Putin has proven himself a skillful politician. When passing judgment on the effect of sanctions, the authors make the following distinctions: Did the sanctions roll back objectionable policies, contain them, or deter Russia from further objectionable policies? First, however, it is important to assess the real problem with Putin’s regime and its international repercussions. This report distinguishes microeconomic effects of sanctions as well, but does not try to quantify them. A secondary impact of the financial sanctions was enticing the Kremlin to pursue a more restrictive fiscal and monetary policy than would have been ideal for economic growth. The financial sanctions had the greatest impact on Russian GDP, by restricting Russia’s access to foreign capital, including credits to both the government and the private sector, as well as foreign direct investment (FDI). The authors argue that while Western sanctions have not succeeded in forcing the Kremlin to fully reverse its actions and end aggression in Ukraine, their effect has been quite substantial with regard to the weakening of the Russian economy and stopping further military aggression. Its focus is the impact of sanctions on gross domestic product (GDP). This report aims to assess how effective Western sanctions on Russia have been in macroeconomic terms, and what could be done to render them more effective. “The Global Sanctions Data Base,” European Economic Review, October 2020, 129, In general, sanctions are becoming more diverse, with the share of trade sanctions falling, while financial and visa sanctions are becoming more popular. In addition, the West has introduced some restrictions on the export of technology, while it has abstained from the previously common trade sanctions. The West has focused on two kinds of sanctions: financial sanctions and personal sanctions on human-rights violators and corrupt businessmen working for the Kremlin. But, since Russia’s aggression in Ukraine in 2014, the West has felt a need to do something substantial to impede Russian foreign aggression. Instead, it pursues cheaper, so-called hybrid warfare, such as cyberattacks and assassinations.įor the West, a real war with Russia has been out of question.
As the Russian economy has barely grown since 2014, the Kremlin has become more cautious with major real warfare. One means of doing so has been small victorious wars, as described by a century-old Russian term. It is designed to promote the interests of the current Kremlin elite, not the Russian nation. The Kremlin’s foreign policy should be seen from this perspective. The two main objectives of Vladimir Putin’s system are to maintain power and to enrich a narrow elite. 1 This report follows the line of Daniel Fried and Alexander Vershbow, How the West Should Deal with Russia, Atlantic Council, November 23, 2020, The authors call it “kleptocratic” or “neopatrimonial” autocracy, as such regimes sustain loyalty of elites and population through the redistribution of benefits and spoils. When analyzing a Western policy on Russia, one must first assess the nature of Russia’s government. “World Economic Outlook Database, October 2020,” International Monetary Fund.
The International Monetary Fund assesses that Russia’s gross domestic product has grown by 0.5 percent in total during the seven years 2014–2020. “Russia Statistics,” Bank of Finland Institute for Economies in Transition, accessed March 20, 2021.
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