It’s easy to say sanctions. A month and a half after the start of the Russian invasion of Ukraine and after the imposition of an endless series of sanctions against Russia (we are over 6,000, and more are in the pipeline) and the confiscation of assets against wellknown Russian political and economic figures, Some are beginning to doubt that this is the right strategy. Among other things, we should also agree on the definition of the “right strategy. When it comes to ending the war as quickly as possible, sanctions are not the right instrument because they will (if and when) take effect in the medium term anyway: Russia itself, but also Cuba, Iran, Syria and many other countries have been standing for many years under sanctions and have not changed their political beliefs or actions.
Why sanctions
So what do we want to achieve with sanctions? The French Economy Minister Bruno Le Mairehe said it clearly a month ago: “The Collapse of the Russian Economy”. It is possible? How long does it take? 37 countries have imposed sanctions on Russia: they do not represent the majority of the world’s population (huge countries like China and India did not join), but they collect about 60% of the planet’s economic activity. ISPI calculated that the sanctions blocked 12% of Russian imports and 7% of Russian exports. A lot, but not much. Also, the conditional is a must, because trade and profit have infinite possibilities: for example, it is still possible to export certain goods banned to Russia (technology, spare parts for planes, etc.) to countries like Armenia or Kazakhstan, where they then sold to the Russians by cunning intermediaries.
However, the Russian government does not hide the fact that it is in trouble. Yesterday for example Prime Minister Mishustin publicly stated that “due to the international situation” (note the delicate metaphor) the Russians could be suffering from drug shortages, and indeed at the same time announced some measures to stimulate the national pharmaceutical industry. This is known, for example Because of the sanctions, car prices have risen sharply (and indeed the Russians buy them in Kazakhstan, see above, where they cost much less) and that construction almost stopped. But bringing down the Russian economy is another matter.
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All the money (still) comes to Russia
Here Vladimir Putin would have to do some calculations in his pocket, which is not an easy task. THATThe international system has almost completely excluded Russiato sanction the main banks and, in any case, to ban access to Russian finances via Swift (the banking transaction transmission system). But actually almost why Gazprom Bank, That is, Gazprom Bank, which is the state monopoly in natural gas sales abroad, was not sanctioned because all continue to buy Russian gas. And the EU states compact in the embargo against Russia pay Gazprom 230 billion euros in normal years, a number that could almost double in this warridden and highpriced year 2022. Which means that a nice nest egg arrives in Moscow anyway, which still needs to be added the money from the reserves of the Central Bank of Russia. Again, sanctions have blocked much, but not all, of the $640 billion that the Kremlin had committed. There is still $133 billion in gold safely stored in Russia and at least $87 billion in yuan stored in China, A friendly country of Russia. It’s not much, but there’s something to do for a while. Also because the Central Bank of Russia spent heavily in the first month of the war (about $39 billion) but managed to lift the ruble off the bottom and bring it back to preinvasion prices, thereby avoiding imports too expensive and becoming expensive above all in order to spread panic among the population.
Then, of course, there is all the trade and business that Russia continues to do with countries that are not participating in the sanctions. Bilateral trade between Russia and China, For example, it has grown strongly in recent years: by 35% in 2021 alone, when it hit a record $150 billion, with a target (if Putin’s projections are correct) of surpassing $200 billion by 2024. Let’s talk about India: In 2021, Russia exported $7 billion worth of goods (mainly oil and fertilizers) to India but most importantly, India is trying to develop a payment system centered on the yuan (Chinese currency) and on the SPFS, an alternative system to transfer transactions to Swift. If the experiment worked, an important part of the western boycott would be bypassed. Not by chance Moscow has offered New Delhi significant discounts on oil supplies.
The cases of Cuba and Iran
It could go on indefinitely, just as there are infinite hypothetical or real schemes to combat the sanctions imposed on Russia. However, the conclusion is only one. The collapse of the Russian economic system is not for tomorrow or even the day after tomorrow. Cuba remained under sanctions for sixty years, suffering, living in poverty, but not collapsing. Iran has been under sanctions practically since 1979 and has not collapsed. Why would Russia, much more sanctioned than these two examples, but also much more resilient, collapse in a short space of time? Which, of course, is very bad news for Ukrainians and for those hoping for a speedy end to this senseless war.
