Consequences of Sanctions on Russia

2022/04/04 | Note, political, top news

Strategic Council Online - Opinion: Targeted economic sanctions by the European Union and the United States will impose costs on the Russian economy. But sanctions have not yet convinced Russia to change its policy toward Ukraine. Pouria Nabipour - PhD in political science and international relations

The conflict over Ukraine is important and costly for both Russia and the West. Russia’s war against Ukraine is both a problem and an opportunity for China. Although Chinese Foreign Minister Wang Yi has stated in one of Beijing’s most outspoken statements that China does not want to be affected by US sanctions over the Russian war, would use the opportunities ahead to defend its national rights and interests and strengthen regional ties.

Logic behind strategic sanctions against Russia

The rationale behind economic sanctions is simple: free trade with free markets promotes growth (and thus political support for the government), while restrictions slow growth or reduce it to zero (and as a result eliminate support for the government). By using such sanctions, those who impose the sanctions will steadily increase the diplomatic and financial costs of Russia’s offensive measures against Ukraine. On the other hand, the objectives of the sanctions are to increase Russia’s political isolation, as well as Russia’s economic costs, especially in important areas for President Putin and his entourage. But for economic sanctions affect the political behavior of a “target” country, they must interact with a variety of factors that turn sanctions into levers that can, in turn, influence political arrangements and the decisions.

Effect of sanctions on Russia

It can be expected that in the short term economic sanctions can leave negative impact on the Russian economy. Geopolitical tensions, further threats and imposition of sanctions will create crisis of confidence that undermines the willingness of domestic and foreign actors for starting any commercial investment in Russia; sanctions or sanctions restrictions for a country like Russia with abundant natural resources, technology and skilled manpower can have the opposite effect. In short, Russia has almost all the factors it needs to move forward, despite – or because of – the sanctions. But turning opportunity into reality requires that Russia and any sanctioned country pursue an economic transformation. It will have to invest in its relative strengths, from technological capabilities to the resources. But as the experience of many African and Latin American countries has shown, the mere export of raw materials is not enough to advance development. Historically, the most effective policy for development has been government intervention to create higher value-added domestic industries. In recent decades, Japan, Taiwan, South Korea, China, and even post-World War II Germany have all taken the path for reconstruction.

Russia’s war against Ukraine, both a problem and an opportunity for China

Although China may have been astonished as many Europeans, unlike the West, in China the exchange of fire between Russia and Ukraine has not been widely condemned, and reactions in China have been more and more generally aimed at condemning and blaming the West. China, as a rule, does not bring the importance of maintaining strong ties with Russia under question. At least openly – China, like Russia, sees its geopolitical realm gradually limited and threatened by US moves in the China Sea and the threat of sanctions. Therefore, Beijing will carefully consider the West’s more aggressive leanings against Beijing and Moscow, and will seek similar tactics for military confrontation and sanctions, as well as practical solutions to its disputes over Taiwan and the South China Sea. However, as Zhang Hong, a researcher at the Chinese Academy of Social Sciences, writes: You can change your friends, not your neighbors. China and Russia, as neighbors, must come together. From China’s point of view, Russia is the only “pole” in the ideal Chinese multipolar world that can act as both a counterweight to the United States and, if necessary, alongside Beijing.

Possible consequences of strategic sanctions for Russia and China

The economic sanctions imposed on Russia by the West can undoubtedly be painful, but the political effects of the sanctions are less obvious than their economic effects. While economic factors favor the success of sanctions, identified political factors have ambiguous and negative effects on the likelihood of the success of the sanctions. Sanctions can unite China and Russia even more, and in fact, in the target country, they may even have the opposite effect, making Russia – and its president – even stronger. China and Russia, on the other hand, have everything they need to produce the final products they previously imported. In fact, import substitution can now increase productivity in several key sectors, including engineering, petrochemicals, light industry, pharmaceuticals, agriculture, and so on. In addition, Russian sanctions and potential threats against China will accelerate further cooperation between the two countries with the BRICS countries (Brazil, India, China and South Africa) as well as the Shanghai Cooperation Organization (SCO). Therefore, Western sanctions against Russia may not only fail to change the situation in Ukraine, they may even contribute to the long-awaited structural transformation of Russia. At the same time, Russia will seek trade and other markets that are more secure in terms of political risk and currency stability; in the meantime, we can see the growth of trade cooperation between the SCO member states.

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