Putin’s War in Ukraine Shows the Limits of Western Sanctions

Youf the goal of this week’s G7 summit in the quaint Bavarian town of Schloss Elmau was to ensure the world’s wealthiest countries remained united on behalf of Ukraine, then it appears to have been a success. U.S. and U.K., France, Germany, Italy, Canada. Japan and the European Union agreed to look at additional options to increase sanctions against Russia, such as higher tariffs for Russian goods. But if the Western-led sanctions regime against Russia was meant to push Vladimir Putin toward ending his war of aggression in Ukraine or sitting down for negotiations with the Ukrainian government on a possible settlement to the conflict, then the measures have failed—and they will continue to fail.

Although Washington and Brussels might not like to hear this, the fact is clear: Putin remains as determined to pursue the war against Ukraine today as on the day that he invaded. The Russian president has calculated that calling it quits in Ukraine would deal a threatening blow to Russia’s geopolitical position and can therefore not be tolerated, even at the cost of a years-long recession.

Many people in the West struggle to comprehend this. In terms of the economic realities, there is little doubt the Western-led sanctions campaign is having a negative impact on Russia’s business climate. More than 1,000 multinationals have either stopped operating in Russia, or left completely. The coordinated decision by the U.S., the E.U., and Japan to wall off as much as half of Russia’s massive $640 billion in foreign reserves was an unprecedented move against a major economy. Russian billionaires linked to Putin are increasing persona non grata in the international financial system—$30 billion in Russian assets have been frozen, including yachts, luxury homes, and personal planes. Export controls on U.S. technology like microchips will hurt Russia’s ability to stay competitive in the global marketplace and dent innovation for a long time to come.

The sour economic outlook in Russia has also driven thousands of highly-skilled IT workers to pack up and leave, leading to a brain drain in one of the world’s most lucrative industries. Due in part to the U.S. & E.U. The sanctions are expected to erase 15 years worth of Russian economic growth. Moscow has also defaulted in its foreign debt, the first such default in nearly a century.

The problem, however, is the economic bad news is not making a dent on Putin’s strategic calculations with respect to the war. Even though Russian forces had pulled out from this area in April, they resumed their missile and air strikes in Kyiv after a temporary lull. Multiple targets in northern and western Ukraine were hit by dozens upon dozens of Russian-made missiles on June 25. A particularly vicious attack by Russian bombers on June 27th targeted a Kremenchuk shopping center, in central Ukraine. It killed at least 13 people.

In the east Donbas, where they are now the main force, Russian forces have made slow, but significant progress. They hope to use this opportunity to their advantage during a difficult time for the Ukrainian military. The capture of Severodonetsk after weeks of unrelenting artillery fire, as well as the Russian army’s ongoing attempt to encircle Ukrainian defenders in Lysychansk, are preludes to an even bigger Russian offensive on Kramatorsk and Slovyansk. Five months into the war and facing hundreds of casualties a day, the Ukrainians are at a difficult moment—and Putin knows it. Additional sanctions at a time when Putin’s forces are finally exhibiting some momentum will not force a course-correction.

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Russia took measures to defend its economy both prior and post-war. Increasingly cut off from Europe, Moscow is diversifying its customer base and exporting more oil to energy-hungry China and India, two countries that aren’t bound by the Western-led sanctions regime. These deals, which offer discounts up to 30% on oil, are just too tempting at a time of high inflation and high prices.

Moreover, the sanctions aren’t cost free for the rest of the world, particularly for poor countries that rely on Ukraine and Russia for grain or wheat. Russia’s ongoing blockade of Ukrainian ports, in addition to financial restrictions on Russian cargo vessels, has spiked global food prices. For some African countries, this is simply unsustainable, and it’s why much of Africa is more interested in ending the war as soon as possible instead of punishing Putin.

This is not meant to suggest that sanctions are unfair. Washington’s options are quite limited. Washington’s diplomatic options, including expulsions and U.N. Security Council resolutions, are largely a matter of virtue signaling and have no teeth. An increase in military involvement, beyond providing intelligence and weapons, would make the conflict more complex with nukes. One of the best options for Western policymakers is economic sanctions. Freezing assets and blocking a targeted entity from accessing U.S. financial institutions is a relatively quick and easy way to punish bad behavior (it’s why U.S. sanctions designations have increased by 933% over the last 20 years).

Sanctions, though, don’t address the causes of the behavior, and therefore fail to solve the problem at hand. They haven’t compelled North Korea to eliminate its nuclear weapons program, pushed Syria’s Bashar al-Assad into resigning, or pressured Venezuela’s Nicolas Maduro to cede his office. And they most certainly won’t be responsible for ending the war in Ukraine. It will only be possible due to the battlefield geometrie and risk tolerance of combatants.

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