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Soon after the Russian invasion of Ukraine, I sent a contribution directly from my bank to the Ukraine government’s national bank account in Kyiv. It transferred the same day using SWIFT, the international payments message system.
It cost me nothing. I am just a random American with no special ties to Ukraine.
If a person wants to follow exactly the same process to send a gift to Russia, they can’t. SWIFT to Russia is functionally closed. That’s an economic sanction.
The big question is whether the sanctions imposed by the world’s largest economic powers, the U.S. and the EU, will work. Sanctions have been considered only partially successful in the past. But cutting SWIFT, halting other world financial links or suspending preferential trade deals have not been used before now.
Part of the problem with sanctions is that they usually take time to work, while an invasion is immediate. Vladimir Putin, Russia’s dictator, obviously believed his army would occupy Ukraine so quickly that sanctions would have had little time to work. They would be more symbolic than real. After all, that’s what happened when Russia seized Crimea in 2014.
One reason economic sanctions have not worked well is that countries using them often intend them purely for show. They may hit the assets or travel of a few leaders of an offending country, but sanctions usually avoid harming average citizens. In short, sanctions may look tough, but they amount to little.
So what’s different now?
Russia’s invasion of Ukraine flouted the world order. Two world wars began as European conflicts, and the allied victories in World War II were meant to end territorial land grabs there. Russia has destroyed that post-war peace, or at least the absence of war.
The second motive for tough sanctions has been Putin’s orders to the Russian military to attack civilians. If Russia would hit average Ukrainians, then average Russians would become legitimate targets.
The sanctions leave Russia significantly cut off from the rest of the developed world. Europe is learning the harsh lesson that its excessive dependence on Russian natural gas and oil now limits its range of action. Bruised by the Ukraine experience, it is likely permanently to reduce its economic ties with Russia.
In fact, learning this lesson amounts to recognition of a faulty belief, shared by the U.S., in the future of relations with Russia after the collapse of the Soviet Union in 1991. The theory was that closer economic ties with Russia would modernize and westernize it, eliminating it as a threat.
The theory depended on Russia accepting its reduced role in world affairs. Despite being the largest country geographically, heavily armed with nuclear weapons, it is only a middle-rank economic power. Refusing to accept that reality, Putin resisted simply becoming a member of the club.
Putin seems to think Russia can go it alone, even nationalizing foreign operations there. Vladimir Potanin, a billionaire Putin pal, worries about such a policy. “This would take us a hundred years back, to the year 1917, and the consequences of such a step – the global distrust of Russia from investors – would be felt for many decades,” he wrote last week.
That’s exactly the risk in Putin’s ignoring sanctions. They could have a long-term effect. Globalization is a reality, shown by Russia’s participation in the World Trade Organization. Without their country enjoying international economic links and access to trade and investment, ordinary Russians will suffer.
In short, the sanctions could change the economic world. Europe would no longer take for granted its need for closer cooperation. The U.S. would see America First fade after this reminder that isolation means a loss of influence.
Even those private investors who care more about democracy than their profits could become more wary of possible risks in Russia.
Putin needs to understand that failure to win a quick war over Ukraine is bringing economic disaster, accelerating the steady decline of post-war Russia. Russia’s foreign military adventures in Afghanistan, Crimea and Syria have undercut its economic growth.
The sanction penalties are so severe that some have an immediate impact. As Russians experience sanctions at the supermarket, they may increasingly conclude that, despite Putin’s propaganda, the Ukraine invasion is not worth its cost to them. Worse for him, they may recognize they have been lied to.
Putin seems not to care about his own public’s opinion, but he might pay attention to his intelligence circle, generals and billionaire oligarchs whose support he needs to continue to rule. While he obsesses about obliterating Ukraine, they may prefer stability.
This time, because sanctions are serious not merely symbolic, they work. Putin can only ignore them if he proves to be a maniac, totally committed to a war Russia cannot win.
Note: Last week I incorrectly wrote that the Gulf of Tonkin Resolution responded to a North Korean attack. In fact, the gunboats were North Vietnamese.