Punishing Russia is no easy task
Once again the effectiveness of sanctions is being questioned as a response to a blatant breach of international law. The Russian incursion into eastern Ukraine has been met with Western outrage accompanied by warnings of dire economic consequences. Yet such threats have been issued in the past, often against Russia, dating back to the Soviet invasion of Afghanistan in 1979, the occupation of parts of Georgia in 2008 and the illegal annexation of Crimea in 2014. Since Russia continues to take the action that sanctions are meant to deter, it does suggest their efficacy is limited, to put it charitably.
The purpose of sanctions is to punish as well as deter. But there is no evidence that the individuals targeted by constraints on their financial activities in the West find them especially onerous given their great wealth. Boris Johnson yesterday defended the package of UK sanctions amid criticism that they do not go far enough and said another raft of far tougher measures is being held in reserve to be deployed if Russia does not back down. Yet it is not at all apparent that these will work, either. America has long operated sanctions against some of the oligarchs and banks targeted by the UK this week without any obvious impact on the behaviour of Vladimir Putin.
Mr Johnson and other Western leaders have pledged that Russia’s aggression will be met with the severest consequences yet the Kremlin appears to have discounted most of the likely responses. It knows that much of Europe is beholden to Russia for gas supplies, including Germany, notwithstanding the decision to suspend the Nord Stream 2 pipeline project. True, it is a symbiotic relationship since the Russians rely on the revenues from gas and oil. But this dependency makes it hard to take the dire threats being made by EU countries too seriously.
Much more threatening to Russia would be military deployments or the incorporation of Ukraine into Nato but this is not going to happen and Mr Putin knows it. The best that can be offered is military assistance but even now European countries are divided over what form it should take. Mr Johnson told MPS that the UK would be sending “lethal aid in the form of defensive weapons” when the Ukraine government has requested offensive weaponry. That might yet come but the West is clearly still waiting to gauge Mr Putin’s precise intentions before committing to anything more bellicose.
The extension of UK sanctions would encompass more of the oligarchs around Mr Putin and members of the Russian Duma who voted for the independence of the two breakaway regions of Donetsk and Luhansk. There is also a possibility that Russia Today, the Kremlin’s broadcast mouthpiece, might be shut down in Britain after a referral by Nadine Dorries, the Culture Secretary, to the regulator Ofcom. There could also be a prohibition on a range of high-tech exports. Mr Johnson was right to say it would be a serious step by a liberal democracy to sanction parliamentarians (which would require legislation) and close a media outlet. But, given the circumstances, both would be justifiable.
Other measures in the second wave would involve blocking Russia from selling sovereign debt in London and other international financial markets, though only in the event of a full-scale invasion. Russian firms would be blocked from raising money or clearing in sterling and dollars. It is sensible to deploy these sanctions gradually in the hope that some diplomatic solution may yet be found. It is also important that they are part of a concerted and united response: Mr Putin will doubtless seek to sow division among Western countries. To that end, EU ambassadors yesterday signed off on a formal ban on the trading of Russian debt, as well as targeting 351 members of the Duma and 27 individuals and entities “who are playing a role in undermining or threatening Ukrainian territorial integrity, sovereignty and independence”.
But the suspicion remains that vast amounts of Russian oligarch money is still invested in Western businesses and property or is stashed away in banks outside the scope of any sanctions because the Kremlin has been planning for just such an eventuality for years. Unmasking the true owners of Russian companies is a hard task that no amount of rhetorical posturing will achieve.