Over the two years since the onset of military escalation in Ukraine, Western countries have imposed a significant number of sanctions against Russia. However, their effectiveness is at least debatable. On one hand, Russia has successfully adapted to the new restrictions, evidenced by the growth of its economy. On the other hand, the costs of sanctions for the Russian economy are evident. Analyst Alexander Kolyadov delves into this duality in an article for Carnegie Politika.
The main problem with the Western approach, according to Kolyadov, lies in the lack of a long-term strategy to contain Russia.
"To illustrate, one can try to break down Western sanctions into three factors of production as defined by Adam Smith: land, labor, and capital," the expert writes. However, the results of sanction measures across all three fronts are ambiguous.
One of the primary targets of anti-Russian sanctions is Russian oil ("land" in the author's classification). In 2022, Western countries introduced a mechanism to cap prices and ceased purchasing Russian oil delivered by sea. These measures were partially circumvented by using a shadow fleet of tankers and redirecting some volumes to Asian markets. However, the blow to the Russian economy was still significant. Redirecting to Asia incurred additional costs, leading to reduced profits. Moreover, Russia is forced to sell oil to China and India at a discount, further limiting profits. Other measures to combat circumvention include sanctions against tankers carrying "gray" oil, sanctions against banks cooperating with Russia, and sanctions against traders and insurers.
Another direction of sanctions concerns the inflow of capital, which was restricted after February 24, 2022. These measures slightly increased the volatility of the ruble but had no significant effect on Russia, which "has been an exporter of capital for many years." Some measures taken by the West regarding capital add to Russia's stability. For instance, restrictions on the withdrawal of Russian citizens' personal funds ease the Kremlin's battle against capital flight.
Restrictions on the "labor" factor manifest in the prohibition of exporting advanced technologies to Russia, but the wide range of such goods complicates monitoring compliance with deliveries. Almost a complete ban on professional emigration from Russia is also a weak point of sanctions, as it hinders the "brain drain," which would be disadvantageous to Russia.
The same applies to business. "There is little doubt that a significant number of them would not mind stopping support for the Kremlin, taking with them experience, capital, and often their entire business. But the West has not yet offered clear criteria allowing those willing to switch sides in exchange for lifting sanctions," concludes Kolyadov.
Source: Carnegie Politika
