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141. Economic Consequences of Sanctions on Russia

Author:
Davit Shatakishvili
Publication Date:
01-2022
Content Type:
Commentary and Analysis
Institution:
Georgian Foundation for Strategic International Studies -GFSIS
Abstract:
Russia’s military intervention in Ukraine, coupled with Western political support for Ukraine, was followed by a tough economic response through an unprecedented package of sanctions against Russia set forth by the West. Their decision to do so seeks to make Russia pay an economic price for its military aggression, aiming to reduce its economic and martial capabilities, which are currently costing the lives of thousands of innocent people. The sanctions have already had quite severe economic consequences for Russia, but it is interesting to see whether they will achieve the West’s political goals and push President Putin to suspend the military aggression. Generally, a medium- to long-term period is required to see the effects of sanctions, and, currently, despite heavy economic losses, Russia is managing to coexist with the restrictions. Today, Russia is experiencing its biggest economic downturn since the end of the Cold War. The World Bank estimates that gross domestic product in Russia will reduce by 11% in 2022 (World Bank, 2022), while the International Monetary Fund forecasts this figure to be 8.5% (IMF, 2022). According to some estimates, the economic scale of the reduction may even reach 15% (IIF, 2022). Clearly, this largely depends on the potential consequences of the sanctions already imposed and the possibility of enacting new sanctions, including in terms of energy embargoes. As a result of the global economic crisis of 2008, the Russian economy shrank by about 8%, and now this figure is almost twice as high. Consequently, we can get some idea of its scale. The losses caused by sanctions will become more visible and tangible over time, resulting in much more severe social and economic effects in the coming years. According to the International Finance Institute, Russia will have lost the wealth it generated over the last 15 years by the end of 2023 (IIF, 2022). One of the main reasons for this will be reduced domestic demand, and if the trade-related sanction package is expanded, exports will fall further than expected, which in turn will lead to a sharp decline in budget revenues. Clearly, the Russian military aggression has also caused global economic consequences, such as rising prices for basic consumer goods, disruption of supply chains, and delays in international trade. However, since invading Ukraine, Russia’s financial losses have been high. It is interesting to take a look at what actual consequences the Russian Federation has faced in terms of sanctions, and how the country will be able to continue coexistence with the restrictions and expand its own aggressive foreign policy.
Topic:
Economics, Sanctions, and Russia-Ukraine War
Political Geography:
Russia, Ukraine, and Eastern Europe

142. Military Effects Of Economic Sanctions On Russia

Author:
Davit Shatakishvili
Publication Date:
01-2022
Content Type:
Commentary and Analysis
Institution:
Georgian Foundation for Strategic International Studies -GFSIS
Abstract:
Russia’s military industry is a fundamental factor of its national power. The enterprises operating in its defense sector are largely state-owned. Consequently, Russia’s sizeable military corporations and their subsidiary organizations operate not on the principles of a competitive domestic market, which is one of the key foundations of technological progress, but their main goal is to pursue Moscow’s political interests and ensure the stability of the regime. Accordingly, along with military capabilities, having a powerful economic leverage in the form of energy resources, encourages Russia not only to pursue its own economic interests but also intimidate neighboring countries and extort their territories to satisfy its imperialist intentions. The responsibility of the defense industry in Moscow’s current governing model is exactly on what the Russian government itself has based its legitimacy - military modernization, restoring Russia’s strength and greatness. One of its ill-favored manifestations is the military aggression in Ukraine which is claiming the lives of thousands of innocent people. The unprecedented scale of sanctions imposed by the West will clearly affect Moscow’s defense capabilities but the only questions are - when and to what extent? Russian military production, on the one hand, helps the country to pursue an aggressive foreign policy and, on the other hand, arms exports are an important source of country’s budgetary revenues. At the same time, this allows it to exert political influence over the purchasing states. The collapse of the Russian attack on Ukraine may not only sacrifice the hegemonic goals of the latter but also lead to the loss of existing and potential customers of its military weapons. There is no doubt that Russia is experiencing colossal military losses as a result of the war and, at the same time, questions are being raised about the quality of its arms and heavy equipment. Until now, there has been a consensus that Russian armaments were a viable and affordable alternative to Western weapons, although this statement could also be another victim of the war. As a result of the sanctions, Russia faced not only financial but also technical problems. In addition to Western countries, Asia’s leading technology powers have restricted Russia’s access to critical components needed for military production. Existing restrictions apply to advanced technologies such as semiconductors, telecommunications equipment, software and encryption, microelectronics, aviation systems, oil extraction equipment and other manufacturing components. In this context, it is important to discuss the impact that economic sanctions may have on Russia’s military capabilities, its recovery prospects and its aggressive foreign policy in the future.
Topic:
Sanctions, Military Affairs, Economy, and Russia-Ukraine War
Political Geography:
Russia, Ukraine, and Eastern Europe

143. Promoting the Euro – Countering Secondary Sanctions: Germany Should Push to Complete Monetary Union

Author:
Markus Jaeger
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
US-Chinese rivalry will increasingly play out in the geo-economic realm. The use of secondary sanctions – especially secondary dollar sanctions – negatively affects German economic interests. The new German government should therefore intensify efforts to promote the euro as an international currency coequal to the dollar in addition to lending its qualified support to EU anti-coercion policies.
Topic:
Economics, Sanctions, European Union, Rivalry, and Geoeconomics
Political Geography:
China, Asia, and United States of America

144. Designing a Geo-Economic Policy for Europe

Author:
Markus Jaeger
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
Geo-economic policies have become an increasingly important feature of international politics – and not just since the war in Ukraine. The EU has proposed an economic anti-coercion tool to deter third-party coercion. This policy brief analyses the risks and benefits as well as the challenges related to the EU’s proposed deterrence policy based on a review of the academic literature on coercion and the effectiveness of economic sanctions.
Topic:
Sanctions, Coercion, Geoeconomics, and Russia-Ukraine War
Political Geography:
Russia, Europe, Ukraine, and Germany

145. Sanctions Against Russia: Five Lessons from the Case of Iran

Author:
Stefan Meister and David Ramin Jalilvand
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
German Council on Foreign Relations (DGAP)
Abstract:
Russia’s war of aggression against Ukraine has led to the most comprehensive economic sanctions imposed on a country of this size since the end of the Second World War. Yet sanctions are only an effective tool of foreign and security policy if they are embedded in a sustainable political strategy that considers the cost-benefit analysis for both sides. Looking at the sanctions against Iran can be helpful when it comes to learning lessons about how to deal with Russia.
Topic:
Security, Foreign Policy, Sanctions, and Russia-Ukraine War
Political Geography:
Russia, Iran, Eurasia, and Ukraine

146. Underreporting of Russian Investments Abroad: Are the Sanctions Undermined?

Author:
Haggy Etkes
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Institute for National Security Studies (INSS)
Abstract:
There are indications of underreporting to Western authorities of Russian investments worth about 90 billion dollars, when Russian reports of investments abroad are compared with Western data. If correct, this undermines the effectiveness of the asset freezing that is part of the sanctions imposed by the West following Russia’s invasion of Ukraine
Topic:
Foreign Policy, International Cooperation, Sanctions, and Conflict
Political Geography:
Russia and Europe

147. Strategic Patience: Sustainable Engagement with a Changed Afghanistan

Author:
Adam Weinstein
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
One year after the United States withdrew its military from Afghanistan, relations between the two countries are stuck in a holding pattern. The United States remains the single largest humanitarian donor to the people of Afghanistan, with over $774 million USD distributed since the Taliban takeover, but the United States maintains no diplomatic presence in the country — nor does it send official diplomatic envoys.1 U.S. sanctions have not altered the Taliban’s calculus on human rights or ties with al-Qaeda. The Taliban has proved intransigent and unrealistic in its relations not only with Washington but with neighboring countries like Pakistan. Its senior leaders lack a coherent vision for the country and its emir remains reclusive.2 Future U.S. policymakers might be tempted to disengage diplomatically and economically from Afghanistan and instead rely primarily on “over-the-horizon” counterterrorism.3 The most likely consequence of this approach would be a more isolated and unstable Afghanistan, which in turn could foster an even more permissive environment for transnational terrorists. Consistent diplomacy tied to long-term U.S. security objectives is likely to produce incremental results at best, but is still preferable to diplomatic disengagement or military intervention. This brief provides a concise background and analysis of the most pressing issues affecting U.S. interests in Afghanistan. It draws on open source data; interviews with government officials — including from the de facto Taliban government; and interviews with private analysts that were conducted remotely or in person — in the United States, Pakistan, and Qatar. Broad policy recommendations • The United States should work closely with regional countries, including Pakistan, India, Tajikistan, and Uzbekistan to ensure they are prepared to handle security challenges as they emerge. If the Joint Comprehensive Plan of Action (JCPOA) is revived, opportunities may emerge to engage Iran on Afghanistan. These should include routine dialogue, intelligence sharing, and capacity building, such as policing and border security. Washington should engage separately with India and Pakistan to bolster humanitarian aid and limited commerce to Afghanistan. • The United States should reiterate mutual responsibilities under the 2020 agreement it signed with the Taliban in Doha, but recognize that it lacks effective enforcement mechanisms and therefore is better understood as an aspirational framework. • Formal recognition of the de facto Taliban government should be withheld until it demonstrates a clear commitment to its counterterrorism responsibilities and respect for basic human rights, including for women. But Washington should place diplomats in Afghanistan either through the creation of an in-country Afghanistan affairs unit, whether based in the prior U.S. Embassy or inside a friendly third country’s diplomatic mission, or by sending temporary delegations to Kabul, as our allies have. This should be coupled with multilateral steps to remove the leadership’s travel privileges. It is important that U.S. officials interact with Taliban cabinet members in Kabul and other Taliban stakeholders based in Kandahar.4 Direct outreach by U.S. military officials and the intelligence community may have utility but it is not a replacement for a coherent civilian-led diplomatic strategy. • Sanctions intended to target the Taliban as a non-state actor now extend far beyond their original scope, since they became the de facto government of Afghanistan. If not yet determined, the U.S. government should communicate what steps the Taliban must take to be de-listed as a Specially Designated Global Terrorist Group.
Topic:
Foreign Policy, Human Rights, Sanctions, and Engagement
Political Geography:
Pakistan, Afghanistan, South Asia, India, and United States of America

148. Eighth sanctions package: Which side will be the economic loser?

Author:
Nigar Islamli
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
Since February 24, 2022, Russia's invasion policy towards Ukraine has been tried to be prevented by several series of sanctions by the European Union. These sanctions include trade, travel, asset freezes, oil, transport, and SWIFT bans. Since the start of the war, 7 sanctions packages have been presented and many of them are being implemented. In response to Russia's invasion policy against Ukraine, the European Commission presented the eighth package of sanctions covering visa issues and asset freezes.
Topic:
Economics, Sanctions, European Union, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

149. Assessment of Initial Impacts of Western Sanctions against Russia: Effects for Azerbaijani Economy

Author:
Emin Mammadov
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
Repercussions of the western sanctions on the Russian economy increasingly arise that negatively affect the total economic structure. National GDP shrank by 4.3% in the first quarter of the current year. As forecasted by the Russian Central Bank following the exposure to sanctions, a 7 percent reduction in the GDP could be expected in the third quarter. Russian ruble lost its value by 7 percent against the dollar in less than a month which even resulted in an inevitable devaluation in the official exchange rate.
Topic:
Sanctions, Economy, and Russia-Ukraine War
Political Geography:
Russia and Azerbaijan

150. Potential Impacts of Sanctions against Russia on the Non-oil Exports of Azerbaijan

Author:
Eldayag Mustafayev
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
By using statistical descriptive analysis, this article analyzes how the isolation of Russia from the international trade and finance system, as a result of the Western sanctions, will affect the Russian trade turnover and what type of future challenges and opportunities it may provide for the non-oil export base of Azerbaijan. In terms of the opportunities, Azerbaijan can further focus on its main non-oil export goods such as agricultural and chemical industrial products to capture an additional share in the semi-abandoned Russian market, along with considering possible competition pressure coming from the other non-western Russian trade partners. Re-exporting opportunities currently are limited in scale and have a risk of facing international sanctions and criticism.
Topic:
International Trade and Finance, Sanctions, Exports, and Russia-Ukraine War
Political Geography:
Russia and Azerbaijan