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25 August 2016

Lifting Russian Sanctions – Be Careful What You Wish For

Important arguments for maintaining sanctions

Again and again the mantra of lifting sanctions against Russia has been repeated in the EU. For the time being, open calls for rewarding the Eastern neighbor for doing nothing to repair inflicted damages are usually perceived as too costly in political terms. The problem also is that most painful financial sanctions are linked to ‘not-to-be-implemented anytime soon’ Minsk II agreement which makes Russlandverstehers of various origin a little bit uneasy. Therefore, rather unsurprisingly, a new idea has been invented to ease the alleged pain, namely gradual phasing-out of restrictions for yet unseen positive signals from Russia.

Self-made hostage

To be honest, it is not Russia’s fault, but an unfortunate and predictable fallout of the decision that sanctions be prolonged unanimously every six months. Every consensus has its price, and there was probably no other way to overcome traditional divisions but to agree on temporary restrictions. Nonetheless, this way the European Union turned itself into a hostage of internal political dynamics within member states and overseas. This way, the EU also unwittingly provided additional fuel for those who aim to capitalize on European divisions when it comes to Russia. It applies both to mainstream politicians fighting for political survival and to populists like AfD who dream of leaving political fringes. Germany provides a vivid example how self-imposed debate about sanctions turns into domestic political strife, with the idea of lifting restrictions being instrumental for populist opposition (AfD), coalition partner (see minister Steinmeier’s  position), and inner-party rivals (see CSU leader Horst Seehoefer comments). Yet, Germany is not unique. Sanctions are used in domestic debate in France, Austria and Italy as well.

It is not enough to trigger political debate, as many people these days are not eager to trust politicians. Therefore the idea of phasing out of sanctions has to be re-wrapped and addressed to target groups by "experts" and think-tanks to gain credibility. Such an approach is helpful, since an "expert" can be more blunt with no political costs attached. Sometimes an “expert” is, by chance, an interested party (say former employee of Russian financial groups) and is offered a column on the web-page of a renown institution. Naturally, the institution, for the sake of objectivity, adds a footnote that the paper does not represent its view. However, can you think of a better way to legitimize the messenger and to escape from responsibility? This is how the product is advertised and sold, but how does the story go? Why should sanctions imposed on Russia be lifted according to this latest call to change track? What is so wrong with such an approach?

  • One of the arguments against maintaining sanctions is as follows: Sanctions were supposed to lead to regime change, but instead they helped Putin exploit the rally-around-the-flag effect, put the blame on the West, and consolidate public support.  The existing system of government and governance will not change any time soon.

I shall put aside the “lack of alternative” argument, since it is just typical propaganda cliché. The other suggestion - that sanctions were thought to initiate regime change - distorts reality heavily. Not a single serious Western policy-maker has ever framed the aim of restrictions this way, in contrast to Russian propaganda machinery. Sanctions were introduced in response to blatant breach of international law to influence the cost-benefit analysis of the wrongdoer by attaching a price-tag to its future behavior. Sanctions are the political equivalent of a precautionary approach to prevent the adversary from doing even more harm to the public. In such a case, the “burden of proof” falls on those whose actions may pose a risk. The EU’s task is just to wait patiently for Russia to provide credible evidence of policy change. Sometimes, the best action is just lack of action. Lifting sanctions beforehand would be a sign of the EU’s failure. It would discredit the whole sanctions policy in the future and send an encouraging message to all other actors willing to violate international norms that they will remain untouched should they do so.  

There is another equally important argument for maintaining sanctions. For years, Russia used to be one of the most divisive issues among EU member states. The principle of the lowest common denominator prevailed, with no sign of common policy on the horizon towards Moscow until Russian aggression towards Ukraine, the annexation of Crimea, destabilization of Donbas, and downing of MH17 happened.  The ritual of expressing “grave concern” was finally replaced by common action. Maintaining sanctions equals maintaining EU unity and coherence, lifting sanctions means fulfilling objective of traditional Russian ‘divide and rule’ policy towards the EU.

  • The other chain of arguments is as follows: Sanctions do not work since they contributed little to the recession in comparison to structural problems due to a primitive growth-model based on oil price. Russia avoided economic collapse through policy adjustments, but to achieve growth it needs to remove financial restrictions. Moscow would be more likely to make concessions if rewarded with gradual reduction of sanctions; otherwise it would pivot to China/Asia for good.

In other words, sanctions are like Schrödinger’s cat - painless and painful at the same time. The argument that they had only a negligible impact on the Russian economy, and that without the oil price slump nothing would have happened seems decent only at the first blush. However, it is purely counterfactual, since oil prices actually went down and both things must be analyzed together. Had there been no financial sanctions, Russian government and companies would have easily borrowed money abroad to manage economic risks emanating from their foreign policy adventures.

However, sanctions-lifter proponents are perfectly aware, especially when they come from the financial sector, that the argument of slight impact is weak. Therefore, they get more emotional and combine the picture of benign Russia allegedly ready for trade-offs, accompanied by warning shots that without any moves from the West, Russia will lose interest, and adopts a more belligerent position and turns to China.

First, there is no proof of Russian readiness for making any concessions. There is only the ambition to make the West step back unilaterally. Second, the “pivot to China” is still more of a useful narrative than serious policy (Russian determination in the Nord Stream pipeline is just one example of who is indispensable to whom).

To sum up, financial sanctions should be seen as critical for Western policy because they have  a significant impact on Russian state policy and economic planning, as well as on strategic planning of major international corporations.

Sanctions provided a useful test to dispel the deeply-rooted myth of Russia as an indispensable trade partner of the EU. European losses due to sanctions and counter-sanctions are almost negligible.

Sanctions are about the future, not the past. They are about EU unity, not kleptocratic needs and corporate interests that may create political and security risks for the West. They do not rest upon a naïve “back to business-as-usual” assumption, but stem from pre-emptive and preventative logic to impose prohibitive costs on aggressive behavior to deter its continuation. Finally, sanctions are designed to signal disapproval and to confirm that the EU treats seriously its normative commitments. 

So, to those determined to lift sanctions now, the appropriate adage is “be careful what you wish for”. 

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