Why US couldn't deal a blow to Russian economy with sanction bullet?

Sanctions imposed by the Biden administration following Russia’s invasion of Ukraine have not delivered the severe economic impact many anticipated. In a recent report, researchers Oleg Itskhoki of Harvard University and Elina Ribakova of the Peterson Institute for International Economics suggest the sanctions’ limited effect is due to their gradual implementation. They argue that imposing them more swiftly and decisively right after the invasion would have been far more effective.

"In retrospect, it is evident that there was no reason not to have imposed all possible decisive measures against Russia from the outset once Russia launched the full scale invasion in February 2022," Itskhoki and Ribakova wrote in their paper, reported AP.

Ribakova said that "the critical takeaway is that sanctions are not a silver bullet." According to the researchers, Russia was able to prepare for the financial penalties due to previous experiences with sanctions in 2014 after the Crimea invasion. Also, the lack of participation from economic powers like China and India weakened the impact.


The report notes that while the number of sanctions is high, their tangible effect on Russia's economy is ambiguous. "Global cooperation is indispensable," it adds.

The effectiveness of sanctions is a significant issue beyond the Russia-Ukraine conflict. Sanctions are a crucial tool for the United States and other Western countries to exert pressure on adversaries without resorting to military action.

The report provides a detailed view of how Russia adapted to the sanctions and what this could imply for future US sanctions. The paper is set to be presented at the Brookings Institution next week.

Since February 2022, the US has sanctioned over 4,000 individuals and businesses, including 80% of Russia's banking sector by assets. The Biden administration recognizes that sanctions alone cannot stop the invasion and has also sent around $56 billion in military aid to Ukraine.

Despite these efforts, the Russian economy continues to show growth, suggesting that the sanctions may not be strong enough. US officials have noted that Russia has been sourcing technology and machinery from China to support its war efforts.

A Treasury representative highlighted Treasury Secretary Janet Yellen's remarks in July during the Group of 20 finance ministers meetings, where she called the actions against Russia "unprecedented."

Moreover, Russia has managed to bypass a $60 price cap on its oil exports by using its own fleet of aging tankers that avoid Western services. The cap's enforcement relied on barring Western insurers and shipping companies from handling oil sold above the cap.

The G-7 leaders have agreed to plan a $50 billion loan to support Ukraine, funded by interest earned on Russia's frozen central bank assets in Europe. However, the specific structure of this loan is still under discussion.


(With AP inputs)