President Biden, from the White House, speaking about a coalition sanction strategy to deter a Russian invasion.

The Coming War of Economic Attrition Between Russia and the West

Before Russia invaded Ukraine the United States and its European allies signaled strongly that they would impose crushing sanctions if Russia, indeed, invaded. Russia invaded anyway. The threat of sanctions were not a deterrent.

After surprisingly heavy sanctions were imposed, Russia did not moderate its behavior and cease its attack. Just the opposite. The imposition of sanctions were not, therefore, what is known in International Relations speak, “a means of compellence.”

So what have the sanctions accomplished? And why might these sanctions and countermeasures by Russia be leading to a war of economic attrition between Russia and the West?

To answer these questions, we are joined by Bruce Jentleson, a professor of political science at Duke University former senior state department official, and author of the new book  Sanctions: What Everyone Needs to Know.

 

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Transcript lightly edited for clarity 

Why Were Sanctions Used Against Russia?

Bruce Jentleson [00:00:00] Ad the Ukrainian military resistance not been as courageous and effective as it had been, including with NATO and US support, sanctions wouldn’t have really mattered much at all.

Joe Biden (excerpted speech) [00:01:02] These have been closely coordinated with our allies and partners and will continue to escalate sanctions if Russia escalates. We’re implementing full blocking sanctions on two large Russian financial institutions, VEB and their military bank. We’re implementing comprehensive sanctions on Russia’s sovereign debt. That means we’ve cut off Russia’s government from Western financing. It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets either.

What sanctions were used against Russia in the beginning of their war on Ukraine?

Mark L. Goldberg [00:02:52] Can you take us back to before February 24th and describe the kind of signaling that was coming from the Biden administration and European allies in terms of the kinds of sanctions that might be imposed on Russia if indeed Russia invaded?

Bruce Jentleson [00:03:28] Yeah, as the intelligence analysis came in late 2021 into 2022, it was becoming clear that 180,000 troops showed at least a risk of invasion. The Biden administration started signaling in late 2021 very extensive sanctions, like sanctions like you’ve never seen before. President Biden called them devastating. Secretary Blinken and national adviser Jake Sullivan use similar language. A lot of consultation with the Europeans, some statements from Europe, but it still wasn’t that clear until they invaded that Europe would fully support these because there had always been internal alliance differences over different economic interests and different diplomatic strategy. So, they really tried to make sanctions a crucial part of their effort to deter the invasion and really ratcheted them up higher than I think we ever have.

Why didn’t Western sanctions stop Russia from invading Ukraine?

Mark L. Goldberg [00:04:18] And it obviously didn’t work: the idea of threatening sanctions as deterrence. Is that because perhaps the Biden administration wasn’t specific enough on the kinds of sanctions that it might impose on Russia? Were there other key factors at play that suggest that in this case, sanctions would never be a sufficient deterrent to Russia invading Ukraine?

Bruce Jentleson [00:04:43] I think there are two aspects to that, Mark. One is whether or not Putin was deterrable, you know, whether his vision of greater Russia was driving him to invade irrespective of what the threat was. But secondly, so we’re not just doing Putinology, sanctions have worked as threats when they’ve had very limited objectives. For example, they worked with nuclear nonproliferation actually against countries like South Korea back in the seventies when there was a concern, they might develop their own nuclear capacity as an ally. But this is a very extensive objective — to have an objective as extensive as deterring a war, you go back to the League of Nations, the mid-1930’s, sanctions were threatened against Mussolini’s Italy, and he invaded Ethiopia Abyssinia anyway. You go back to 1990, there was a U.N. threat against Saddam, he invaded Kuwait. Late ’99, 2000, the Soviets invaded Afghanistan. It’s not clear that sanctions as an inherently limited coercive instrument, even when they’re extensive, can deter a really big, ambitious objective like an invasion.

What sectors were affected by Western sanctions on Russia?

Mark L. Goldberg [00:05:48] So sanctions don’t have a great track record as a tool of deterrence, but after February 24th, when indeed Russia invaded Ukraine, the United States and its allies imposed those so-called devastating sanctions. Can you remind us, what were those sanctions that the U.S. and its allies and many countries around the world agreed to impose on Russia following the invasion?

Bruce Jentleson [00:06:20] Yeah, they were the most extensive and widely supported sanctions ever outside of those mandated by the United Nations Security Council. So, you had financial sanctions freezing about half of Russia’s $640 billion in externally held hard currency reserves. You had technology and export embargoes, particularly trying to hit semiconductors, which are used both for consumer goods and a lot of military equipment. You had companies, really interesting thing, a lot of companies that most often will try to go around sanctions, for example, a number of companies tried to go around the sanctions against China over the Uyghurs, lined up and a lot of them self-sanctioned even before they were ordered to by governments. Over a thousand companies internationally have done that.

What are sports and cultural sanctions?

Mark L. Goldberg [00:07:04] There was like a social pressure I remember at the time, you know, this spring when countries wanted to prove themselves to be joining this international consensus in support of Ukraine.

Bruce Jentleson [00:07:15] Yeah and there were sports and cultural sanctions, too, you know, Formula One, World Cup, the International Weightlifting Federation, a big sport in Russia. And those are intended like in South Africa in the 1980s, in some respects, the banning of South Africa from world rugby and cricket hit the Afrikaner population in ways that made them very real for people, not just economic. And so those sports and cultural were trying to deliver the message to the Russians that you guys, you’re being isolated and things that matter to you in your daily life. So, it was a pretty extensive package that was put together with pretty wide support, as you said. Not everybody, there are a number of countries that still traded with Russia, but pretty ambitious. Even countries like Singapore, which had never before supported sanctions other than those authorized by the U.N. and the Swiss, which are normally very guarded about taking care of financial resources that are left in Switzerland. They all joined in; it was a big deal.

How have the sanctions affected Russia’s economy and ability to wage war?

Mark L. Goldberg [00:08:11] And what was the impact of these sanctions inside of Russia? I mean, I remember at the time a lot of attention, I think rightfully so, was paid to the sanctions on the U.S. foreign currency reserves held in Russia’s central bank, which, everyone prior to the invasion thought would not be sanctioned and sort of saw as Putin’s ability to weather the coming sanctions storm. But indeed, those were sanctioned in a very big way. What impact did that have and have the other sanctions had inside Russia thus far?

Bruce Jentleson [00:08:51] They had a lot of impact, a fair amount of shock, not enough for shock and awe. The ruble, for example, crashed in terms of its value to the dollar. The mayor of Moscow at one point in April, a couple of months into the invasion, said they were losing 200,000 jobs just in Moscow. But, you know, sanctions are interesting. A lot of times we think of sanctions, not just in this case, but other cases, that we have enormous economic power, of course, they’ll work for our objectives. It’s a bit like we think about military power, and we forget that the other side has strategies, too. So, Russia, like a lot of targets of sanctions, had three basic strategies. One was to turn to alternative trade partners. China didn’t do everything Russia wanted and didn’t do as much as a friendship with no limits as Putin and Xi declaration before the invasion might have you think but they did buy some of the oil, provide some of the trade. India dramatically increased its imports of Russian oil from about 2% of its imports to 20 and got it at a discount price and refined it and then both used it at home and sold it. So, there were alternative trade partners. Second strategy that targets use is domestic offsets. And so, the central bank put on capital controls in Russia and raised interest rates and the government increased pensions for pensioners to try to soften the costs. And of course, domestic offsets can be a euphemism for political repression, arresting people that were protesting against it. And the third is sanctions busting. There was all sorts of oil that were sanctioned being put on ships secretly at sea, so-called dark oil. There are a whole variety of ways of getting around the sanctions. They allowed Putin to contain the costs. They didn’t eliminate them, but they did contain them, well, short of President Biden’s devastating original threat.

How did Putin avoid the potentially devastating effects of Western sanctions?

Mark L. Goldberg [00:10:39] So Russian countermeasures, in other words, undermined the ability of these historic sanctions — there have never been kind of sanctions outside the U.N. Security Council as powerful as this. It undermined its ability to be a means of compellance by the United States, by the European Union, to sort of force Putin to make concessions.

Bruce Jentleson [00:11:05] That’s right, he contained the costs. He didn’t eliminate them. In fact, the ruble hit an all-time high in the middle of June because they were able to bring it back. They used methods that even the head of the central bank said were not sustainable over time. Had the Ukrainian military resistance not been as courageous and effective as it had been, including with NATO and U.S. support, sanctions wouldn’t have really mattered much at all. But it’s been this mix, a little bit of a pincer between the military and the economic, and that’s where even more than the financial sanctions, the ones on semiconductors have been really effective because the Russians have lost so much military equipment in the battle that they’ve been having to MacGyver semiconductors out of refrigerators and dishwashers to keep resupplying themselves. So, you really see an impact that’s different than just squeezing the economy. You know, no country, Putin, or nobody else ever says uncle just because of an economic squeeze, it doesn’t happen. But the military part is the part of the most interesting part. Of course, Putin now has moved to his own countersanctions against Europe on energy and putting us in this position of sort of an economic war of attrition on both sides.

What is an economic war of attrition?

Mark L. Goldberg [00:12:18] I wanted to dive a bit into that idea that we are entering this economic war of attrition. On the one hand, you have the Western and international sanctions against Russia. On the other hand, you have Russian meddling with energy exports to Europe, ostensibly in an effort to affect politics in Europe and break the trans-Atlantic unity and the European unity that has been enjoyed thus far in confronting Russia’s aggression in Ukraine. That’s a long game. The sanctions that you described are also a long game. What trends going forward, therefore, can we expect in the coming months and even years ahead as this attrition plays out.

Bruce Jentleson [00:13:11] Yeah, you posed it really well. It’s a bit like warfare; it’s economic warfare. So, Putin’s strategy is to squeeze particularly on energy. Europe had turned more and more to Russian gas, partly because it was less expensive and partly to reduce its dependance on the Middle East, but got too dependent on Russian gas, and so we’ve already been seeing major manufacturing sites shut down because they don’t have the gas to fuel their production, adding to the recession and the unemployment in Germany and other countries in Europe. The plans for possibly rationing home heating as the winter comes and for Americans, you know, sometimes we look at Europe and say, come on, where’s your backbone? We should take a deep breath and realize what an extra $1.50 a gallon for gasoline has done to our politics before we hammer the Europeans and ask ourselves whether we would be totally resistant to that kind of squeeze. So, Putin’s trying to break the Western alliance like that and, you know, he plays the long game. On the other hand, the sanctions, some of the measures the Russians have used, were finite in their capability to do the offset. Even before this latest exodus over the draft, they had an over 500,000 people fled the country, including some of their highly educated and tech sector people. Gazprom’s own stock tumbled for the first time since 1998. The Russian economy could get into the kind of chaos that it had back in the 1990s that helped bring Putin into power in the first place. So, both sides are playing the economic war of attrition, and it’s not totally clear which one is going to work the most quickly in the most effective way. And, you know, it’s rolling on their stories about intentional sabotage of the pipelines that broke recently in the news and part of it, I think, is going to be whether or not the combination of the military struggles and problems: like I mean, one estimate was the Russians had lost almost 3000 armored vehicles and heavy equipment in Ukraine and 70% of the precision guided missiles. Well, semiconductors and other technologies are necessary to redeploy them and you sort of begin to wonder not if Putin’s being pressured from the right a little bit, but whether or not a new Gorbachev but Russian nationalists who don’t want Ukraine to join NATO but also are seeing what’s happening to their military and to their own national pride having to turn to North Korea and Iran — you kind of wonder about the internal politics there and while we can’t totally count on it, it’s also not to be dismissed.

Mark L. Goldberg [00:15:36] So on the one hand, Russia is trying to break European unity through high gas prices and the political chaos that that might cause. And the United States is trying to cause economic chaos in Russia and also use sanctions to prevent Russia from resupplying. But again, this all seems like something that will unfold over the course of many months or many years to have the intended political impact that both sides are seeking to achieve.

What can the 1980’s South Africa sanctions teach the West about sanctions against Russia?

Bruce Jentleson [00:16:09] Yeah, it’s so hard to say. You know, if we had sat down in the early 1980s after almost two decades of UN sanctions against South Africa, we would have said they were really ineffective and by the end of the decade it was clear that global sanctions — including by the way, the United States, was late to that party; we didn’t actually impose significant sanctions until 1986 in a bill passed by Congress that President Reagan vetoed and a Republican Senate, mind you, overrode that veto — it was very different politics. And by the Mandela period, sanctions were a critical factor there. It’s really hard to say. This could go on for a long time. My own view is that I worry about the long term. I worry about this going into the next calendar year. The military balance could re-tip; Putin could further escalate. And that’s where in other studies of sanctions, I kind of use the terminology to get at the powerbrokers inside of country of they’re either circuit breakers or transmission belts. If their interests are the same as the regime or they’re just fear opposing the regime, they’re kind of circuit breakers. They break the pressure from outside before it goes into the country too much. But if they see their interests as fundamentally threatened by the regime’s continuous policy, they can be transmission belts, and this is not sort of the oligarchs that are out there with yachts and owning football teams in Britain and the like. There’s kind of Yeltsin-era oligarchs. You really start to look at the so-called siloviki, the national security establishment, as I said before, not that they’re pro-West, but whether or not they feel that it’s time that Russia has more to lose than gain by continuing and they begin to get a bit more open to serious negotiations. That’s the leverage you’re looking for in sanctions, not, say uncle, but strengthen your negotiating hand and try to get it to that point.

Are they any other possible sanctions the West could impose on Russia?

Mark L. Goldberg [00:17:57] As of now, though, it does not seem that we are there or near there. And in fact, we’re seeing increased violent rhetoric from the Russians, from Putin himself, now threatening nuclear escalation. What might be left on the sanctions front in terms of responding to a dramatic Russian escalation, say Russia somehow detonates a tactical nuclear weapon on the battlefield or maybe in the skies in some sort of demonstrative effect, is there anything left on that sort of escalatory ladder of sanctions that the U.S. or others might impose in response to something terrible like that?

Bruce Jentleson [00:18:47] There are. As we were saying before, we started with extensive sanctions after February 24th and then there have been different waves or sets of sanctions that we’ve done, that the Europeans have done, the Brits have done, the Australians, New Zealanders, Japan and the like. The oil sanctions that Europe is doing, many of which kick in at the end of the year, they can be moved up, they could be made more extensive. My own view is that it’s not so much more sanctions; it’s really trying to make sure the sanctions have the most impact on military operations as quickly as possible. Control the sanctions busting; continue to resist the Russians through the Ukrainian military and NATO support, and so there’s not a point where they finally say, oh, squeeze is too bad, I give up, it’s really trying to hit those transmission belts. In Russia. we’re seeing both criticism from the right, like you were saying, “do more,” “escalate.” And particularly since he did this call up, some criticisms all over the place and protests in different parts of Russia that you hear not just in Moscow, Saint Petersburg, and that’s really where you wonder whether another Russian leader pressuring Putin or somebody else would want to negotiate. At that point, the west is going to have to decide, you know, what do you negotiate? The Russians would not come in a negotiation and just concede everything there. You really have to get into what sanctions would get lifted for, what concessions, what’s acceptable to the Ukrainians, to Europe and to us, and that’s kind of what I have my eye on more. I think more sanctions make a statement, but there’s not a crucial point that you reach where the sanctions are just too much for them to resist any longer.

Mark L. Goldberg [00:20:27] So there’s no other sector that, you know, might be vulnerable to escalating U.S. and international sanctions. Rather a more effective strategy, you’re saying, might be just something highly targeted to imperiling Russia’s military efforts?

Bruce Jentleson [00:20:45] That’s right. Combined with the other elements of the strategy, the military, the intelligence, the public diplomacy. We’re not going to go to full embargoes against the Russian people. We’ve done that pretty much in other countries like Iran and Venezuela and it has had enormous humanitarian consequences to the point where you really have to question the ethics of what you say. You’re standing up for human rights and values, but you’re hurting the people, not the regime. So, we’re not going to go there in this situation and there’ll be announcements over this sanction and that sanction as message sending. But I just hope that the administration in Brussels and others know that those signals are helpful, but they’re not going to turn the tide.

How has Russia’s war on Ukraine changed how sanctions are used in international politics?

Mark L. Goldberg [00:21:26] So we are deep into this war. You have just published a new book on sanctions. Has the conflict in Ukraine, the American and European response, the Russian counter responses taught you anything new about sanctions as a tool of international politics?

Bruce Jentleson [00:21:50] Yeah, it’s a really good question. I actually started writing this book in 2020 with a sense that sanctions had become what somebody else has called a Swiss Army knife of American foreign policy: when in doubt, impose sanctions. And our use of sanctions was like so extensive it was useful to think about what would make them effective. So, I’d say two things here. 1. The key to effective sanctions is as much extensive support internationally as you can get. It’s not perfect in this case, but it’s pretty extensive. 2. Is this notion of proportionality. There are limited instruments, so they’ve got to be combined with other instruments when you have an objective that’s more than just changing a small policy. And 3. Their negotiating instrument. That’s what President Obama did with Iran and what President Trump didn’t do. His sanctions were more economically effective, but he wanted regime change, which wasn’t going to happen. Obama was willing to trade some lifting of sanctions for an agreement on nuclear nonproliferation. We actually did that with Libya back in the early 2000’s to get them to start ending their WMD programs and compromise on some of the terrorism issues. So, you need to have achievable objectives and some sense of reciprocity, if you will, in what you’re going to trade. There’s a lot of discussion now about what happens if China were to invade Taiwan. Let me simply say that some of the factors that have made these sanctions more effective than they often are unique, I think, to Ukraine. I don’t think they would be there likely if China invaded Taiwan. Ukraine is a classic one country invades another, and Taiwan is more debatable about interstate or intrastate to the center of Europe. Companies have much greater economic interest in China than they do in Russia, so, you know, this is a unique case which still may not achieve its objective, but if it does, it should not be a new renaissance of let’s go use sanctions all over the place. It’s a very limited capacity that they have to achieve objectives and oftentimes they not only don’t achieve those objectives, but they’re counterproductive and they end up net negative.

Mark L. Goldberg [00:23:53] Lastly, in the coming weeks or months, are there any indicators or anything you’ll be looking towards that will suggest to you whether or not these sanctions that the West and most of the world has imposed on Russia are having their intended impact or effect.

Bruce Jentleson [00:24:13] I think, again, looking at the military situation in Ukraine, Russia’s capacity to resupply its equipment, we know what’s happening with its troops and that’s not being successful. That’s the most immediate impact it can have. Second is whether some of these Band-Aids, these offset measures, start to run their course, inflation going up, more jobs disappearing within Russia. And then third, frankly, something that I hope we don’t hear about, but maybe some quiet diplomacy starting between us and the Russians, the Ukrainians. We shouldn’t hear about it if it’s happening but if we go back to the Cuban missile crisis, the breakthroughs came through quiet diplomacy from John Scali, who was then an ABC News reporter and Russians that they did actually at a restaurant in Washington and then they helped bring it back to Khrushchev and Kennedy. You know, I don’t want to know about it, if it’s not quiet, I don’t want it. I don’t want the media to know about it, but I think that element is really key, along with the other ways you’re trying to raise costs and then to coerce them. Then is there the possibility of diplomacy. If not, we’re going to a situation like you were talking about before in which even though we may be winning, the risks of escalation are quite scary.

Mark L. Goldberg [00:25:26] Bruce, thank you so much for your time and for your new book.

Bruce Jentleson [00:25:29] Appreciate it, Mark. Thank you.

Mark L. Goldberg [00:25:38] Thank you for listening to Global Dispatches. Our show is produced by me, Mark Leon Goldberg, and edited and mixed by Levi Sharp.

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