The Sanctions Boomerang

Guest post by Branislav L. Slantchev

Ever since Russia escalated the crisis in Ukraine with the annexation of Crimea, the Western response has relied on semi-tough talk and sanctions. Western governments ruled out the use of military force explicitly from the outset, and essentially defaulted to sanctions for lack of other policy options. As Russian meddling in East Ukraine intensifies, it is becoming abundantly clear that sanctions are not really expected to deliver much of anything except show that the West is “doing something” to stop Putin. The problem with sanctions (aside from the fact that they provide an excuse not to consider alternatives) is that they can be worse than doing nothing. Yes, that’s right, we might be better off abandoning Ukraine – although I personally think we absolutely should not – than sanctioning Russia.

The scholarly debate on sanctions revolves around their effectiveness: do they work, and if they do, under what circumstances. Whatever the consensus is – and I am not sure we have more than a bunch of “mixed results” – the fundamental shortcoming of this debate is that it fails to consider a third possibility: that sanctions might aggravate the very behavior they are meant to discourage.

First, let’s dispense with the notion that the sanctions can actually force Putin to change course. Even now the limited sanctions are targeted at Putin’s close friends and allies, and so rely on the unwarranted assumption that he is a typical authoritarian leader who must depend on the support of elites. But Russia, owing to its incomplete transition to a market economy is stuck in situation where the oligarchs seemingly control vast wealth but are in fact at the mercy of the state, which owns directly or less so nearly everything and which is responsible for the vast share of the economy. The oligarchs are not going to take a saw to the branch they are sitting on.

As one should have expected, these sanctions achieved nothing, and now the logical next step is … more sanctions, only of a different sort. This time, we are told, “we will impose increasing costs on Russia” until it stops destabilizing Ukraine. The sanctions might hurt the economy by prompting capital flight (although the outflow so far has been from Russian assets – which can be intimidated into staying – and not from reducing inflows from foreign investors). The idea is that by hurting the Russian economy, we will hurt the Russian people, and this will somehow discipline Putin.

We can, of course, immediately engage in the traditional sanctions debate for there is very little reason to believe that the sanctions will have this salutary effect. Putin seems quite secure, so even if sanctions succeed in eroding this support, it is unlikely that his regime would wobble. Certainly not in time to help in the crisis in Ukraine: by the time any such wobbling occurs, Ukraine might have been dismembered.

It is not even certain that the sanctions will seriously hurt the economy despite the capital flight we have seen so far. The usual collective action problem will ensure that the West will not hold the line. Given the strong commercial and energy links between Russia and the European Union, EU cooperation is key but the US and the EU are already split over what sanctions are appropriate. Even worse, the EU cannot coordinate a response internally in part because everyone wants someone else to pay and few wish to antagonize Russia.

We should, however, consider what might happen if sanctions actually do hurt the Russian economy as intended. Contrary to expectations, this will increase Putin’s domestic position and the support for his policies. How can that be? Why would ordinary Russians reward policies that are so obviously directly linked to the deterioration of their economic conditions?

From 2010 until early 2014, economic performance approval had been steady but Putin’s approval had taken a steep dive (although, to keep things in perspective, it never dipped below 60%). One can interpret this, as Daniel Treisman does, to say that “Putin’s popularity remains highly vulnerable to a further deterioration in the economy.” If so, hurting the economy might compel him to change course provided he cares about his approval and provided that he is blamed for that deterioration. The problem is that Russians are not going to blame Putin for this, they will blame the West.

As I have argued here and here, Putin’s regime is by now almost entirely legitimized by the idea of recovering Russia’s rightful place in the sun. His policies have explicitly aimed at overcoming what I call the Cold War Syndrome – the purported illness that has afflicted Russia after the demise of the Soviet Union and that is to blame for all its current troubles at home and abroad. Briefly, with the disappearance of the military might of the USSR, Russia has been unable to resist the victorious West which has relentlessly advanced everywhere, pushing a new Iron Curtain ever closer to the Russian borders. The expansions of NATO and the EU, the increasing commercial and cultural penetration around the globe, globalization itself, all of this has marginalized Russia, depriving it of influence and forcing it into the humiliating role akin to that of former colonies of the West: exporter of raw materials to fund Western consumerism. Russia can only prosper if it counters these tendencies and establishes a zone of influence in Eurasia. It must halt the inexorable advance of the West, which has moved the Iron Curtain east, and this can only be done if it recovers its military posture.

This portrait of the past and prescription for the future are not merely crude propaganda relentlessly prompted by the Russian media obedient to Putin but also widely shared beliefs among ordinary Russians, whose attitudes toward the US and the EU have hardened considerably in recent years, whose estimate of Russian power has reached new heights (and with it, the sense of encirclement), even though many of whom have not seen much of the post-Soviet wealth, do not have much to live on, and live in a world of corruption. In a sense, since the economy has reached the limits with what it can deliver without political and market reforms, and because the export-funded bribes through subsidies are unsustainable, Putin must tap into these emotions for legitimacy.

Ukraine is an integral part of any zone that Russia can hope to influence. If Ukraine goes, this entire policy will be in shambles, and Putin’s regime will be dangerously discredited since it will have failed to deliver on the thing it itself had identified as the most important prerequisite for prosperity. Trying to keep the West out of Ukraine is thus seen not merely as a legitimate foreign policy goal, but as a vital necessity for the future of Russia. If our sanctions succeed in inflicting harm on the Russian economy, the inevitable conclusion will be that Putin was right all along and the West is punishing Russia for pursuing its only chance of prosperity. This can only bolster the popularity of his regime and strengthen its determination to continue its aggressive policies.

Doing nothing might embolden Putin so it has its own drawbacks. But hurting the Russian people will surely make things even worse, for the Cold War will resume.

Branislav L. Slantchev is a Professor of Political Science at the University of California, San Diego.