war against the Ukraine. In this respect, Russia is not cut off from technology, but has to buy the goods at higher prices than would be the case without sanctions.
Money, the most efficient means
Which brings us to money, the most efficient means of making Russia feel the consequences of its many wars. The financial sanctions, which Putin doesn’t like to talk about, are cutting deeply into the Russian budget. Russia has lost its monetary reserves stored in Western banks, and the interest on these reserves goes to Ukraine. Russia is excluded from international payment transactions, it can no longer use the financial service provider Swift, and it can no longer sell its oil for euros or dollars at the world market price. Banks are cut off from international markets and Russia can no longer issue bonds on global markets. These sanctions have already cost the Russian state hundreds of billions of euros, far more than the entire Russian state budget per year.
That has consequences. Financial sanctions are not the only cause, but Russia is plagued by high structural inflation, capital flight and a lack of investment. The exorbitantly high key interest rates are strangling civilian industry; the subsidized war economy is doing particularly well. Despite high government spending, the country suffers from permanent economic stagnation.
Wladimir Putin has been waging war almost continuously since 1999, against Chechnya, Georgia, Ukraine, Syria and Africa. But unlike before, German gas consumers no longer pay for this. Putin is waging war at the expense of Russia’s future.
