U.S.-Led Alliance Face Frustration Over Russia Sanctions

WASHINGTON — Four months into the war in Ukraine, countries aligned against Russia face mounting economic hardship, even as sanctions and energy embargoes have little impact on the Russian president’s military campaign Vladimir V. Putin or on his political position in his country.

US officials have sworn that Russia’s financial system would be harmed if it attacked Ukraine, and President Biden boasted in March that the sanctions were “crushing the Russian economy” and that “the ruble was reduced to nil”. But Russian oil revenues have set records as crude prices soar. And after plunging in February, the ruble hit its highest level in seven years against the dollar this week.

Biden officials say Russia’s economy is nonetheless suffering damage that will worsen over time, especially as restrictions on technology exports to Russia gradually curb the growth of its industries, from aerospace to computing. And on Thursday, a White House spokesman said leaders of the Group of 7 industrial nations, due to begin meetings in Madrid on Sunday, will discuss new plans to “tighten the screws” on Russia’s economy.

But it’s unclear which side has more time to spare. The Ukrainian government says up to 200 of its soldiers are killed every day and thousands of civilians have died as Russia seizes territory in eastern Ukraine. Mr Putin continues to wield near dictatorial power and is unlikely to start serious peace talks with Ukraine while his army advances.

“The Russian financial system is back to business as usual after a few weeks of violent bank runs,” said Elina Ribakova, deputy chief economist at the Institute of International Finance. wrote on Twitter last week, adding that those who thought “that cutting off funding to Russia for a few weeks at the start of the war would stop the war have been naive”.

Few if any Biden officials expected the sanctions to end the war immediately. But neither did the administration and its European counterparts expect the economic strain they are now under. Despite initial assurances that the sanctions would not affect Russian energy exports, America has since banned the import of Russian oil and the European Union has announced plans to cut imports by 90% this year. Partly as a result of these actions, energy prices have risen in the United States and Europe, with regular gasoline averaging over $5 a gallon in some states.

Now Mr. Biden is gearing up for midterm elections this fall in which Republicans are likely to capitalize on the rising cost of living. Late summer will also bring cooler temperatures to Europe amid growing alarms that Moscow is choking off natural gas supplies.

And in a scathing twist, the sanctions and related embargoes allow America’s main strategic competitor, China, to buy huge amounts of oil at heavily discounted prices, while Russia seeks willing customers to replace lost revenue.

Biden officials initially framed the threat of “massive” economic sanctions as a way to deter Mr Putin from invading. After this failure, their precise justification was unclear. In remarks to reporters in Germany on Friday, Secretary of State Antony J. Blinken said the United States was “raising the costs for Russia to end the war more quickly through sanctions and export controls without previous”. But US officials have not publicly offered to lift the sanctions in exchange for Russian concessions on the battlefield.

“Sanctions certainly do not deter Russian forces from the kind of military operation they are carrying out,” said Alina Polyakova, president of the Center for European Policy Analysis.

“Most governments have grossly miscalculated the outlook or worldview of Russia’s elite and what Putin is interested in,” she added. “It’s been clear for a very long time that Putin and the people around him don’t care about economic growth. What matters to Putin and the elites is revenue, and they always derive revenue from energy sales.

Part of the problem, said Andrew Weiss, a longtime Russian expert and vice president of studies at the Carnegie Endowment for International Peace, is that the economies of Western countries are more at risk than their governments anticipated. In February, US officials disavowed any plans to target Russian oil and gas exports.

“We deliberately directed the pain of our sanctions at the Russian economy, not ours,” said Daleep Singh, the White House’s recent deputy national security adviser for the international economy, in late February. “None of our measures are designed to disrupt the flow of energy to global markets.”

That changed quickly as the world reacted to the startling scale and brutality of the Russian attack and the valor of the Ukrainian resistance.

Ukraine’s fierce defense has also prolonged the conflict longer than experts and intelligence assessments predicted, locking Russia and its adversaries into a long-term — and still escalating — economic war.

“Like all battle plans, the original transatlantic plan to impose harsh and crippling sanctions on Russia collided with reality after the war began, and Western leaders were pressured into doing things they hadn’t originally planned or didn’t want to do – namely impose sanctions on the Russian oil and gas sector,” Weiss said.

Moreover, inflation has risen faster than White House officials had expected. Mr Biden blamed ‘Putin’s price hike’ for rising costs, although Federal Reserve Chairman Jerome Powell told a Senate committee this week that ‘inflation was high before – certainly before. that the war in Ukraine does not break out”.

US officials warn against underestimating Russia’s economic shock. Mr Blinken said in Berlin on Friday that many economists predict Russia’s gross domestic product will contract by 10-15% this year. Moscow has “so far prevented an economic collapse by taking extraordinary measures to support its currency, but these tactics are unsustainable as the full impact of Western sanctions and trade restrictions begins to be felt,” he said. he adds.

Mr Blinken also noted that export controls mean Russia has little it can buy with its oil revenues. And he said stocks of items like iPhones will soon run out, leaving Russians increasingly destitute.

A senior State Department official says the impact of the sanctions is clear on the ground in Moscow: luxury stores around Red Square, including those selling furs, Gucci bags and Lamborghinis, have closed for the moment. Inflation is high and people are worried about their jobs, said the official, who spoke on condition of anonymity to speak more freely about sensitive political issues. Many wealthy Russians left for Turkey and the United Arab Emirates.

But the official also acknowledged that countries often show incredible resilience.

And with regard to Russia specifically, senior US officials have already overestimated the impact of Western sanctions. In January 2015, President Barack Obama bragged that sanctions for Mr Putin’s annexation of Ukraine’s Crimean peninsula had left the Russian economy “in tatters”.

Now former Obama officials say those sanctions had a modest impact at best, though some say they helped deter Mr Putin from a bigger invasion of Ukraine in the meantime. era.

US-led sanctions against Iran, Syria, North Korea, Venezuela and Cuba have largely failed to change the behavior of these governments. The researchers found that ordinary citizens bear the brunt of the sanctions, while those loyal to the regime find ways to profit from them.

A key question now is whether patience with sanctions could run out in Western capitals. Speaking to reporters last week, Mr Biden said that “at some point it’s going to be a bit of a waiting game: what Russians can take and what Europe will be willing to take” . Mr Biden said it would be a topic of discussion at the Group of 7 summit.

A growing problem in Washington and European capitals – and watched closely by the Kremlin – is the possibility of a sharp divergence of opinion among policymakers on new sanctions. During the recent debate among Europeans over whether to boycott Russian oil, Hungary delayed action for weeks and forced an exclusion for its own imports.

On Monday, Jens Plötner, foreign policy adviser to German Chancellor Olaf Scholz, said Germans needed to have a serious discussion on the “exciting and relevant” issue of the country’s long-term relationship with Russia – widely interpreted as a sign that Mr. Scholz favors a more conciliatory approach with Moscow.

“Overall, I think we’ve reached the political limits of sanctions,” said Gerard DiPippo, a senior fellow at the Center for Strategic and International Studies and a former senior US intelligence officer on economic issues. “New sanctions are probably not necessary and certainly not sufficient to achieve an acceptable end to the conflict. But Ukrainian victories on the battlefield are probably both necessary and sufficient. This should be at the center of American policy.

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