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Are the Russia Sanctions Working?

by Maia Otarashvili

Background: the Ukraine Crisis Unfolds 


The Russia-West relationship saw significant worsening as the Ukraine crisis unfolded in late 2013. After Ukraine’s President Yanukovych backed out of signing the EU Association Agreement, an agreement that was designed to put Ukraine on a path go greater Westernization and eventual EU accession, protests broke out in Ukraine’s capital Kiev. After months of protests, in February 2014, Mr. Yanukovych was ousted and forced to retreat to Russia, leaving Ukraine in deep financial and political crises. Just days after Yanukovych fled Ukraine, pro-Russian separatists seized government buildings in Ukraine’s Crimea peninsula. The separatists were backed by covert Russian troops, otherwise known as the “little green men.” As Russia continuously denied any involvement in the separatist movements in Crimea, self-appointed pro-Russian officials held an illegal referendum for Crimea’s secession from Ukraine. The officials claimed that, according to the referendum’s results, 97% of the voters wished to join Russia. Thus in March 2014 Moscow annexed Crimea. This annexation was condemned by the West, and as the EU and the US prepared a sanctions package against Russia, a new force of pro-Russian separatists began to take over official government buildings in Ukraine’s east. By mid-April 2014, the eastern cities of Donetsk, Lugansk, and Kharkiv, located close to the Russia-Ukraine border, were the scenes of a war between Ukraine’s armed forces and Russia-backed separatists. This civil war would continue indefinitely, with occasional ceasefire agreements which would be continuously violated, with Russia’s formal denials of any involvement in the conflict, and with thousands of innocent victims losing their homes and lives every month.

On July 17th, Malaysian Airlines Flight 17 was downed by the separatists in Ukraine, killing 298 civilians. Moscow denied involvement despite clear evidence that the sophisticated surface-to-air missile used to shoot down the aircraft was supplied and possibly manned by Russians.

In summer 2014, Ukraine elected a new government, one that promised to tame the widespread chaos and corruption in the country, and end the war. In September 2014, a ceasefire agreement was signed in Minsk, Belarus, between Ukraine, the separatist forces, and Russia. Just one day after the agreement was signed, the fighting was renewed in Ukraine’s east. February 2015 brought the Minsk II agreement. This agreement was brokered by the leaders of France and Germany. Ukraine and Russia agreed to a package of measures that would help end the war. The provisions of Minsk II were due to be fully implemented by December 2015, but the terms of the deal remain mostly unfulfilled. As of today the conflict in Ukraine’s east remains ongoing. According to a recent report July was the deadliest month since August 2015, with 42 servicemen killed and 181 wounded.

The West Sanctions Russia

The EU and the US saw Russian annexation of Crimea as a move to challenge the existing global order. Russia had previously fought a brief war with Georgia over the latter’s frozen conflict zone of South Ossetia. This war, which took place in August 2008, went mostly with no consequences for Russia. Moreover, Russia had continuously opposed the idea of EU expansion into Russia’s “backyard” and did not approve of Georgia’s, Moldova’s, and Ukraine’s NATO membership aspirations. The 2014 events in Ukraine appeared to be a continuation of Putin’s narrative that, due to its historical experiences, Russia has certain rights over the former members of the USSR, and that it is entitled to a sphere of influence, which happens to a be majority of the Eurasian states.

Thus, in order to moderate the Russian aggression, the EU and the US imposed diplomatic, economic, and political sanctions on Russia. First imposed in March 2014, the sanctions involved visa and travel bans for Putin’s inner circle, a list of oligarchs and strongmen that grew over time as Russian aggression failed to cease despite the sanctions. Moreover, on the economic end, the sanctions targeted the finance and energy sectors of Russia. Russian state-owned enterprises in the banking, energy, and defense sectors now have restricted access to Western financial markets and services. There is also an embargo on exports of high-technology oil exploration and production equipment to Russia, and on exports of military goods to Russia from the West.

It was predicted that the sanctions would take some time to pay off in terms of stalling Russia’s economic growth. However, in mid-2014, oil and gas prices began to plummet globally. Due to the fact that Russia is a resource-rich state that relies on energy exports for its primary source of income and political leverage at home and abroad, the double-shock of the economic sanctions and the low energy prices sent the country into a recession. 2016 GDP growth projection for Russia is -1.2 per cent according to the World Bank.

The initial expectation was that the Russian government would be unwilling to suffer the consequences of the sanctions for long, and would soon ease up on its aggressive policies. However, the large Russian financial reserves, accrued during positive economic growth years, have helped fuel President Putin’s activities abroad without having to implement overly severe austerity measures. The sanctions were thus strengthened and renewed three times so far: in the fall of 2014, summer 2015, and winter 2016.

Are the Russia Sanctions Paying-off?

The impact of Russia sanctions should be measured in three major ways: 1) The effect of the sanctions on the behavior of the Russian leaders; 2) The effect of the sanction on crippling Russia’s economy; and 3) The larger impact of the sanctions: shockwaves beyond Russia’s borders.

The effect of the sanctions on the behavior of the Russian leaders. The sanctions were designed to moderate the Russian aggression. This was the primary expected outcome. In this sense the sanctions have not worked, as Crimea remains annexed, and Donbas is still a volatile conflict zone. Since the sanctions were placed, President Putin has only dialed-up on Russia’s aggression, going as far as Syria to support the Assad regime and thus act against the interests of the United States. Moreover, since the sanctions were imposed on Russia, the Putin government has been actively testing the NATO borders by violating the airspaces of NATO’s Baltic members. Lately, the issue of Russian aggression is no longer just about Ukraine’s territorial integrity, but also about NATO’s commitment to its Article V according to which NATO would have to protect its member states, in this case the Baltic states, in case of an [Russian] attack. Thus it could be argued that the sanctions have not stopped Russian aggression, at least not yet.

The effect of the sanctions on crippling Russia’s economy. Russia’s economy is in recession. How much of the recession is a direct result of the sanctions is unclear, and it is unknown whether or not the economy would have suffered as much if the energy prices had not plummeted. While the original intention of the sanctions was not to actually devastate Russia’s economy, but to simply threaten it, it appears that the economic crisis could be the only meaningful vehicle against continued Russian aggression in its near abroad. Depleting resources will make it difficult for President Putin to carry out his ambitious plans of establishing a complete sphere of influence in Europe’s East. It seems that he will have to settle for just keeping the region destabilized and away from the EU and NATO, rather than staging a full-on takeover of Ukraine, Georgia, or Moldova, as some observers had previously speculated.

Larger impact of the sanctions: shockwaves beyond Russia’s borders. The Russia sanctions have had a net negative impact on many of its neighbors from a financial standpoint. In case of Tajikistan, for example, the Russian economic crisis coupled with Russia’s harsh immigration reforms has sent many young Tajik workers to Syria to join the ISIS, thus helping fuel terrorism and radicalization. In Azerbaijan, the combination of lowered remittances from Russia and the falling energy prices have led to one of the worst economic crises in the country, making the manat (the local currency) plummet. In Georgia and Armenia, the declining remittances have also led to severe currency crises, which are still unresolved.

Moreover, as some experts argue, alienation of Russia can lead to closer Sino-Russian ties. As Dr. Rens Lee recently explained: “Russia and China have long shared a hostility to US ‘hegemony’ in world affairs, and Russia had for some time been reorienting its foreign relations from Europe to the more dynamic markets of the east, Yet the sanctions policy greatly accelerated, concentrated and magnified the shift.”

Can the Sanctions Have an Impact Going Forward?

Since the unfolding of the Ukraine crisis in 2013 the world has witnessed a dramatic transformation of Russia’s global image. During President Obama’s first term, Russia and the United States agreed to a “reset” in order to normalize the two countries’ relations. Russia occupied its rightful place in the G8, and even hosted the Winter Olympic Games in Sochi in 2014. However, since President Putin’s government’s actions in Russia’s near abroad became so overtly aggressive that it did not hesitate to annex another country’s territory, most hopes of forming a meaningful Russia-West partnership have dissipated.

Russia’s reputation as an anti-Western aggressor was further consolidated with its entry into the Syria conflict. As President Putin began backing Syria’s President Assad, violating Turkish air space, and counteracting the West’s strategy in Syria, it became clear that the Russian government intends to challenge the current global order. While the sanctions are an important way to show Western strength and determination, they have not helped moderate Russia’s aggression thus far. They have, however, served as a force multiplier of the effects of the plummeting energy prices, which has sent Russia and its neighbors into economic crises.

In order for the sanctions to yield meaningful outcomes, the West will have to couple them with other powerful policies towards the region. It will be important for the EU and the US to help make sure that Ukraine becomes a stable and peaceful state, and Russia’s neighboring countries in the Baltic and Black Sea regions are protected and not left vulnerable to potential Russian provocation. In both of these regions the strength of NATO will continue to be tested by Russia as this is an institution whose legitimacy, just like that of the US and the EU, has been frequently questioned by the Russian officials. This is also an institution that has the potential to protect these vulnerable regions. Recent and planned buildup of NATO forces in the Baltic and the Black Sea regions is a clear sign that NATO officials understand the threat that Russia poses to its neighbors, but how far President Putin is willing to go to continue to test the Western nations’ limits, despite the painful effects of the sanctions, is still to be seen.

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Maia Otarashvili
Maia Otarashvili is Research Fellow and Program Manager of the Eurasia Program at the Foreign Policy Research Institute in Philadelphia. She holds an MA in Globalization, Development, and Transitions from the University of Westminster in London, UK. Her current research is focused on the post-communist countries of the Eurasia region, including the Black Sea and Caucasus states.

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