Europe is discussing the resumption of economic ties with Russia. But do the sanctions imposed by the United States against Moscow remain effective?
From Iran to Russia, Africa and North Korea - the Obama administration is constantly using financial sanctions everywhere as the preferred means against the opponents of the United States. However, over the past year, it was the allies of America who were increasingly confronted with troubles, forcing Washington to ask itself the question: is this favorite economic tool not becoming as a result of excessive use ineffective and in some cases counterproductive?
The American financial system is the engine of all global trade. Sanctions, which are prohibitive or in some other respects too restrictive to encourage trade risks, direct business to foreign markets - and thus they create new alliances between long-standing friends and enemies of America.
“It is important to be confident that our sanction tools remain effective and that they are not being used excessively,” said Acting Deputy Secretary of the Treasury Adam Shubin (Adam Szubin) this month. “We must continue to weigh the costs and benefits of our sanctions regimes, and ensure that this ratio is in our favor.”
Shubin oversees counter-terrorism issues in the Ministry of Finance, as well as the direction related to financial intelligence. His boss, Treasury Secretary Jack Lew (Jack Lew) warned Congress in March that financial transactions could be bypassed by the United States if sanctions “make the business environment too complicated and unpredictable, and also if they are too active intervene in cash flows all over the world.
We must be aware of the risk that the excessive use of sanctions could undermine our leadership position within the global economy, as well as the effectiveness of the sanctions themselves, ”said Lew.
For example, the tension associated with the United States imposed sanctions against Russia and Ukrainian separatists, has split the US allies in Europe, who are already experiencing financial difficulties, and soon they will face the indirect impact of the imposed penalties. On Thursday, the lower house of the French Parliament approved a non-binding resolution calling for the lifting of sanctions imposed by the European Union against Russia.
“Sanctions have been successful? Not. This is a real failure, ”said Italian lawmaker Deborah Bergamini, who is also a delegate to the Parliamentary Assembly of the Council of Europe, in her speech at a forum in Rome devoted to the analysis of relations between the West and Russia. According to her, Italy lost at least 1,25 a billion euros in its exports after the United States and the European Union imposed sanctions in 2014.
Chief Coordinator for US Department of State Sanctions Ambassador Daniel Fried disagreed with her argument and noted that it was the sanctions that made it possible to reach an agreement on a ceasefire, known as the Minsk Agreements, which after that are almost not implemented in the Donetsk region in eastern Ukraine .
“I disagree with the fact that the sanctions have failed,” said Fried of this conference, held at the Center for American Studies in Rome. - If it were not for the sanctions, then there would be no Minsk agreements at all - and there would be more hostilities. The sanctions created an opportunity for a diplomatic solution. ”
Bergamini objected: “The sanctions were a failure; I insist on it ... Europe pays a big price for it. Let's face it. ”
At this time, Kremlin adviser Dmitry Suslov (Dmitry V. Suslov), deputy director of the Russian Council on Foreign and Defense Policy, sat quietly in his chair, and a slight smile played on his reddish face.
“Sanctions harm both sides,” said Suslov and added that economic measures had little impact on Russian military actions in the Donbas. "They could not change the behavior of Russia."
New studies by the Cato Institute and the New American Security Center (Center for a New American Security - CNAS) raise the question of how effective sanctions are, in fact, as well as evidence that there is growing evidence that they have a negative wave pattern. Effect.
Researcher at the Catona Institute Emma Ashford (Emma Ashford), an expert in the field of energy policy, called the sanctions against Russia "a complete failure." In her opinion, the sanctions caused a shortage of food and problems with loans from ordinary Russians, and ultimately "they are detrimental to the US economy and the geopolitical interests of the United States."
The Ministry of Finance in its message sent to the editorial office of Foreign Policy magazine by e-mail, did not agree with this statement.
"It is obvious that the sanctions, together with the collapse in oil prices, force the Russian leadership to pay a high price, while all this has a limited macroeconomic effect on the economy of the United States and Europe," the statement said. It further states that transatlantic economic sanctions "have already contributed to worsening financial conditions, reducing confidence and reducing investment in Russia." The Russian economy is in recession, as its pillar has suffered from sanctions from the United States and the European Union, introduced in 2014 as punishment for invading Ukraine. This year, the ruble showed a record fall against the US dollar, and, moreover, Moscow suffers from a decline in oil prices, which led to a sharp reduction in planned budget revenues. A poll conducted by Reuters on Thursday says that the Russian economy will shrink by another 1,5% in 2016, and experts from the International Monetary Fund believe that the Russian economy will not be out of recession next year.
There is one successful example of sanctions - Iran.
In the middle of 2000-ies, the United States, the UN and the European Union imposed a number of sanctions against Tehran in order to force the Islamic Republic to comply with the terms of an international non-proliferation treaty, under which it cannot possess nuclear weapons. These sanctions were strengthened in 2012 against the backdrop of protracted and ineffectual negotiations between the world powers and Tehran; As a result, Iran’s economy was severely affected, oil production declined, and its exports fell by more than half — from 2,5 million barrels in 2011 to 1,1 million barrels in 2013.
The financial implications, as well as the coming to power as a result of the election of relatively moderate Iranian President Hassan Rouhani, gave a new edge to the negotiations on the nuclear issue. In July, 2015, the world powers agreed to lift the sanctions in exchange for Iran’s reduction of its nuclear program, although such a goal for a long time seemed unrealistic.
“Our sanctions against Iran’s nuclear program are the most convincing example of how global efforts with serious diplomacy can ensure success,” Lew said in a speech in Washington last month.
However, the nuclear deal reached with the help of the sanction also provoked a backlash against the United States by Israel and Saudi Arabia - two key allies in the Middle East - and Washington still has to somehow mitigate the problems that have arisen. In the Congress, Republicans and some Democrats insist on rejecting this deal, including by increasing the sanctions against Iran. Lawmakers from the Republican Party also oppose attempts by the Obama administration to provide Tehran with greater access to the global financial system, including conducting dollar transactions.
But even Iran is unhappy: The head of the Central Bank of Iran, Valiollah Seif, this month accused the United States and Europe of not complying with the terms of the nuclear deal, as they are blocking the Islamic Republic’s access to the international financial system.
В stories about the impact of sanctions on Iran is not paying due attention to what CNAS believes is the main - if not the main - reason for Iran’s financial difficulties: “the fall in oil prices in 2014, as well as significant omissions caused by poor economic management” . CNAS experts believe that this also applies to Russia.
In the world as a whole, the Ministry of Finance has introduced existing sanctions for 28 programs. Some apply to geographic regions and countries, while others are limited to individuals and business elites. Although most of them remain invisible - with the exception of those people, businesses and governments that they directly affect - very many of them are very far from stopping the aggression of unfit players. As for North Korea, the trade embargo imposed to punish Pyongyang for its nuclear weapons and ballistic missile programs did not force the hermit kingdom to abandon frequent rocket launches, including the one that was carried out on Thursday this week.
As for South Sudan, the Obama administration has long been threatening - the last time this week - to impose sanctions on President Salva Kiir and rebel leader Riek Machar for not complying with the rather vague peace agreement, as well as for the ongoing bloody power struggle in the third year of his reign. However, Washington has so far refrained from directly punishing Kiir and Machar, although he has imposed large-scale sanctions against those who threaten the stability of Southern Sudan, including through war crimes and human rights violations.
The United States also warns that they may eventually ask the United Nations Security Council to impose a supply embargo on South Sudan, although the Obama administration has opposed such measures for several years.
American sanctions against Somalia led to unexpected - and devastating - consequences. According to experts, restrictions on the money sent to Somalia stopped the financing of the Al-Shabab terrorist group operating in that country. However, a report from the Center for Global Development, published in 2015, concluded that legal cash transfers to non-profit aid organizations or impoverished relatives also declined.
“The main sources of income, as everyone in Somalia recognizes, are remittances,” emphasizes Elizabeth Rosenberg, senior researcher at CNAS. “You have closed the main source of income for the country.”
However, American sanctions imposed on Russian oligarchs and warring separatists in eastern Ukraine are the most puzzling, as well as the question of whether Europe will extend its restrictive measures.
In addition to France and Italy, the number of those who support the lifting of sanctions is also growing in Germany. Last month, German Economy Minister Sigmar Gabriel called on the European Union to try to create conditions for the lifting of sanctions by the summer of this year. The trade between Moscow and Berlin fell by about 12 billion euros (13,6 billion dollars), which is a quarter of the total trade from 2014 to 2015 year, said Michael Harms, chairman of the Russian-German Chamber of Commerce.
As expected, the leaders of the European Union in June will decide on the extension of their sanctions. Representatives of the Ministry of Finance said on Thursday that, in their opinion, the sanctions will continue, as evidenced by the talks held by Barack Obama last week with some European leaders.
Foreign direct investment in Russia fell from 69 billions of dollars in 2013 to 23 billions in 2014, that is, after the invasion of Moscow in the Crimea. Anders Åslund, an expert on the economic policy of the Atlantic Council, noted that it was precisely these goals that pursued sanctions, and this is evidence that they have a certain negative impact.
“International finance in Russia is a one-way street from Russia. There is no possibility to receive alternative financing, ”he added. However, the flip side of this coin is the economic impact of the imposed sanctions on Europe.
According to the European Commission, the sanctions have reduced economic growth in the European Union by 0,3% of GDP in the 2015 year, that is, at a time when there was an urgent need for economic expansion. Austrian Institute for Economic Research (ASTI) experts concluded that continuing sanctions against Russia could cost over 92 billion euros, or 104 billion dollars in the next five years, in the form of losses in export earnings, as well as 2,2 million jobs. Financial problems are particularly acute in Germany, which could lose about 400 thousands of jobs due to sanctions.
A CNAS report released this month stresses that modern sanctions "do not have a significant impact on the target country's GDP."
However, the sanctions, in fact, "have a significant impact on foreign investment, corruption, business conditions, governance, as well as other components of the country's hospitable attitude towards the international financial community," the report stresses.
Perhaps it is for this reason that Western officials rethink their attitude towards the use of sanctions instead of other means of influence on the enemy. In February of this year, Deputy Defense Minister Christine Wormuth admitted that the sanctions “have not yet changed what Russia is doing on the ground, and this is causing great concern.”
Roseberg, a CNAS researcher, believes that sanctions do not have a direct impact on GDP and do not cause its decline. In her opinion, there is no single and simple way to measure the effectiveness of sanctions, which are detrimental to the American economy, although it is not possible to establish its size.
“It’s terrible that we are so aggressively using this set of economic instruments against Russia, the vast global economy, without conducting a thorough simulation of their impact and their consequences,” Rosenberg emphasized.
"All this, of course, has its price, and the question is whether we want to pay it."