Russia’s ability to withstand the financial penalties imposed after its invasion of Ukraine has surprised many, as the waves of sanctions imposed by the Biden administration have failed to deal a devastating blow to Moscow’s economy. In a new report by Oleg Itskhoki of Harvard University and Elina Ribakova of the Peterson Institute for International Economics, the researchers argue that the sanctions should have been imposed more forcefully and comprehensively immediately after the invasion, rather than in a piecemeal manner. The authors state that there was no reason not to have imposed all possible decisive measures against Russia from the outset. However, they also emphasize that sanctions alone are not a cure-all solution. The researchers attribute Russia’s ability to withstand the financial penalties to the lessons learned from sanctions imposed in 2014 after the invasion of Crimea. Additionally, the impact of the recent sanctions was weakened by the failure to secure broader international participation, with major economic powers like China and India not included. The report highlights the need for global cooperation in making sanctions effective. This issue extends beyond the Russia-Ukraine conflict, as sanctions have become crucial tools for Western nations to pressure adversaries into reversing actions without resorting to direct military confrontation. The limited impact of sanctions on Russia has been a topic of discussion for some time, but this report provides a more detailed examination of how Russia has adapted and the implications for the effectiveness of future U.S. sanctions. Since the beginning of the Ukraine invasion, the U.S. has sanctioned over 4,000 individuals and businesses, including a significant portion of Russia’s banking sector. While the Biden administration acknowledges that sanctions alone cannot halt Russia’s invasion, it has also provided substantial military assistance to Ukraine. However, many experts argue that the existing sanctions are not strong enough, pointing to the growth of the Russian economy. U.S. officials have noted that Russia has turned to China for various technological resources to support its military efforts. Treasury Secretary Janet Yellen has highlighted the ongoing efforts to crack down on Russian sanctions evasion and the targeting of foreign financial institutions supporting Russia’s war machine. Despite these measures, Russia has managed to evade a $60 price cap on its oil exports imposed by the U.S. and other G7 countries supporting Ukraine. Russia achieved this by assembling its own fleet of older tankers that do not rely on Western services, allowing them to transport the majority of their oil. The price cap was initially proposed to reduce Moscow’s oil profits without impacting global oil prices and inflation. Concerns about these potential effects also delayed the European Union from imposing a boycott on most Russian oil for almost a year after the invasion. G7 leaders have agreed to engineer a $50 billion loan for Ukraine, funded by the interest earned on profits from Russia’s frozen central bank assets held in Europe. However, the specifics of the loan structure have yet to be finalized.
