Sanctions haven't deterred Russia, so what do we replace them with?

An avalanche of criticism against the western sanctions imposed on Russia has largely missed a fundamental point.

Sanctions are a pillar of the international system. The tool has become the first resort when tensions between nations threatens to erupt into uncontrollable confrontation. Yet, few stopped to ask if the penalties that sanctions bring can achieve the goals that the architects have in mind. Fewer still consider that reliance on sanctions as a weapon has negatively crowded out other instruments of defence and security.

Sanctions have warped the international system and in the Ukraine crisis, we are seeing the lack of effectiveness of the policy imposing a damaging toll on the ability to defend the established global system. In this instance, we already know deterrence steps have failed. UN Secretary General Antonio Guterres was unusually blunt last week in calling on Russia to end its offensive in Ukraine, which he said contravened the UN Charter.

Wise statesmen like Britain’s William Hague have said that the Russian decision calls for an “entirely new strategy, nothing less than a resetting of the western mind”. That being the case, economic sanctions should be the first to be rethought in the reset.

It is true that the era of globalisation, with Russia and China enjoying the "Most Favoured Nation" status in the World Trade Organisation, was a vast enabler of resources that have ensured the modernistation of their militaries. To have sanctions that constrict that flow of resources has not proved to be an exact parallel.

A report of the UK Parliament in 2019 called for a root-and-branch look at the country’s sanctions policy. “Sanctions are too essential to the preservation of the rules-based international system and the defence of our national interests to be treated as an afterthought,” it said.

The committee responsible posed a series of questions of the government. “What are the costs and benefits of divergence on key sanctions regimes? How can the UK make the most of its power in financial services? Where do UK interests most closely align with those of our key international partners? How will we influence their decision-making in future? We have seen no evidence that the [Foreign Office] or wider government have even begun to explore these questions.”

These are indeed the matters now at hand, as the UK and others bring in the “largest” and “most punishing” set of sanctions ever adopted against Russia. Yet, this is being done with an unknowable outcome. The ways and timescales of sanctions taking effect are not scientific to gauge. Even its proponents concede that restrictive measures are mostly not immediate nor do they offer a magic bullet but have effects that work their way through the system.

Sanctions are obviously deeply unwelcome and Russia has been issuing a series of threats against them. Look at the track record with Iran. It makes the prospect of the Vienna agreement on its nuclear programme contingent on sanctions relief. The Iranian economy is crippled and has been for some years. A period of Chinese-backed development was snuffed out by the US sanctions imposed more than a decade ago.

Yet, it has been able to direct its resources to equipping and building up proxy forces in Lebanon and Yemen. It was able to play a role in the Syrian civil war even before the 2015 nuclear deal temporarily delivered more oil revenues for Tehran to amply fund its regional interference.

One former US official describes this dynamic – which is now playing out writ large with Russia and Ukraine – as a contest between the priorities imposed by a quest for local military superiority versus the pressures that can be brought to bear by exclusion from the global financial system. In the current immediate outlook, the limitations of sanctions are likely to be brutally exposed.

The obvious shift would be to security structures more akin to the mid-20th century. In the case of Russia, the paramount response is likely to be a stronger Nato containment policy that will see investment in defence. That would mean a return to the world that was shaped by alignment and power blocs, something that would then inform trade relations and travel.

Eclipsing the sanctions toolbox as the first response would mean a wider need to reinvent economic statecraft. The contours of global trade would be necessarily reshaped as a part of this effort. Cross-border investment would be drastically altered as an activity between friendly nations. Rather than issues of transactions, which were played out in the so-far futile attempts to get the global bank messaging system Swift to banish Russia, other factors would weigh more heavily in the playbook – such as demographics and structural cultural forces.

One academic study examining 170 examples of sanctions imposed found that the measures were effective only in one third of the cases. Considering the energy that goes into the policy and the priority the decisions assume, that is a dreadful outcome.

The concept serves one purpose: it contains the confrontation, either by country or targeted sectors. Recent events show that in the future, the issues of conflict and diplomacy will shape the fundamentals of the world economy. Playing defence has become the name of the game in every facet.