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As the U.S. and Europe roll out an arsenal of economic sanctions to combat Russia’s invasion of Ukraine, there is scant understanding that the financial interdependence of the crisis’s significant players means quick and easy solutions are unlikely to work. Worse still, imposing sanctions on Russia’s elite will do little if anything to bring order to what has fast-become chaotic.
Putin in the Sanctions Crosshairs
Nevertheless, news earlier this week that Russia ordered its military to take a “peacekeeping” role in disputed regions of eastern Ukraine, prompted the western democracies to impose sanctions on Russia.
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Specifically, the U.S., U.K., and other countries slapped penalties on specific Russian companies and people. In the U.S., the sanctions list included some Russian banks and wealthy individuals and oligarchs. Plus, there’s a ban on purchasing the country’s debt. In short, these actions are aimed at hurting the rich and powerful in Russian President Vladimir Putin’s inner circle. The problem is that few experts think these actions will make much difference.
“So far, we’ve seen timid sanctions,” says Peter Tchir, head of global macro strategy at New York-based financial firm Academy Securities. “Sanctions only work when they force behavior change, but in Putin’s case they won’t.”
As it was under the Czars, the issue in Russia now is that the population is mainly poor – with average annual per capita income around one fifth of that in the U.S. Just a few ultra-wealthy individuals sit at the top of the economic pyramid. Ultimately, the poverty-stricken will feel the bite of sanctions far more than the elite. “Russia has always treated the poor as peasants,” Tchir says.
Poor History of Sanctions Success
Other experts see more significant flaws in imposing sanctions. “The record of those actions is that they fail,” says Steve Hanke, professor of applied economics at Johns Hopkins University. “There are always workarounds,”…
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Source : time
