Pressure is mounting for an escalation of sanctions on Russia. The sudden retreat of Putin’s army from northern Ukraine has revealed both its weakness and its brutality, with reports of a massacre in the Kyiv suburb of Bucha spurring calls for greater economic penalties.

On 8 April 2022, the EU agreed to close its ports to Russian vessels and ban all imports of Russian coal. The bloc’s foreign policy chief Josep Borrell Fonteles said that the measures were intended “to stop the reckless, inhuman and aggressive behaviour of Russia’s troops and the illegal aggression against Ukraine”.

Whether the sanctions will actually affect the course of the war, however, is unclear. The invading forces are unlikely to be starved of basic supplies any time soon – Russia is one of the world’s largest exporters of oil, metals and food. The direct impact of sanctions on Russia’s military capability is likely only to be felt over the longer term, as technology embargoes limit Vladimir Putin’s ability to modernise his armed forces.

Instead, the short-term strategy is one of carrots and sticks. As US President Joe Biden explained when announcing the first tranche of sanctions in February, the hope is that sanctions “will so weaken [Putin’s] country that he’ll have to make a very difficult choice: of whether to continue to move to being a second-rate power, or to respond”.

The implication is that the suffering of ordinary Russians, watching prices rise and shelves empty, will pressure Putin to change course.

Reality has rarely conformed to this simple logic. Most notably, a near-total UN embargo on Iraq in the 1990s failed to topple Saddam Hussein, despite the economic, political and social devastation wrought on the country’s civilian population.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

That failure did prompt a rethinking – after all, dictators are not known for their responsiveness to public opinion. Sweeping embargoes were soon replaced by ‘smart’ sanctions that targeted the wealth and privileges of ruling elites.

Reflecting the urgency of the current situation, Western powers have opted to impose both targeted sanctions and broad-based measures designed to strangle the Russian economy.

Sanctions striking a blow

In both cases, sanctions’ effectiveness depend first and foremost on their ability to cause economic pain. That depends, most obviously, on the significance of the economic relationship being targeted.

In 2020, for instance, the US accounted for just 1.3% and 0.2% of Russian oil and coal exports, respectively, meaning that the current US energy embargo is likely to have little impact in Russia. Far more significant are the steps being taken by Europe, given that the continent is responsible for 75% of Russian gas exports, half of its oil exports and one-third of its coal.

A much less well-appreciated factor determining the impact of sanctions is what response strategies are available to the target state. Few countries take sanctions lying down, and under the right conditions counter-measures can be highly effective.

For instance, though sanctions have been widely hailed as critical in bringing down South Africa’s apartheid regime, initial efforts were an abysmal failure. A UN embargo on exports of oil and arms to South Africa should, in theory, have been crippling – the country was highly dependent on imports of both, and both were vital to the regime’s ability to maintain the oppression of its non-white populations. 

Lee Jones, a sanctions expert at Queen Mary, University of London and author of Societies Under Siege: How Sanctions (Do Not) Work, argues that those sanctions failed for two reasons – both of which hold important lessons for current efforts against Russia. 

First, South Africa had anticipated them. The years prior were spent laying the groundwork for a domestic arms industry, stockpiling oil and building facilities to produce it out of the country’s abundant coal reserves.

Second, South Africa had the economic means and strategic nous to survive the embargoes. The country’s preparatory efforts, and later the additional costs of operating on the black market, were funded by a well-timed surge in commodity prices that had left the government flush with cash.

Similarly, EU and US sanctions on Myanmar in the 2000s were easily cushioned by a boom in the country’s trade and investment relationship with its Asian neighbours, most notably a resurgent China.

In both cases, expensive programmes of sanctions-busting and import-substitution also tightened the relationship between the government and business elites, creating a class of loyal patrons whose wealth was tied to the existence of sanctions.

By contrast, the sanctions imposed on South Africa in the 1980s were genuinely damaging. By that point, a slump in commodity prices and a rise in the price of capital goods had caused South Africa’s terms of trade to nosedive, calling into question the government’s ability to repay foreign creditors. Growing popular unrest, meanwhile, was draining government revenues and scaring off much-needed investors.

Where once the government might have overcome sanctions and neutralised business concerns through lavish industrial programmes, now its finances were stretched thin by popular unrest and a structural economic crisis. Where business leaders might once have relished the opportunity to free themselves from foreign competition, now they faced spending the golden years of globalisation trapped in an economy whose per capita output was shrinking every year.

By intervening into an already-fragile situation, sanctions helped tip the scales in favour of business owners’ defection from the regime. Business lobbyists and their political representatives would prove a vital counterweight to the national security apparatus, eventually convincing the government of the need for full political reform.

With commodity prices booming and mass opposition nowhere to be seen, the Russia of 2022 would seem to bear a stronger resemblance to the South Africa of the 1960s than that of the 1980s.

“There’s actually more money flowing into Russia now than there was to begin with,” says Jones. “The long-term impact of sanctions will be detrimental, there’s no doubt about that, but the economy can survive.”

Another similarity is Russia’s extensive preparations in the years leading up to the sanctions. Since 2014, Russia has been building its resilience to the measures now under way. Its foreign currency reserves have steadily relocated out of Nato countries, inflated by an increasingly strong trade surplus. The country has also launched homegrown alternatives to the financial messaging service Swift (from which major Russian banks are now disconnected) and the payment systems Visa and Mastercard (both of which have voluntarily severed their ties to Russia), and has been investing heavily in expanding its capacity to export energy to China.

On the other hand, the Russia of early 2022 was far more integrated into the global economy than pre-sanctions South Africa. As recently as 2020, Russia relied on imports for 75% of its consumer goods.

Not only did South Africa’s search for autarky begin from a lower base, but it took place in a global economy that was far less globalised in general. Russia, on the other hand, will struggle to compete as a self-sufficient siege state in a world dominated by highly integrated, technologically advanced economies. Its journey to economic self-reliance is therefore unlikely to be as swift or as painless as South Africa’s.

“It seems like Putin’s popularity is holding, but over the long haul fractures and fissures are likely to open,” says Jones. 

The shortage of electric semiconductors is going to be a massive problem for Russian industry. The Chinese can’t supply them, they can’t make them domestically, and they’ve been cut off from the big suppliers in South Korea and Taiwan

“These sanctions are going to have major impacts on the economy – there’s no doubt about that. But as history shows, you can have a lot of economic pain without getting political gain.”

Securing change in Russia

That question of political gain is key. If the purpose of the sanctions is to change the course of the war, or even to rid Russia of Putin’s regime entirely, then what matters is how economic immiseration affects the country’s domestic politics.

That question, the subject of Jones’s book, has tended to receive little attention from either policy-makers or academics. In practice, the debate has tended to shift between two extremes: the notion that elites will inevitably respond to the suffering of their people, justifying broad-based sanctions, and the idea that elites respond only to their own financial interests, which is the argument for targeted sanctions.

In reality, of course, no government is either entirely responsive to or insulated from its citizens. Elites in all countries, democracies and dictatorships alike, base their power upon coalitions of social groups with a variety of fluid, overlapping and contradictory interests.

“The Putin regime is narrow in the sense that it’s quite closed and semi-authoritarian, but it’s also very broadly based,” says Jones. “It’s not just that he’s in power because he and a few of his mates have just decreed it – it’s widely popular.”

Whether sanctions work, then, depends not only on the measures taken and Russia’s response, but on how the infliction of economic pain affects the domestic political landscape. Assuming that regimes change behaviour when their political power is threatened (or taken away), the goal of sanctions should be to divide the regime and unify the opposition.

Dividing the regime

Smart sanctions might seem like a powerful weapon against Russia’s politically connected super-rich, whose penchant for London’s banks and Paris’s shopping districts is well known. Indeed, they were the primary means by which the West responded to Russia’s 2014 annexation of Crimea and the 2018 Salisbury poisonings. Yet, they have done little to weaken Putin’s control or dissuade him from further aggression.

“When speaking about oligarchs, we should keep in mind that none of them can approach Putin and push him in this or that direction,” says Nikolai Petrov, a politics professor at Moscow’s Higher School of Economics and a senior research fellow at Chatham House. 

“All oligarchs depend on the Kremlin, if only because they have business in Russia,” he says. “None of them can be happy with what’s going on, but they are atomised just like the general population. There is no way for them to consolidate against Putin. We’ve not heard any criticism from the elites. The bravest have called for peace, but none of them have criticised Putin for starting this war.”

To the extent that sanctions on Russia’s super-wealthy make sense, Petrov says, it’s as a public display of punishment and a way of weakening the Kremlin’s influence in Western capitals. Far from dividing oligarchs from the regime, however, he expects that sanctions may drive them closer together: “If all of your assets in the West are frozen, it makes you totally dependent on the Kremlin. It incentivises absolute loyalty,” he says.

That said, Petrov does expect growing tensions over control of Russia’s dwindling economic resources. “The political-economic base of the regime is very seriously damaged by sanctions, meaning that the regime will become weaker over the longer term,” he says.

“The pie is shrinking, so in order to keep their piece of pie the same elite groups will need to fight each other. It won’t be a coup – I don’t believe in this kind of thing, given Putin’s huge control over the bureaucracy and over businessmen, and the fact that they are so atomised. But I do think that their internal fights between, say, different security agencies will lead to a weakening of the regime.”

Lessons from Iraq

Those destabilising effects were evident in Iraq. Saddam Hussein’s power was built over decades of generous welfare spending, strategic patronage and the mediation of clan disputes. When the sanctions took effect and oil stopped flowing, the state coffers ran dry. This forced the regime into austerity, scaling back its patronage networks and severing its ties to consumers and public employees. 

Groping for a new power base, the regime ended up allying with the thin sliver of society that had benefited from sanctions: smuggling networks and tribal landlords. The turn to smuggling generated enormous tensions within the regime, culminating in the high-profile defection of a senior cabinet member. Meanwhile, the integration of tribal landlords into the political system undermined the government’s neutrality in dealing with clan disputes, exacerbating inter-clan warfare and prompting several failed coup attempts.

Could sanctions on Russia prove similarly fractious? Much is likely to depend on the extent and speed of further energy embargoes. Like Iraq, Russia is heavily reliant on energy exports to fund both its current account and the regime’s extensive networks of patronage. Were those to dry up, it’s hard to believe that calls for blind loyalty would bind the country’s kleptocratic establishment to Putin for long.

It's all about the energy

“Energy exports are the basis for the Russian economy,” Petrov says. “Europe is already seeking to become much less dependent on Russian energy. That’s not in the distant future, it’s taking place right now. If the regime can no longer redistribute these huge rents, it will need to cut off certain industries, businesses and parts of the state bureaucracy which benefit from this redistribution.”

Hundreds of millions of dollars in hard, foreign currency are flowing into Russia every day in the form of energy exports, a stream of cash that Jones describes as an “economic lifeline”. “They can make sure that that money is reserved for the key apparatus of the state and keep it going,” he says.

Europe has committed to ending its dependence on Russian energy, but has yet to implement a full embargo.

“They’re starting sanctions on coal, and that’s not insignificant,” Jones says.  “But gas and oil are difficult to substitute in the short run. They will start to move to more liquified natural gas and nuclear, but this is a long-term process. Doing it overnight would mean an immediate depression in Europe – not a recession, a depression.”

If energy continues to be exempted from major sanctions, there is a risk that the regime could actually be strengthened by the overall package. The country’s innovative, high-tech sectors would wither on the vine, concentrating growth in the energy industry and thereby reinforcing the regime’s hold on economic life. 

Jones gives the example of Western sanctions against Myanmar’s military junta in the 2000s. Exports of oil, minerals and raw logs (all dominated by state-owned firms) were easily diverted to east Asia, where rapid growth was fuelling a boom in demand. Investment from Asia into those sectors had a similarly compensatory effect.

The private sector was not so fortunate. The two major private sector industries, garments and wood manufactures, were overwhelmingly dependent on trade with Western markets and struggled to find alternative buyers in Asia. Moreover, the smaller size of these firms meant that the additional burdens created by sanctions (such as paying fees to smugglers or offshore bankers) were harder to bear.

Sanctions thereby concentrated activity in the state-owned extractive sector at the expense of the privately owned manufacturing industry. Not only did this increase the power of the state directly, but it likely slowed the emergence of two factors historically vital to democratic transitions: an industrial working class and a business elite free of state patronage.

The early sanctions against South Africa had similar unintended effects. Politically connected domestic firms were able to buy out the assets of departing Western firms at fire-sale prices, while state programmes of import-substitution and sanctions-busting became a vital source of patronage, increasing the regime’s hold over the country’s business elites.

“The sanctions do risk concentrating economic power around the state,” says Jones. “Insofar as the state rations foreign exchange, the ability of private businesses to trade will also become more dependent on their political relationships. That’s the long-term trajectory of any state that is sanctioned: greater state intervention into the economy and a greater dependency of private business on the state.”

Uniting the political opposition

If sanctions against Iraq were successful in using economic pain to fracture the regime, why wasn’t Saddam toppled? The answer, according to Jones, lies in the weakness of the opposition. 

The regime had spent decades deliberately atomising and depoliticising his population. The most powerful opposition group, the Iraqi Communist Party (ICP), was almost entirely liquidated in the 1970s. The rest were forced into exile, where they descended into sectarianism as their links to Iraq slowly withered.

These opposition groups did attempt to unify in 1992, under the umbrella of the Iraq National Council (INC). The main players were the Iran-backed Shi’ite Islamists Sairi, the rump ICP and two Kurdish parties with a long history of antagonism (the PUK and KDP).

Sanctions only exacerbated the tensions. The KDP began helping Baghdad smuggle oil into Turkey, and its refusal to split the profits with the PUK prompted a civil war among the Kurds. Meanwhile, the INC’s support for sanctions alienated the Iraq National Accord (INA), a group of ex-regime officials who had declined to join the organisation, and later also the ICP and Sairi. The INA would go on to compete with the INC for US backing, even attempting to assassinate its leader and sabotaging its attempted invasion of Iraq. 

The INC had expected a popular revolt in support of its invasion, but this never materialised. Ordinary Iraqis suffered immensely from the sanctions, but instead of revolting they retreated into a struggle for survival. Civil society was eroded in favour of clans, sects and the nuclear family. What uprisings did occur were mainly sectarian in nature, alienating the rest of Iraqi society and driving them closer to the regime.

Sanctions had a similarly depoliticising effect on Myanmar’s small business owners. As one opposition politician argued: “[The logic of sanctions] is very easy logic: when you become poorer, you have to fight the government. No: in actual life, this does not happen. When you become poorer, you become more fearful, and far away from politics – they became apolitical.” 

In South Africa, by contrast, the economic misery induced by sanctions provoked anger, not apathy. Years of trade union organising and political education campaigns by the ANC meant that resentment over sanctions-induced mass unemployment could be channelled directly at the regime.

Putin’s Russia is certainly not Saddam’s Iraq. In the winter of 2011-12, protests against rigged parliamentary elections drew tens of thousands of Russians onto the streets. The protests were geographically broad and pointed towards the emergence of a politically liberal, temperamentally unruly middle class.

Yet, the protests also revealed the weaknesses of Russia’s opposition, a loose coalition marked by ideological disagreement and only the loosest of organisational linkages. In the years since, Putin’s turn to authoritarianism and nationalism has further weakened this movement.

“The key difference between South Africa in the 1960s and the 1980s is that by the 1980s the non-white opposition had become much more organised and mobilised in pursuit of its own freedom,” says Jones. 

“In Russia, the trajectory is in the opposite direction. People have become less well organised, more atomised, more fragmented and less free over time. The institutions that you would need to organise resistance against Putin have been steadily dismantled. Opposition leaders have been jailed, parties shut down, media ownership consolidated in friendly hands. The collective organisations that you need to man an effective opposition to the regime simply don’t exist.”

Petrov believes the sanctions may be reinforcing, rather than alleviating, these pressures on the opposition. “The fact that sanctions are painful for ordinary Russians doesn’t mean that they are equally painful for all ordinary Russians,” he says. 

“There is much bigger pressure on big cities and the so-called creative class, forcing them to leave the country. That means the opportunities for the re-emergence of protests like we saw in 2011 are declining.

“At the same time, opponents of the regime who have left the country have now lost any possibility to use their money while outside of Russia, because Visa has stopped operating with Russian banks. Now, from the other side, the Duma has banned Russians abroad from selling their property. Those sanctions have played into the Kremlin’s hands.”

What is the purpose of sanctions?

These issues are further complicated by the West’s lack of clarity about its end goals. “I think there’s probably quite a few different goals – some explicit, some implicit,” says Jones. 

“Trying to force Russia to withdraw from Ukraine is the explicit goal, but it’s also clear that some people in the West would like to use it as a means of regime change. That will complicate the lifting of sanctions. We saw a similar mission creep in Iraq, where sanctions that began in order to drive Saddam Hussein out of Kuwait later became about reparations, and then about human rights, and then about regime change.

“The risk, as in Iraq, is that you undermine the incentive for compliance. What’s the point in complying if you’re never going to get any sanctions relief anyway? It doesn’t work anymore as a coercive instrument.”

If sanctions fail to depose Putin or change his behaviour, that won’t necessarily make them a failure in the eyes of policy-makers. Petrov believes that some of the current sanctions are intended mainly for domestic audiences in the West.

Jones agrees. “Sometimes it’s just about punishment," he says. "Policy-makers tend to deny this, but I think that’s often what’s going on – signalling disapproval and inflicting some kind of cost, without seriously expecting to change their behaviour. That may be why policy-makers generally don’t give any serious thought as to how sanctions are actually supposed to work. Punishment is a success the moment you’ve inflicted costs.”

The idea of punishing civilians for the actions of their government sits uneasily with the supposed purpose of that punishment – to reinforce international norms around the conduct of war. Punishment can also serve a broader purpose, however, by acting as a warning to other would-be aggressors.

Yet, fracturing a country’s leadership without paying mind to the strength of its opposition has been the source of major Western foreign policy failures in recent years, from Iraq to Libya.

“There’s a kind of otherworldly aspect to foreign policy making at the moment, because we’re used to going to war with weak countries in the Middle East and North Africa [that are] far away and don’t really affect us,” says Jones.

“This is very different – it’s a nuclear armed power and a major part of the global economy. We can’t just treat it like some tin-pot country that you can do what you like to. I saw people the other day saying: ‘Let’s just hope it all fragments. There’ll be temporary instability but then we’ll get democratic states emerging in Russia.’

“Well, you hope, but it’s a terrifying prospect. You have to be careful what you wish for. Do you really want instability in a state that large, which is nuclear armed? You’ve got to have a dose of political realism here.”

Petrov is similarly cautious. “Whatever can stop the war and push Russia out of Ukraine is good, but let’s not be limited to sanctions alone,” he says. “I would also think in terms of negotiations, and even certain concessions.

“We shouldn’t think that the sooner the regime weakens the better. That should be a long-term goal, not an immediate one. It’s impossible to imagine a regime like Putin’s will be defeated internally in the way people would like, and to corner a guy with nukes is a very dangerous enterprise.”