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61. Who is to suffer? Quantifying the impact of sanctions on German firms

Author:
Holger Görg, Anna Jacobs, and Saskia Meuchelbock
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In this paper, we use a novel firm level dataset for Germany to investigate the effect of sanctions on export behaviour and performance of German firms. More specifically, we study the sanctions imposed by the EU against Russia in 2014 in response to the annexation of Crimea and Russia's countermeasures. We find a substantial negative effect on both the extensive and intensive margin of German exports. While the negative effects are strongest for firms exporting products subject to trade restrictions, we provide further evidence on the indirect effects of sanctions. Analysing the impact on broader measures of firm performance, we document that the cost of sanctions is heterogeneous across firms but overall modest. Our results reveal that the negative impact of the shock was concentrated primarily among a small number of firms that were highly dependent on Russia as an export market and those directly affected by the sanctions.
Topic:
Foreign Policy, Globalization, International Trade and Finance, Sanctions, Russia-Ukraine War, and Firm Dynamics
Political Geography:
Russia, Europe, and Germany

62. How Russia Went to War: The Kremlin’s Preparations for Its Aggression Against Ukraine

Author:
Kalev Stoicescu, Mykola Nazarov, Keir Giles, and Matthew Johnson
Publication Date:
04-2023
Content Type:
Special Report
Institution:
International Centre for Defence and Security - ICDS
Abstract:
This report examines Russia’s preparations for its full-scale invasion of Ukraine: domestically, in Ukraine itself, in the global information domain, and in building its relationship with China. For Russia, crushing Ukraine’s quest for democracy was central to meeting its objectives of reshaping the post-Cold War order in Europe and globally, restoring its own status, and reconstituting the Russian empire and Russian world. Its preparations in the political and informational, military, and economic domains for a full-scale war in Ukraine were too extensive and overt to go unnoticed, but they were not acted upon. It is hard to avoid the conclusion that the evidence went against the dominant narrative in the West and was simply brushed aside. In the political and informational domains, Russia’s domestic preparations including cementing the regime’s authority, and taking advantage of the population’s Soviet nostalgia and aspirations for the restoration of the Russian world and the empire. Limited economic preparations were intended to safeguard Russia’s economy against current and future Western sanctions, while Russia’s extensive military preparations involved large-scale defence spending and extensive military modernisation efforts. Russia’s preparations beyond its own territory included: a campaign within Ukraine to divide society and discredit the democratically elected leadership; a campaign directed at the rest of the world about Ukraine, discrediting the country and its people as an object of sympathy and support in their resistance against Russia; and a campaign of intimidation designed to instil in western leaders and populations a fear of obstructing, impeding, or offending Russia. Russia also worked to build a relationship with China. China’s support is essential to Putin’s ambitions. But equally, China’s strategy for confronting the United States – which China cannot do alone – depends on Russia remaining at least a quasi-great power.
Topic:
Security, NATO, Development, Sanctions, Military Affairs, European Union, Resilience, and Information Warfare
Political Geography:
Russia, China, United Kingdom, Europe, Asia, and United States of America

63. The Wagner Group’s Expanding Global Footprint

Author:
Raphael Parens, Colin P. Clarke, Christopher Faulkner, and Kendal Wolf
Publication Date:
04-2023
Content Type:
Special Report
Institution:
Foreign Policy Research Institute (FPRI)
Abstract:
1. The sanctions discussion needs to be expanded, as such designations should aim to shame Wagner’s state partners. 2. Sanctions lists should expand to include actors in third-party countries, such as Broker Expert LLC, a Russian-owned company widely reported to be shipping heavy machinery to support Wagner Group forestry activities in CAR, and First Industrial Company, a business owned by Wagner operator Dimitri Sytyi which concocts cheap “Russian” alcohol in Cameroon and sells it in CAR. 3. Perhaps one of the more important lessons for countering Wagner and other Russian PMCs is the importance of multilateralism. 4. NATO must also continue to consider proactive tools to counter Russian and other PMCs. 5. NATO should work to amplify efforts to push the adoption of the 2008 Montreux Document—an international agreement designed to reaffirm the legal obligations of states where PMCs originate and for those who hire them. 6. The Wagner Group and other Russian PMCs require consideration within a larger great power discussion, particularly as Russia’s invasion of Ukraine has firmly aligned Europe and the US against Russia. 7. US senior leaders should demonstrate a greater diplomatic commitment to African allies and put pressure on other African leaders considering, or currently contracting, the Wagner Group and other Russian PMC operations. 8. International bodies such as the African Union, ECOWAS, and the East African Community (EAC) should reevaluate their approaches to peacekeeping and instability. 9. Exploiting the friction between Wagner’s financier and the MoD should also be considered a worthwhile policy option. 10. Last, NATO members must formalize methods of blocking contact with the Wagner Group through their international activities.
Topic:
NATO, Sanctions, Wagner Group, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

64. Russia’s War in Ukraine: Critical Vulnerabilities to Russia’s Military Operations and Systems

Author:
Rob Lee and Philip Wasielewski
Publication Date:
06-2023
Content Type:
Special Report
Institution:
Foreign Policy Research Institute (FPRI)
Abstract:
Some of the critical vulnerabilities to Russia’s military operations and systems—revealed during the war in Ukraine—are due to its military culture and poor strategic choices at the beginning of the war including overly ambitious strategic aims. Deficiencies in Russian military culture include a highly centralized decision-making process, a disregard for the welfare of its soldiers, and flagrant dishonesty. Certain aspects of Russia’s military culture, especially the disconnect between front-line soldiers and senior officers, complicate the Russian military’s ability to adapt, develop solutions to obvious deficiencies, and institutionalize lessons learned from the battlefield. Other critical Russian military vulnerabilities are not inherent to its military culture but to Russia’s national demographic and industrial capabilities. Limits in these areas make it difficult for Russia to regenerate military power by either increasing the size of its military or increasing the quality of its weapons systems. Even if Russia’s military culture experiences a post-war military renaissance, its ability to regenerate military power lost in Ukraine will be limited by its declining population and industrial bases as well as Western sanctions on high technology.
Topic:
Sanctions, Armed Forces, Military Affairs, and Russia-Ukraine War
Political Geography:
Russia, Eurasia, and Ukraine

65. Biden’s Middle East Balancing Act: Iran’s Nuclear Program and Saudi-Israeli Ties

Author:
Leon Hadar
Publication Date:
08-2023
Content Type:
Commentary and Analysis
Institution:
Foreign Policy Research Institute (FPRI)
Abstract:
This summer, the Biden administration decided to negotiate a temporary deal with Iran involving the release of American prisoners held by the Islamic Republic in exchange for the release of some of the funds that were held by the United States as part of the economic sanctions on Tehran. The White House expects that this package deal will open the road to talks with Iran on its nuclear program. The outline of a deal would include a pause in the accumulation of enriched uranium and an Iranian pledge not to produce weapons-grade fissile material, in exchange for the removal of US economic sanctions. But any diplomatic deal between Washington and Tehran raises fears among two of America’s allies in the region, Saudi Arabia and Israel, that regard Iran as an existential threat. From that perspective, a US-led process of normalizing the relations between Riyadh and Jerusalem could help contain Iran and reinforce the American pledge to strengthen the alliance with Saudi Arabia and Israel.
Topic:
Diplomacy, Nuclear Weapons, Sanctions, Negotiation, and Joe Biden
Political Geography:
Iran, Middle East, Israel, Saudi Arabia, and United States of America

66. The Rise of Sanctions as a Tool of Modern War: An Interview with Nicholas Mulder

Author:
Nicholas Mulder and Mahia Bashir
Publication Date:
03-2023
Content Type:
Commentary and Analysis
Institution:
The Toynbee Prize Foundation
Abstract:
The 2008 global financial crisis and the dislocations it caused sparked a renewed interest in economic and international histories of capitalism, globalization, and internationalism and produced a new corpus of writings that we broadly know as new economic and new international histories. Nicholas Mulder’s new book The Economic Weapon: The Rise of Sanctions as a Tool of Modern War is the latest addition to this corpus. It details the history of sanctions, their wartime origins in the economic blockade of the First World War, and their evolution from a deterrent to an actively used tool of modern state warfare. In doing so, it raises and answers important theoretical questions about the limits and contradictions of the interwar liberal international order, state sovereignty, and the legitimacy of a totalising instrument that profoundly and rather devastatingly impacts civilian societies. Through the story of sanctions, the book also offers a fresh perspective on the tragic escalatory spiral of the 1930s—the rise of fascist states but also the Second World War. Straddling regions from Albania, Greece, and Switzerland to Manchuria and Latin America, The Economic Weapon has all the trappings of a gripping international economic history: it blends detail and analysis harmoniously. I had the delightful pleasure of speaking with the author, Nicholas Mulder on a balmy spring day about the book. We talked, inter alia, about Professor Mulder’s scholarly journey, the origins and evolution of sanctions, the ethical dilemmas they posed, and the role of historical memory in the history of sanctions. Professor Mulder was also very generous in giving us a glimpse into his exciting new project on confiscation.
Topic:
War, History, Sanctions, and Interview
Political Geography:
Global Focus

67. Reset U.S.-Syria Policy

Author:
Daniel Depetris
Publication Date:
10-2023
Content Type:
Commentary and Analysis
Institution:
Defense Priorities
Abstract:
After 12 years of civil war, Syrian President Bashar al-Assad’s government has consolidated its power and defeated credible threats to its rule. The anti-Assad armed opposition, which once controlled half of Syria, is relegated to the northwestern province of Idlib. While the Biden administration recognizes that Assad will likely remain in office, U.S. policy remains punitive, maintaining comprehensive sanctions on Syria until Assad negotiates political reforms with his opponents and agrees to free and fair elections. This policy will not produce the desired results. Assad is firmly entrenched, benefits from the help of security partners in Iran and Russia, who prefer that he stays in power, and remains highly unlikely to comply with U.S. demands. The status quo amounts to collective punishment of the Syrian population. Approximately 900 U.S. troops remain in eastern Syria, allegedly to train and advise the Kurdish-led Syrian Democratic Forces against ISIS. But ISIS lost its territorial caliphate more than four years ago. The risk of keeping U.S. forces there in perpetuity which includes sporadic attacks on U.S. positions and escalation risks with various actors, outweighs any rewards. Neither the sanctions nor the occupation of eastern Syria serves U.S. security interests. The former does no good, and the latter risks embroiling the United States in a mission without an end date. The United States should withdraw its remaining forces and offload what is left of the counter-ISIS mission to local actors. The United States should also reduce if not end its failing sanctions regime.
Topic:
Foreign Policy, Sanctions, Armed Forces, Islamic State, Syrian War, and Bashar al-Assad
Political Geography:
Middle East, Syria, North America, and United States of America

68. El lugar de Venezuela en las restricciones chino-estadounidenses: una mirada desde la prensa española en el marco de la invasión rusa a Ucrania

Author:
Iván Luis Alonso Peláez
Publication Date:
01-2023
Content Type:
Journal Article
Journal:
Revista UNISCI/UNISCI Journal
Institution:
Unidad de investigación sobre seguridad y cooperación (UNISCI)
Abstract:
El artículo hace un recorrido histórico para conocer cuál ha sido el papel de Venezuela en el marco de las relaciones chino-estadounidenses, especialmente los cambios ocurridos a partir de 1999 con los gobiernos de Hugo Chávez y Nicolás Maduro. Acorde con lo descrito por la abundante bibliografía sobre el tema, se constata que se ha producido un cambio de roles en el que China progresivamente ha ido ocupando en Venezuela el espacio comercial preferente que tradicionalmente había ostentado Estados Unidos desde el restablecimiento de la Democracia en 1958. A través de un análisis informativo utilizando como fuente un grupo de textos periodísticos publicados en los seis principales diarios de circulación nacional editados en España, se valora cómo la invasión rusa a Ucrania promueve un todavía incipiente deshielo en el curso de las sanciones impuestas por Washington a la industria petrolera venezolana.
Topic:
Oil, Sanctions, Energy Crisis, Newspapers, and Russia-Ukraine War
Political Geography:
Russia, China, Ukraine, South America, Venezuela, and United States of America

69. No Winners in This Game: Assessing the U.S. Playbook for Sanctioning China

Author:
Emily Kilcrease
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Center for a New American Security (CNAS)
Abstract:
The relationship between the United States and the People’s Republic of China (PRC) is marked by both geopolitical tensions and deep economic linkages. While policymakers may have once believed that economic integration would inject stability into the overall relationship and provide a deterrent to conflict, that idealistic vision has been shaken by Russia’s brutal invasion of Ukraine. No longer can the United States and its partners assume that the PRC’s economic interest in retaining ties to the global economy will override its nationalist impulses. The once unthinkable idea of imposing severe sanctions on China has become a strategic imperative to consider, as one of a range of measures that the United States and its partners may consider if relations with the PRC deteriorate further. Yet, sanctioning China represents a challenge more complex than any other in the modern era of sanctions. The scale and interconnected nature of China’s economy means that the damage from sanctions will not be contained in China; instead, the negative effects will rebound globally through China’s deep economic ties to nearly every country around the world, including the United States. China has substantial capacity in key economic areas, such as manufacturing, that provide it with important means to retaliate against U.S. sanctions or impose its own economic costs on the United States and its partners. This report seeks to advance policy debates on how to sanction China, if geopolitical conditions warranted doing so at scale. It builds on prior Center for a New American Security (CNAS) research, including a 2023 report that outlines how the United States currently uses a variety of sanctions tools to manage the strategic relationship with the PRC.1 A key finding of the earlier work is that the United States imposes sanctions at a relatively limited scale compared to the scope of challenges that exist in the bilateral relationship, with the notable exception of an increasing range of technology-related sanctions. A large divide separates the existing level of sanctions on China and the full range of economic measures that the United States may consider. This report attempts to envision that fuller range of economic measures and consider whether the use of sanctions would meaningfully advance U.S. interests during a potential conflict. The report begins, in chapter 1, with an assessment of the main economic and political characteristics that would determine China’s vulnerability to, and resolve to withstand, sanctions pressure. The concentration of power at the very top of the PRC’s political system, along with a willingness to subordinate economic objectives to political ones, indicate that China may have a high degree of resolve to absorb the costs of sanctions. China’s continued reliance on the U.S.-dominated global financial infrastructure is a key area of vulnerability to sanctions pressure. But, China retains significant economic leverage through its manufacturing relationships, as well as through the importance of its large domestic market to foreign multinational companies. Attempting to impose sanctions that are asymmetrically more painful to China will be a fraught exercise, given the degree to which China is embedded in global supply chains. In chapter 2, the report examines sanctions actions that the United States and its partners may impose during a conflict scenario, drawing from the sanctions playbook used against Russia and projecting adaptations that would be needed in the China context. The main objective of this analysis is to identify points of asymmetric leverage in the U.S.-China economic relationship, where imposition of a sanction would be more economically damaging to China than to the United States and its partners. The sanctions actions are examined through the lens of a ends-ways-and-means framework, loosely borrowing concepts from the defense community and mapping them into the economic domain. The value in such an exercise is to impose discipline in identifying why a particular economic measure may be taken and what the intended impact would be. It can also enhance the ability to integrate economic actions with those being considered in military or other domains. The report examines possible actions under three broad categories, based on the objective of the sanctions: technology denial, embargo of commodities and materials, and macroeconomic pressure. The research includes analysis by the CNAS Energy, Economic & Security team of economic data and research interviews with a wide range of sanctions, export controls, macroeconomics, trade and finance, and China experts in the United States, Europe, and Asia. In addition to examining potential sanctions options on a sectoral basis, the report also includes a company-by-company lens to assess the potential impact of sanctioning specific Chinese companies. The report finds that the U.S. options to impose harsh sanctions on China are severely constrained. U.S. options to deny militarily relevant technology to China are modest, at best. Certain areas, such as maritime capabilities, will be difficult to target due to the nearly entirely domestic supply chains of China’s main military shipbuilders. Other areas, such as semiconductors, cannot be targeted without running the risk of disruption to critical U.S. supply chains. Overall, efforts to deny technology to China require a longer time horizon to be effective and may have less utility in an immediate run-up period to a potential conflict. Attempts to use sanctions tools to deny commodities or materials to China will require innovation and the development of new sanctions tools. Key commodities, such as energy, are inherently substitutable and globally available, including from many countries that will likely not align with the United States in a conflict with the PRC. Building on the example of the oil price cap used in the Russia context, the United States and partners will need to consider novel policy approaches that provide positive economic inducements to align with U.S. policies, in addition to using traditional sanctions tools.
Topic:
Security, Defense Policy, Sanctions, and Geopolitics
Political Geography:
China, Asia, North America, and United States of America

70. China’s Semiconductors Reflections on Sources and Solutions to an Expensive Problem

Author:
Jonathan Liebenau
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
LSE IDEAS
Abstract:
The semiconductor industry has been a renewed topic of political debate for over three years. Due to recent US sanctions on the most advanced semiconductors, the industry has quickly become another flashpoint in the competition between the US and China to dominate the 21st century’s strategic technologies. In this Strategic Update, Dr Jonathan Liebenau explains the development of the semiconductor industry in the context of China’s rise to become an increasingly capable technology power. China’s sustained efforts in industrial policy to cultivate a domestic innovation system coincided with Western firms’ offshoring strategies since the 1990s, transforming China into a large producer and consumer of semiconductors. While Taiwan and the West retained cutting edge chip design capabilities, Chinese firms such as Huawei and Hikvision have become competitive providers of mobile phones, surveillance equipment and related infrastructure services. Despite Washington and its partners’ conviction to constrain in China’s technological prowess, industrial policy initiatives such as the CHIPS Act will face an uphill battle when it comes to bringing manufacturing capacity back to Western economies. In this context, the UK must combine short term incentives with a longer-term strategic vision to remain competitive in one of the 21st century’s key strategic arenas.
Topic:
Science and Technology, Sanctions, Strategic Competition, Production, and Semiconductors
Political Geography:
China, Asia, North America, and United States of America