Ukraine crisis: why Western sanctions against Russia are a double-edged sword

Not only have US and European sanctions largely failed to make authoritarian governments toe the line, they have further entrenched those regimes and fuelled an East-West geopolitical rift
With the West’s influence waning, reviving dialogue with countries that do not share its norms may be the only way out

Mohamed Zeeshan

Published: 12:30am, 14 Mar 2022

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As war rages on in Ukraine, the West has launched a campaign of economic isolation against Russia that is widening in scope every day. First, those close to the Kremlin were targeted. Then, broader segments of the financial system were curbed. The US has banned imports of Russian oil and natural gas, and, with its allies, announced plans to revoke Russia’s preferential trading status.

So far, over 300 companies have pulled out of Russia, either in solidarity with Ukraine or out of fear of widening Western sanctions. That ever-growing and diverse list includes Mastercard, PayPal and Netflix.

Short of outright military confrontation, economic sanctions are as far as the US and its allies can go towards punishing Moscow. For years now, in the aftermath of the debacles in Iraq and Afghanistan, successive US presidents have favoured sanctions as a coercive tool.

In 2017, US president Donald Trump added nearly 30 per cent more individuals and entities to the US sanctions list than his predecessor Barack Obama had done in his last year. Obama had added nearly three times as many in his last year in office as he had in 2009.

Yet, despite their growing popularity in war-weary Washington, sanctions have largely failed to achieve their goals, whether in North Korea, Venezuela, Iran or elsewhere. Instead, they have left long-term consequences for the world at large.

Already, the ubiquity of sanctions has begun to accelerate deglobalisation, with China and Russia forging a parallel economic system in response to spiralling tensions with the West.

People walk in front of an electronic panel displaying the dollar sign at an exchange office in Moscow on March 10. The rouble fell to new lows amid fresh sanctions by Western countries. Photo: EPA-EFE

Following Russian President Vladimir Putin’s annexation of Crimea in 2014, Western banks reduced their exposure to the Russian financial system by nearly 80 per cent. In 2019, Beijing and Moscow decided to substantially increase the settlement of their trade in their own respective currencies instead of using the dollar.

Meanwhile, China has been diversifying its foreign exchange reserves and buying gold to reduce exposure to the dollar. It is also trying to promote use of the renminbi: since 2001, the renminbi’s share in forex trade has gone from almost zero to over 4 per cent.

That is significantly lower than Western currencies, but as Western sanctions continue to target authoritarian regimes everywhere, Beijing will seek to fill the gap.

The absence of cooperation from China and Russia has also rendered Western sanctions less effective. In 2021, China imported 324 million barrels of crude from Iran and Venezuela on the cheap, skirting sanctions by often rebranding the imports as oil from Oman or Malaysia.

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But even when they have been enforced with somewhat more consensus, unending sanctions have often played into the hands of some of the world’s most authoritarian regimes. Across multiple countries, including Cuba and Venezuela, protests against autocratic rulers have quickly fizzled out in the face of ruthless repression and crippling economic costs, as sanctions take their toll on civilians.

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Without the means of basic survival, most people are unable to keep protest movements going, and as a result, regimes become more deeply entrenched over time. In 2019, a report by the Washington-based Centre for Economic and Policy Research estimated that 40,000 Venezuelans died as a result of sanctions imposed by the Trump administration in 2017.

Then, government propaganda, which paints the West as an uncompromising enemy, also begins to succeed. In Venezuela, for instance, President Nicolas Maduro had reigned over economic mismanagement even before the US imposed sanctions on his country. Yet, sanctions helped Maduro deflect the blame, and in 2019, one poll found that a whopping 68 per cent of his people blamed the US for their poor quality of life.

People collect water from a tanker in Caracas, Venezuela, on March 31, 2019. The water shortage, caused by a week of blackouts, sparked protests against the government of Nicolas Maduro. Photo: EPA-EFE

In Iran, similarly, Trump’s unilateral sanctions and withdrawal from the nuclear deal only served to politically strengthen the hardliners and eventually helped bring the conservative President Ebrahim Raisi to power.

For Washington, all this has also comes with significant geopolitical costs. As America’s unilateral clout has declined, its power to build global consensus against repressive regimes and human rights violations has also declined.

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Unlike in the post-Cold War years, sanctions regimes have fed an East-West rift in global geopolitics, which is increasingly diluting the West’s political capital and influence. During Syria’s civil war, China and Russia vetoed UN Security Council resolutions as many as 16 times.

Since last year’s coup in Myanmar, both India and China have pitted themselves in opposition to Western sanctions. The same fissures are already visible around the Ukraine war.

01:10

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The long-term cost for the West is not only that it is unable to secure consensus – and thereby demonstrate leadership – but also that sanctions progressively diminish its own economic leverage, as each of these countries gets increasingly disconnected from the West and more reliant on China.

Under these circumstances, rather than imposing wide-ranging sanctions everywhere, the West should pursue deeper and more frequent East-West dialogue on international norms, especially with countries with which it does not share those norms.

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Even before his term began, US President Joe Biden made clear that he intends to prioritise ties with democracies, and once in office, he held a rather exclusive Summit for Democracy to further that agenda.

But that left out several important countries and only played into the narrative of an East-West clash – an argument that many authoritarian regimes use in their domestic propaganda to drum up support against the West.

Admittedly, in the midst of Russia’s unilateral aggression against Ukraine, some might find a call for broad-based dialogue feckless. But in a world in which the West is progressively losing its clout, and sanctions are causing more harm than good, reviving multilateral dialogue may be the only way to get things done.

Mohamed Zeeshan is a foreign affairs columnist and the author of Flying Blind: India’s Quest for Global Leadership