Evil exists. He is in the Kremlin, consumed by resentment and the lust for power. He marches on a country whose crime was to dream of freedom and democracy. How can this evil be defeated? Can economic sanctions, combined with the resistance of the Ukrainian people, force Vladimir Putin to back down? Or can they lead to his overthrow? Alternatively, can he risk escalating to the use of nuclear weapons?
Undoubtedly, the sanctions the West has used are powerful. Putin even called them “similar to an act of war”. Russia has largely been excluded from the global financial system and more than half of its foreign exchange reserves have become useless. Western companies are afraid to continue engaging with Russia, for reasons of reputation and prudence.
Neil Shearing, chief economist at Capital Economics, predicts an 8% drop in gross domestic product from peak to bottom, followed by a long period of stagnation. The jump in the central bank’s interest rate to 20% will be expensive in itself. Shearing is perhaps too optimistic.
Restrictions on energy exports are an obvious next step, as the Biden administration argues against German opposition. It is, to say the least, unacceptable that the high energy prices caused by Putin’s crimes also finance them. Ukrainian economist Oleg Ustenko strongly advocated this boycott. Harvard’s Ricardo Hausmann proposes an interesting alternative: a 90% tax on Russian oil and gas exports. Because the elasticity of supply is low, he argues, costs would fall on Russian producers, not Western consumers, and so scarcity values ​​would also be transferred to the latter.
On feasibility, Hausmann argues that in 2019, 55% of Russia’s mineral fuel exports went to the European Union, while another 13% went to Japan, South Korea, Singapore and Turkey. If all these countries agreed to tax their oil, Russia could try to sell it elsewhere, especially to China. But how much would China accept, given the logistical challenges and the risk of some sort of Western retaliation?
A big question is how well the world could handle the energy adjustment. An analysis by Bruegel concludes that “it should be possible to replace Russian gas as early as next winter without economic activity being devastated, people freezing up, or electricity supplies being disrupted”, although this will require a determined effort. With Hausmann’s import taxes, oil and gas prices in the rest of the world should even fall.
The purpose of the sanctions, however, is to change politics and possibly the regime itself in Moscow. Is this viable? Experience suggests that breaking an autocratic regime willing to impose enormous costs on its people is difficult: Venezuela is a recent failure. Against this, one can point the fact that Putin did not mobilize the Russian population for a long war against Ukraine and the West. He even euphemistically called it a “special military operation” against “neo-Nazis”.
Those lies can start to unravel. However, as Sergei Guriev, a Russian-born economist who teaches at Sciences Po in Paris, noted in a conversation with Princeton’s Markus Brunnermeier, that Putin is moving from a dictatorship of propaganda to one of fear. As long as his entourage remains loyal, he may well maintain power, however bad his war and however painful the sanctions.
Broad sanctions of this type are a double-edged weapon, as they work by imposing significant costs on the common population. Among the biggest losers will be the aspiring middle class. The regime may find it easy to convince victims that their suffering only proves Western hostility. So yes, some Russians might blame Putin. But, especially given Putin’s control over the media, a large number can blame the West.
The evidence on the performance of sanctions is also depressing. Dursun Peksen of the University of Memphis offers the following conclusions: target greater and immediate damage to the target economy; seek international cooperation; expect autocracies to be more resistant to sanctions than democracies; expect allies to be more reactive than enemies; and, finally, to expect sanctions to be less effective in achieving grand goals than modest ones.
The West is in good shape on the first two points on this list, although restrictions on energy exports may be necessary for the first and cooperation with China for the second. But he is dealing with a hostile autocrat and also trying to reverse a war he considers to be of vital national and personal interest. The omens of success do not look good.
It is also possible that successful support for the Ukrainian resistance, combined with sanctions that inflict huge costs on the Russians, without ending the regime, could make Putin willing to take even more desperate risks. This could even include the use of weapons of mass destruction against Ukraine or other targets further west.
In retrospect, there should probably be less ambiguity about Western support for Ukrainian independence. Now, we must do everything we can to support Ukraine’s fight for survival, except to take what appears to be the excessive and possibly pointless risk of a direct injection of NATO air forces into the war. We must strengthen sanctions, even though they can wreck Russia’s economy without changing its policy or regime. We must declare that our war is not against the Russian people, although they may not forgive us for the trouble we are inflicting on them.
We should ask China and India to convince Putin to end their war, although we should recognize that such an effort is likely to fail.
There are only bad options. However, Ukraine cannot be abandoned. We must continue.
Translated by Luiz Roberto M. Gonçalves
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
