A Year of sanctions against Russia – and now what?

A few days ago the Centre of Strategic and International Studies published a detailed analysis on the results of the economic sanctions imposed on Russia. Its author, Simon De Galbert, gave also some policy recommendations in case some future scenarios will materialize. Here I report the main points.

•   Transatlantic sanctions adopted against Russia, a strategy of hard power coercion short of the use of force, have enabled Europe and the United States, along with their allies like Canada, Japan, and Australia, to build a united response to Russia’s strategy of militarized destabilization in Ukraine. This achievement was possible even as the interpretation of the origins of the crisis in Ukraine and conclusions to draw from it differed between the European Union and the United States but even more so among Europeans. For many of them, Europe should neither accept Russia’s fait accompli policy in Ukraine nor fully isolate itself from Russia. 


•   Transatlantic sanctions imposed a real cost on the Russian economy in 2014 and in the first half of 2015. Although this cost is hard to disentangle from the fall in oil prices and the poor management of the Russian economy in recent years, sanctions are believed to have cut Russia’s real GDP by more than 1 percent between the summer of 2014 and the summer of 2015, contributing significantly to the recession currently experienced by the Russian economy. Russians acknowledge the impact of sanctions but still support Russia’s actions in Ukraine as President Putin’s popularity has increased in the past year. 


•   Even as sanctions cost Russia a lot, they are also impacting European economies significantly. Europe-Russia trade—about €285 billion in 2014 and €326 billion in 2013 in two-way trade—is expected to decline sharply in 2015: a 30 percent decline would be in line with the data available for the first six months of the year. Europe-Russia trade could therefore shrink by about €80 billion in 2015 and cost Europe about €30 billion in lost exports to Russia. Those amounts are significantly higher than what Iran sanctions cost the European economy in the past decade, and markedly greater than the cost to the U.S. economy of Russia sanctions. This could complicate the support for sanctions over time in Europe. U.S. policymakers should acknowledge the price to their European partners; transatlantic solidarity on sanctions would be undermined if Europeans perceived that the United States was outsourcing to its allies the lion’s share of the cost of handling the crisis. 


•   Despite their impact on the Russian economy, transatlantic sanctions have not altered Russia’s strategy to use military force to destabilize Ukraine and retain influence over its future. But sanctions have likely pushed Russia toward negotiating the conclusion of the Minsk ceasefire agreements and to a certain extent implementing them. Despite frequent violations, the Minsk II agreement concluded in February 2015 remains the only pathway currently on the table toward a long-term political settlement. 


•  As demonstrated by the nuclear deal reached by the P5+1 countries with Iran on July 14, 2015, sanctions do not get sanctioned countries to renounce their strategic objectives, but do force them to compromise when used by sanctioning countries 
as leverage in a negotiation. Sanctions will not solve the crisis in Ukraine by themselves—only if they can be used as leverage by the sanctioning countries, the West, to define with Russia and Ukraine a mutual way forward.

• Although being constrained by Europe’s economic interconnection to Russia, transatlantic sanctions can in that context play a role in buying Ukraine time for domestic consolidation and reform and in helping to achieve a compromise as long as they follow realistic objectives and can be sustained over time. To that end, the European Union and the United States must continue to work hand-in-hand and should:

o Refuse any kinds of sanctions relief as long as a true ceasefire does not hold in Ukraine for several months in a row. Such a ceasefire requires the implementation of all security parameters of the Minsk II agreement and additional monitoring on the ground.

o Stand ready to respond positively and quickly if Russia’s behavior changes in Ukraine enabling a solid ceasefire to be installed, even if the situation falls short of the full implementation of the Minsk II agreement and cannot immediately enable Kiev to restore full control of its border with Russia. However, sanctions relief should remain minimal and reversible as long as Ukraine’s full sovereignty over its territory, including direct border control in eastern Ukraine and a negotiated settlement of the situation in Crimea, isn’t restored.

o Prepare to increase pressure against Russia by the beginning of 2016, when the Minsk II agreement is supposed to be fully implemented, if a sustainable ceasefire still isn’t in place at the time. Additional smart sanctions—which should focus on constraining Russia’s financial room for maneuver rather than further cutting trade between Europe and Russia—could also be required if the security situation significantly deteriorates before that deadline, for instance, if the separatist groups launch a new offensive.

o Recognize that increased sanctions against Russia would be a tough challenge for Europe, considering the different perspectives and interests they have on the ongoing crisis. At least, Europeans should sustain sanctions over a longer time than initially expected by putting in place creative solidarity mechanisms.

o Increase support to the Ukrainian government’s reform efforts, whose success will be key to convince Europeans that sustaining sanctions is worth it. The role of sanctions will be radically transformed if Ukraine collapses, even becoming possibly pointless.

o Focus the use of sanctions against Russia on its destabilizing activities in Ukraine. Deterrence, defense, and civilian measures, rather than sanctions, should be the West’s priority in ensuring the security of NATO member states. Sanctions are meant to address Russia’s behavior in Ukraine, not what Russia has become. Eventually lifting sanctions would not, and will not, mean returning to business as usual.

Read the full analysis at the following link:

http://csis.org/files/publication/150929_deGalbert_SanctionsRussia_Web.pdf