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Monday, November 27, 2023

Russia’s response to Western sanctions

The EU council announced that all the 27 nations have agreed to impose an embargo on Russia and halt 90% of the seaborne imports of crude oil by this year. The three landlocked nations of Hungary, Slovakia, and the Czech Republic have been allowed to continue imports via the Soviet-era Druzhba pipeline for an indeterminate period.

According to the prevailing unfolding international affairs, the US hegemonic status seems to be weakened. The influence of the US is no more the same as it was in the 1990s and early 2000s. After withdrawal from Vietnam (1973), Iraq (2011), Syria (2019), and Afghanistan (2021), the US has lost a bit of its influence over the world. Similarly, in the Russo-Ukraine crisis, the US tried to deter Russia from the very start when the diplomatic rounds were in play. The US and its allies might have never thought that Russia would invade Kyiv and the situation would arise to this intensity. West lived in its credulity of power influence and tried to deter and entrap Russia economically and continue its expansion eastward in Europe. But the question remains whether the culture of economic sanctions and embargoes work to stop the crisis or whether Russia will pay the cost of its offensive foreign policy with pleasure?

Some analysts believe that the US sanctions undoubtedly will affect the Russian economy. Although Russia will manage the economic crisis within the country, it may never compromise strategically in the region and internationally. A renowned analyst who is an assistant professor and co-director of the Russia and Eurasia Program at the Fletcher School of Tufts University, Chris Miller, analyzed the Russian stance on the unified US and its Western allies on sanctioning Russia in the first round of sanctions, and said, Will this deter Russia from doing more?” I hope the answer is yes, but I’m afraid that the answer is no. If you want to think about sanctions as a deterrent, you have to think about what price the Kremlin would be willing to pay to achieve its goal. According to him, if Russian policy is to control Kyiv, several billion dollars of imposed sanctions would be a reasonable price for Putin to pay to get the whole of Ukraine. Hence, it is to be keenly analyzed if the sanctions on Russia are the solution to prompting it to step back from Ukraine.

Read more: Russian Rouble gains value despite western economic sanctions

Analyzing the sanctions

To analyze the effectiveness of US economic pressure on Russia, we need to look at the previous five rounds of sanctions and their impacts on Russia to date. In the first round of sanctions on investment in Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) regions of Ukraine, imports and exports of goods, services and technological equipment were banned. The Nord Stream 2 was also intended to be targeted, and Germany was ready to halt the access of Russia to European energy markets. Russian access to the EU’s capital and the financial market was restricted through different means. 351 members of Russia’s state of Duma and 27 high-profile additional members voted in favor of recognition of Luhansk and Donetsk.

The first round of sanctions seemed limited to Western European Allies, and the US announced the second round of sanctions. In this round, two Russian banks, Vnesheconumbank (VEB), Promsvyazbank (PSP) and five Russian oligarchs, were added to Special Designated Nationals and Block Persons (SDN) by the US Department of Treasury’s Office of Foreign Assets Control (OFAC). The goods and their associated services in oil refining, aviation and space sectors were also banned. The individual designations of leaders and army personnel of Russia and Belarus who contributed or benefitted in destabilizing Ukraine directly or indirectly were increased to the figure of 680 individuals and 53 entities. The US has expanded the trade restrictions on financial and capital markets to hit Russian financial institutions. However, Putin has not given any serious concern to these sanctions, so the US and its Western Allies contracted the net further and launched the third round.

In this round, the US banned transactions with the central banks of Russia and Belarus. They excluded seven Russian banks and all the banks (except three of them) of Belarus from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Three more Russian banks were intended to be excluded, including the Sberbank (the third largest banking group in Russia). Russian carriers were prohibited from using the EU airspace and airports. The broadcasting of Russian channels (Russia Today and Sputnik) was also adjourned in EU states.

In the fourth round, further restrictions were imposed on transactions with state-owned enterprises, new investments in the energy sector of Russia, and trade restrictions on steel, iron, and luxury goods. Despite the four rounds of sanctions, Russia did not step back from its aggressive policy. The Council of the EU announced the fifth round of sanctions to bolster the economic pressure on the Kremlin. In its fifth round of sanctions, the EU expanded the restrictions on imports of solid fossil fuel and goods and exports of jet fuel to Russia. It also prohibited Russian access to EU ports and Russian and Belarusian transport operators’ entry into the EU.

Read more: EU ready to slap new sanctions on Russian oil as Ukraine war worsens

Now, the Russian response to Western-built economic pressure can give a clear glimpse of whether the subsequent rounds of sanctions are achieving the Western goal or the Russian policies are molding towards its strategic and economic requirements accordingly.

Is it easy to prompt Russia to back down from her security goals?

Absolutely not. In his statements to Reuters, President Putin directly addressed the Western sanctions. He banned the payment of gas and oil purchases in euros and dollars for the countries that imposed or adopted the imposed sanctions against Russia. Meanwhile, refusing the payment in rubles, he cut off the gas supply to Poland and Bulgaria. He imposed investment restrictions and closed its airspace to EU and US airlines. He refused to return more than 400 Russian-based aircraft leased from Western companies worth $10 billion.

He restricted imports and exports to the countries that adopted the enforced sanctions against Russia. The competition continues between both sides, and the sixth round of sanctions is ready to be imposed on Russia. Indeed, the Russian economy is in a relative decline because the estimated dependence of its economy on natural resources is around 95%. Despite that, it is fighting fairly against the international economic gravity by making parallel alliances, institutions, and mechanisms. Until now, Russia has been trying to hold her steps strong.

During the discussions regarding the sixth round of sanctions by the EU council, some economically dependent countries on Russian oil and gas rejected further sanctioning Russia. They also argue that sanctions are not the solution as the whole of Europe is dependent on Russian oil. EU states have been importing 2.2 million barrels per day of crude oil and 1.2 million barrels per day of oil products from Russia, from which Russia has been earning over 1 million USD per day. Certainly, Russia would take further measurements eventually and would not give up. The economic strife between Russia and the West is escalating by degrees.

The EU has now come to the final decision to approve the sixth round of sanctions

The EU council announced that all the 27 nations have agreed to impose an embargo on Russia and halt 90% of the seaborne imports of crude oil by this year. The three landlocked nations of Hungary, Slovakia, and the Czech Republic have been allowed to continue imports via the Soviet-era Druzhba pipeline for an indeterminate period. The West is finally ready to exclude Sberbank from SWIFT which would affect Russia and the EU.

Read more: US Democrats demand sanctions over Russian PM & Putin’s spokesman

Considering all the unbinding scenarios, one can conclude that the Ukraine crisis has unveiled numerous realities. First, Russia seems no longer a victim of the liberal economic trap and knows how and where to respond in order to counter the economic recession and ensure regional security. Second, the US hegemony has been challenged amidst the Ukraine crisis. Third, the amount of disagreements among the EU’s 27 member states over decision-making has highlighted the EU’s disharmony. For example, certain landlocked nations, such as Hungary, were divided over whether to approve a ban on Russian oil and gas imports. Finally, in global affairs, states are idiosyncratically opportunistic. Consider how India, one of the Quad’s members, has boosted its energy imports from Russia at low costs, despite the Quad’s vehement opposition to Russia’s invasion of Ukraine.



The writer is working as an Assistant Research fellow at Balochistan Think Tank Network (BTTN) at BUITEMS, Quetta. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.