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Are sanctions against Russia really effective?
On February 24, 2022, Moscow launched its offensive in Ukraine. Since then, the West has responded with a battery of sanctions. But Russian power has managed to partially circumvent them.
Russian President Vladimir Putin during his address to the nation in Moscow on February 21, 2023. AP - Dmitry Astakhov
By: Arthur Ponchelet
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“
It’s a permanent race between the adoption of sanctions and their circumvention
,” whispers a European official. Since February 24, 2022, the date of the start of the Russian offensive in
Ukraine
, the West has responded to the war with a battery of sanctions. Restriction on exports and imports, exclusion of Russian establishments from the international banking system, freezing of the assets of the Russian Central Bank... The objective is twofold: to limit Russia's capacity to finance its war effort and force Vladimir Putin to the negotiating table.
Despite Western sanctions, Moscow succeeded in two years in organizing a real war economy. At the start of the conflict, many observers predicted a collapse of
Russia
. On the contrary, she displays astonishing resilience. Gross domestic product growth was close to 3% in 2023 and public debt remained very low, around 16% of GDP.
The “shadow fleet” exports Russian oil
This is partly explained by the circumvention of Western sanctions. Among the sectors which continue to operate despite the embargo, that of oil is one of the most emblematic. The European Union and the G7 countries have banned the import of Russian crude and imposed a price cap for countries that are not members of their organizations. Concretely, if the latter use ships registered in the G7 countries to transport black gold from Moscow, they must pay less than 60 dollars per barrel.
But that was without counting on Vladimir Putin's “shadow fleet”. An armada of ships which are neither registered nor insured in G7 or EU countries and which continue to transport Russian black gold, thus allowing Moscow to escape the price cap. The method is well known, since it has already been practiced by Iran and Venezuela, both under American sanctions. According to the
Kyiv School of Economics
, last October, this “ghost fleet” allowed Moscow to export 2.3 million barrels of crude per day.
India also constitutes an important channel for selling Russia's oil. New Delhi imports crude from Moscow, respecting the price cap, then refines this black gold, before reselling it at the market price. In December 2023, Alexander Novak, Russian Deputy Prime Minister and Minister of Energy, stated that previously “
there was almost no supply to India, but now it accounts for 40% of exports
”.
More irritating for Brussels, certain member countries would be clients. In its
twelfth set of sanctions
in December 2023, the EU announced “
to introduce new measures aimed at more closely monitoring the sale of petroleum products to third countries, as well as more detailed certification requirements
”.
Western components in Russian weapons
Another example of sanctions evasion: diamonds. Although more symbolic, since it represents only a small part of the Russian economy, the trade in this precious stone continues. In December 2023, the import of Russian diamonds was banned by the G7 countries. But legally, when they are cut abroad (in India or Dubai for example), they change their origin and can therefore be marketed without problem. A practice that the G7 countries want to put an end to “
from March 1, 2024
”.
Sanctions were also expected to weaken the Russian war machine. Since the start of the war, Westerners have been banned from selling military equipment to
Vladimir Putin
's army . But here again, Moscow seems to have found the solution. According to the Kyiv School of Economics, over the first ten months of 2023, Russia imported $22 billion worth of equipment crucial to its military industry.
Inspecting around 2,800 pieces of destroyed military equipment, investigators found Western components in the vast majority of them – electronic components from the companies Analog Devices and Texas Instruments, for example. They are often imported by Chinese, Turkish or Hong Kong companies which buy them from American manufacturers under the pretext of commercial use, before reselling them to Russia.
And when Russia does not use external aid to circumvent sanctions, it can rely on internal dynamics. The most striking example is that of the Russian banking sector. Yet excluded from Swift, the global interbank messaging system, Russian banks generated $37 billion in profits in 2023. This is 16% more than the previous year. This is partly explained by a rush by individuals and businesses for state-subsidized credit, created in part by the need to buy out Western companies that have left the country.
Russians affected in their daily lives
The fact remains that on a daily basis, Russians pay the price of war. Inflation is high in the country, around 7%. Of course, it is difficult to know what is sanctions and what is linked to the international inflationary context. But some products, such as construction materials, have seen significant price increases.
Added to this is the departure of Western companies. Legally, nothing obliges them to leave Russia. However, public pressure and sanctions on services and the banking and aviation sectors make trade very complicated. So, it was necessary to fill the void left by a large number of companies: fake Coca-Cola, fake
McDonalds
and even fake Ikeas appeared in the country.
Some countries quickly set about filling the void left in Russia by the West. Those who continue to export to Russia have even seen their trade increase significantly. This is the case of China, whose automobile sector has partly compensated for the departure of German manufacturers, going from 8% to 55% market share in the country.
Turkey has also done well. Ankara exported $11 billion to Russia in 2023, an increase of 83% over two years. The technique is well established: Western goods are imported before being resold and re-exported to Russia. These are often so-called “dual-use” objects, such as household appliances, cars or even telephones, whose components can be exploited by the military-industrial complex.
“
That doesn’t mean it will never be effective
”
Some Central Asian countries use the same process. How to end it? This is the whole purpose of secondary sanctions, those which could target nationals of these states to prohibit them from trading with Russia. Measures that the European Union is currently refusing to take in the name of international law. Brussels prefers to use other means of pressure. “
We have economic ties with the countries of Central Asia
,” explains a European official, “
so we have pressure levers to make them change their policy
. »
So, what conclusions can be drawn from the sanctions? A source within the European Union wonders. “
One of the goals was to get Russia to change its policies. Obviously it didn't work. But that does not mean that it will never be effective: the day there are negotiations, they will be an interesting lever.
»
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