Sanctions as a Tool of War Time for West to Look for Alternatives News18.com 11 Aug 2022 Maj Gen Harsha Kakar

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Sanctions as a Tool of War: Time for West to Look for Alternatives News18.com 11 Aug 2022

          Since the dollar became an accepted global currency, the US began employing sanctions as a tool to subdue nations, though its success was always questioned. Sanctions imposed were either collective or selective, depending on the US’s foreign policy and national security goals. Within sanctioned nations, the poor suffered while the rulers continued with their oppression and corruption, least impacted by financial or individual movement restrictions. Global studies indicate that sanctions have generally failed to change behaviour of states.

It is also debateable whether US goals have been achieved by sanctions. Other nations are compelled to adhere to US placed restrictions as they could be impacted by punitive financial measures, since the dollar remains the global currency. Iran, Venezuela and Russia are recent examples where sanctions by the US led to nations reducing imports/ exports from/ to them.    

          According to the US Department of Treasury there are 38 active sanction programs in place. These include nations and specific measures including counterterrorism, counter-narcotics, non-proliferation, CAATSA (Countering American Adversaries Through Sanctions Act) etc. Wikipedia states that since 1993, US has imposed more than 40 economic sanctions on 36 countries. The UN Security Council has placed sanctions on 10 countries and two entities, ISIS and al Qaeda. Sanctions are considered a cheaper alternative to military intervention, apart from displaying failed diplomacy.

          Sanctions failed against Saddam Hussain, compelling the US to launch Operation Desert Storm. It also failed against Libya, Myanmar, Venezuela, Iran, Cuba, Afghanistan and North Korea, as none of these countries displayed any change in behaviour. Sanctions placed on Russia after its occupation of Crimea in 2014 had no impact. Sanctions have partially succeeded in few countries resulting in economic distress, Haiti and Serbia being examples. In cases, as with the Russo-Ukraine crisis, they impact nations applying them equally. Once US imposes sanctions, US companies operating in the sanctioned country are compelled to exit, Russia being no different.

          Most nations on whom sanctions were imposed were incapable of responding. In the case of China, the US has sanctioned individuals and companies, attracting similar counteractions. The trade and technology war between the two nations continues, as do diplomatic ties, despite sanctions and countersanctions.

The current round of sanctions imposed on Russia were billed as backbreaking and designed to compel it to withdraw from Ukraine. Simultaneously, nations imposing sanctions sought to insulate their economies and hence left critical items from the sanctions list. The US continues to import mineral fertilizers from Russia while insisting nations adhere to its demand of stopping trade with Russia. The US treasury published a general licence on 24th March 2022 effectively removing mineral fertilizers from sanctions. It claimed this was to prevent grain shortages in the world market.

Europe, for its own interests, kept oil and gas away from Russian sanctions, which has been globally exploited. Europe’s procurement of Russian gas remains high, while it questions Indian oil imports, conveying the impression that India is funding Russia’s war on Ukraine, whereas the opposite is true. EU members are linked by an economic bonding, which Russia is attempting to break, thereby hoping to disrupt EU unity. It retaliated against its sanctions by reducing the flow of gas to European nations through the Nord Stream pipeline, claiming delay in completion of repairs of its gas turbines.

This decision by Russia resulted in increased inflation in Europe. EU economies, barely recovering from the impact of COVID could be pushed into recession. The US already appears to be heading into recession. The EU termed the Russian action as, ‘continuously using energy supplies as a weapon.’ They missed the point that their sanctions had a similar aim, which they defended as compelling Russia to withdraw from Ukraine and damaging its economy. Now that Russia has hit where it hurts, the EU is accusing it of weaponizing oil and gas.

With reduction in gas inflows, European nations would be unable to stockpile gas needed for higher demands during critical winter months. EU countries voluntarily agreed to cut Russian gas imports by 15% from August to March, though it was not binding. Nations not linked to the Nord Stream pipeline as also those heavily reliant on gas for electricity production were exempt. Germany is compelled to continue with its three remaining nuclear reactors, which it had planned to shut down. The US rushed its presidential coordinator for global energy, Amos Hochstein, to Europe to work out alternatives.  

Russian imports have been severely impacted by sanctions, compelling industries, comprising of almost 40% of the Russian GDP, relying on imported raw material, to either cut production or hunt for alternate supplies. The IMF claims the Russian economy could contract by 6%. The major military impact has been starving Russia of microchips and drone spares.

Inputs state that while Russian oil exports sunk by 13%, revenues increased due to rising global oil prices. In May 2022, Russia earned 833 million Euros per day, up from 633 a year earlier. Once oil sanctions kick in by end 2022/ early 2023, Russia could earn even more as global prices would skyrocket. Gas is not even on the sanctions list. The US attempt to create a buyer’s cartel against Russian oil is unlikely to succeed as India and China may not join. The Rouble, which has shifted its base to gold, remains amongst the best performing currencies.  

A Yale university study on the impact of sanctions on Russia concluded, ‘A common narrative has emerged that the unity of the world in standing up to Russia has somehow devolved into a war of economic attrition, which is taking its toll on the west, given the supposed resilience and even prosperity of the Russian economy.’  On Russia it stated, ‘By any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.’

The globe is battling rising oil and food prices which both, the west and Russia, blame on each other. Simultaneously, sanctions against Russia are also hurting nations imposing it, possibly as much as Russia or even more. Is it time for the west to consider alternatives?