How much do sanctions hurt Russia? – On Wednesday, the United States imposed a series of new sanctions on Russian banks and elites, including a ban on Americans investing in Russia. The new sanctions were specifically aimed at Russia’s Sberbank, which holds around a third of the country’s banking assets.
The sanctions also targeted Russian President Vladimir Putin’s two daughters and Alfabank, the country’s fourth-largest financial institution.
But with the invasion of Ukraine still ongoing, many wonder if the sanctions will hurt Russia enough to be effective.
How sanctions are hurting Russia’s economy
JP Morgan economists think Russia’s gross domestic product is likely to contract 7 percent for the year and 35 percent this quarter. The same economists also believe that inflation in Russia could reach 14% by the end of this year. That’s twice the inflation the United States experienced last year.
“Russian GDP peak to trough contraction is now expected at around 12%, comparable to the 1998 (~10%) and 2008 (~11%) crises and the COVID-19 shock (~9%) ‘ JPMorgan’s Anatoliy Shal explained in a memo to clients.
“What is clear, however, is that Russia’s economic growth and political isolation will lead to slower growth in the long term,” she added.
Beyond GDP, inflation and overall quality of life, sanctions also exert indirect pressure on key industries such as airlines. A ban on the export of American technology, including spare parts and tooling for planes built in Russia by Boeing and Airbus, prompted Russia to announce new laws allowing foreign planes to be seized at Russian airports. The planes seized are expected to be used on domestic flights in Russia and could be used to salvage parts for other planes, while Russia sources alternatives – likely from China.
Regardless of whether the sanctions hurt Russia or not – and they undoubtedly do – it has become increasingly clear that the sanctions have not worked in the sense that Russian President Vladimir Putin has not reversed course and continued his invasion of Ukraine will.
Former NATO Supreme Allied Commander General Philip Breedlove said in a recent podcast interview that the sanctions have done harm but not worked.
“Sanctions have hurt Russia. You have harmed the Russian people. They hurt the Russian economy. But they never changed Mr. Putin’s behavior,” he said.
Sanctions affect the daily life of Russian citizens
Sanctions affect not only the Russian government and key industries, but also their citizens. In the first week of the invasion, consumer prices rose 2.2%, with groceries seeing the largest cost increase.
Since the sanctions were imposed, the value of the ruble has fallen, consumers have started losing access to American-made products, and major American brands may have left the country forever.
From the withdrawal of McDonald’s from Russia to the end of Apple’s American-design iPhone phones and computers sold in the US, the sanctions are putting extreme pressure on Russian citizens.
Yellen aims for “Maximum Pain” for Russia
The pain inflicted on the Russian economy is intentional. While the Biden administration has denied ever believing sanctions were a “deterrent,” new sanctions have been announced and implemented week after week since the invasion of Ukraine began.
Treasury Secretary Janet Yellen said Wednesday that the United States will continue to implement sanctions on Russia to inflict “maximum pain.”
“Our goal from the start has been to inflict maximum pain on Russia while doing our best to protect the United States and our partners from undue economic harm,” Yellen told lawmakers, adding that Russia should remain insulated from the geopolitical system and even kicked out of the Group of 20 (G20).
Jack Buckby is a British author, anti-extremism researcher and journalist based in New York. He reports on Great Britain, Europe and the USA, works on the analysis and understanding of left and right radicalization and reports on the approach of Western governments to the pressing problems of today. His books and research address these issues and propose pragmatic solutions for our increasingly polarized society.
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