Russia: “Old world” thinking and economic sanctions

In early June, Putin sat down for an interview with Oliver Stone in which he was asked for his opinion on U.S. Senator John McCain; more specifically, he was asked for his opinion on the senator’s allegations calling Putin a butcher and thug. Though praising Senator McCain’s patriotic commitment to his country, Putin commented that Senator McCain was “unfortunately” one of many senators who were stuck in the “old world” thinking.

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He lamented how such thinking still sees the U.S. and Russia as bitter enemies and that it fails to recognize how wonderfully Russia and the U.S. can work together to solve global issues. The context for this entire engagement is the proposed levying of new economic sanctions against Russia as a response for the alleged meddling with the 2016 American elections and for continued involvement in the Syrian civil war. The plan would have added on to the already numerous sanctions that have been placed on Russia by the U.S., many of which have been imposed as a response to the annexation of Crimea in 2014.

Economic background

The key question is to what extent said sanctions can be described as being successful and why Putin would be so blasé about the threat of new sanctions. To answer the first question, it is important to consider the broader economic context of Russia’s situation over the past half-decade. Russia has been suffering from an economic downturn since 2014. Though this would appear to perfectly coincide with the imposition of U.S. and EU sanctions so as to suggest that the downturn is a direct consequence of the sanctions, the reality is less straightforward. In actuality, a large part of the reason for Russia’s economic stumble lies in the collapse of oil prices in 2014. It is no small secret that Russia greatly depends on oil production with over 60% of export revenues dependent on oil and natural gas production in 2013. Consequentially, as the price of oil dropped, so too did Russian GDP. This is not to suggest that the sanctions levied by the U.S. and her allies had no influence whatsoever. Indeed, Putin himself admitted that the sanctions stung. However, they alone are not the sole reason for the struggles of the Russian economy.

As a response to the imposition of sanctions, Russia levied some sanctions of her own against American and EU products. Russians took to the call and boycotted imported products in favour of locally (or simply non-U.S. or EU) produced goods. Furthermore, some have argued that the sanctions and partial closure of trade between Russia and the U.S. and EU have provided a wonderful opportunity for domestic growth and foreign investment pointing specifically to Asian markets. Still others suggest that the tough times have given Russian businesses an opportunity to reassess their position and cut down on questionable and unprofitable practices. Still, economic growth has climbed and is now positive after seven consecutive quarters of negative growth. It appears finally that the Russian economy is turning around. Yet in the context of considering economic sanctions, this recent growth would appear concerning for western policy makers. If the Russian economy is able to turn around and flourish in the face of sanctions, to what extent can they be described as effective?

Broadly speaking, the rationale behind the imposition of economic sanctions is to punish citizens of a targeted country (be they ordinary citizens, oligarchs, or government officials) or the country itself with the intended goal of having the target country change policy. Ideally, the targeted country’s government will come to the realization that the cost incurred by the imposition of sanctions is not worth continuing to pursue its chosen policy.

Alternatively, policy may be changed should the citizens of the targeted country rise up in opposition to the government’s policy decisions should they sufficiently feel the sting of the sanctions in their personal lives. In the case of Russia, neither of these two outcomes were observed. Though the sanctions imposed by western countries did not make the economic crisis easier to deal with, Russia did not back down from its involvement in Crimea and has been unconcerned with asserting its influence in Syria. On the surface, it appears that the sanctions did not work; an assessment that corresponds with traditional wisdom on the effectiveness of economic sanctions. The question is why they have been so ineffective.

Effectiveness of sanctions

The first explanation offered would suggest that the sanctions failed because Russian citizens do not have a sufficiently strong voice in the Russian political system such that they can call for representatives and leadership to change policy. Supposedly, high-positioned Russian politicians are sufficiently abstracted from the pressures of the public such that any semblance of the voice of the populace is ignored. This explanation is an instinctively appealing one. International evaluations of the level of democracy in Russia are notoriously low when compared to western counterparts and, with unusually high support for the leadership, would seem to suggest the markings of a competitive authoritarian regime unyielding to the will of the people. However, this explanation is not sufficient. It is no secret that the quality of Russia’s democracy is wanting as compared to western counterparts, but a majority of Russians agree with the policy decisions of the Russian Federation which lead to the imposition of sanctions, and are generally supportive of the direction of the country. Even if sanctions sting, the Russian public do not want to change.

An alternative reason would suggest that the Russian public are simply resilient. The sanctions and economic hardship hurt, but one should not be quick to underestimate Russia’s capacity to deal with hard times for the sake of the rodina mat’. Supposedly, the imposition of economic sanctions by the U.S. and her allies in retaliation for the annexation of Crimea was successfully sold to the public as an aggression by the west thus producing a “rally around the flag” effect renewing support for the Kremlin. Alas, this explanation is too simplistic. Russians did stick in defiant support to some extent, but we cannot assume that any failure of economic sanctions to produce change is due to the tough character of the Russian people. The reality is much more complicated than simple assumptions about the quality of Russian democracy and civic participation or broad generalizations about the resilient character of the Russian population. Economic sanctions are finicky measures and a collection of conditions are necessary to render them effective. There is a relatively narrow scope within which sanctions may work and succeed in changing policy.

The bigger picture

There is, however, a grander point that stems from the fact that, despite their limited efficacy, there is a reason why countries continue to use economic sanctions. They themselves occupy a golden area between full military involvement and inactivity. They are the strongly-worded letter of international disagreements, and though they cause pain, this pain is survivable. In the case of Russia, sanctions have not been particularly effective. Realistically though, their end goal was not the total crippling of the Russian economy. The goal was not to get Russia to change its mind and withdraw from Crimea. Though western policy-makers certainly would not have objected to such a reversal and though indeed such an outcome would have been ideal, they understood that such a change would be unlikely. The point, therefore, was to express how displeased America and her allies were at the breach of international norms. Consequentially, the effective purpose of newly-proposed sanctions is not so much to get Russia to stop interfering in American elections as it is an expression of how displeased the United States is at the interference and how seriously it will treat any hint of future attempts.

From the perspective of Putin, the lifting of sanctions would certainly be a welcome event. However, even with a new American president who has suggested an openness and indeed willingness to withdraw the pressure of sanctions against Russia, Putin understands that the sanctions are unlikely to be lifted. Though he certainly disagrees with the accusations levied against him personally by American politicians such as McCain, he continues to laud the patriotism expressed by them because it is this very same style of patriotism that continues to operate in Russia and sustain domestic support. Moreover, the imposition of new economic sanctions against Russia, though certainly not beneficial, are proving to be survivable with the recent uptick in the economy. The sanctions clearly do not hurt enough, and the message of general American dissatisfaction with a Russian presence in Crimea, Syria, and interference in elections is easily learned by reading any number of headlines from major American newspapers. Thus, the rationality behind Putin’s position – and suggestion that the imposition of new sanctions is emblematic of an “old world” mentality – is fairly clear. If the proverbial sticks of economic sanctions do not hurt enough and no carrots are extended, why not simply stop altogether and focus on productive endeavours together?

Members of the House of Representatives have been hesitant to pass the Senate’s bill of proposed sanctions. Initially citing issues of Constitutionality – issues since resolved by a revised Senate version, House members are now expressing concern over potential negative consequences the sanctions would reflect on American energy companies. Consequentially, Russia may not see additional economic sanctions imposed upon it just yet. However, recent revelations that Putin directly ordered interference in the election, and building pressure from their constituents, may lead the selfsame representatives to reconsider their position. As the watchful eye of an increasingly-wary American public builds belief in the seriousness of Russian influence in the election, appropriate measures – both precautionary and retaliatory – will continue to develop. Understanding that sanctions do not appear to have a sufficient effect on changing Russian policy and behaviour, it appears that western policy makers are left with few options.

John Chrobak

John Chrobak

Policy Intern at InPRA
John Chrobak is a recent graduate of McGill University where he completed a BA in Political Science and Philosophy. His primary area of focus is Eurasian affairs and he is particularly interested in contemporary Russian politics. More specifically, he is interested in examining emerging trends in Eurasia by monitoring the development of domestic Russian politics and Russian foreign policy with her neighbours. He plans to continue his studies by pursuing an MA in international relations.
John Chrobak