While these economic impacts have been profound, U.S. policy makers did not anticipate them. Nor did they intend to create them. It is fair to say that the collapse of Russia’s economy would cause many more problems in the region than it would solve, and if the Obama administration wanted to seriously undermine the Russian economy, it could have easily done so by designating a number of Russian banks and directly freezing them out of the U.S. and European financial sectors. This action would have been a far simpler and more direct way to cause Russia economic pain and bring it to the negotiating table over the Ukraine issue. These new, sophisticated sanctions were instead designed to hurt a specific subset of Russian companies, namely those that are owned or controlled by Putin’s inner circle or directly run by the Russian government. Yet, despite the fact that these sanctions are narrowly tailored, they could end up causing economic damage to the Russian economy that would be similar to what would result from a wholesale ban on transacting with certain industries, such as the financial sector.
Second, the political effects of these sophisticated sanctions are also difficult to predict. In the Russian case, U.S. policy makers developed the sanctions in order to target Vladimir Putin’s inner circle. If his henchmen were hurt, it was believed, they would pressure the Russian president to adopt a different course in Crimea and eastern Ukraine. And while the sanctions have damaged the economic interests of these individuals, the result has been the opposite of what policy makers intended. Instead of pulling out of Crimea and ceasing Russian support for the rebel forces in Ukraine, Putin requisitioned property of more liberal oligarchs and consolidated the position of hard-liners within the political, military and economic sectors. For example, in late 2014, Russian authorities seized Russian businessman Vladimir Yevtushenkov’s oil company, Bashneft, and effectively nationalized the company in what was seen as an attempt to secure resources for the Russian government and to reallocate the company to Putin’s allies.
Likewise, Putin has reportedly sidelined even those conservative oligarchs who have supported him thus far during the crisis in favor of relying on the advice of a small group of military and security officials. These officials have further encouraged Russian support of separatists in eastern Ukraine and a generally confrontational approach to the United States and the European Union. In effect, the sanctions may have made it more difficult for the United States to achieve its goals in the conflict; by isolating Putin and damaging the Russian economy, the sanctions have caused Putin to consolidate his power and limit his inner circle to those advisers who advocate policies at odds with U.S. interests.
WHILE THE use of economic statecraft has become more sophisticated in the last decade, tailoring these tools to achieve the desired political effects remains exceedingly difficult, and U.S. policy makers should not be lulled into believing that these new forms of coercion can be perfectly calibrated to address every foreign-policy challenge. And though they may be more effective than the “comprehensive” sanctions of the 1990s or the “smart” sanctions of the early 2000s, these new levers present a new set of complications for policy makers, such as being significantly more powerful and difficult to control than anticipated.
To overcome these obstacles and ensure that these new sanctions are more likely to achieve U.S. strategic objectives, the Obama administration can take a number of steps. First, it should be wary of relying on these new sanctions as tools of first resort. These levers are attractive in large part because they can be imposed unilaterally (or with minimal allied support) and quickly, and are seemingly risk-free in comparison to other forms of coercion such as using military force. In the case of Russia, for instance, the administration was quick to target Vladimir Putin’s clique using sanctions because many of the alternatives were unpalatable. Yet this rush to react also created a number of unanticipated consequences, such as Western businesses that had assets with Russian companies that were indirectly and opaquely owned by some of Putin’s collaborators finding their economic interests unexpectedly harmed. Likewise, as the recent debates in Congress over the Iranian nuclear deal have shown, unwinding sanctions can often be more difficult than imposing them, and turning to sanctions as a knee-jerk reaction can often cause significant complications down the road. To be sure, economic sanctions may still often end up being the best alternative to doing nothing or to escalating to military force, but policy makers need to realize that many of the arguments against those other two options may also apply in some measure against sanctions.
Second, and relatedly, U.S. policy makers should study the likely impacts of these sophisticated sanctions more carefully prior to imposing them. In targeting a number of Russia’s financial institutions, for example, the administration believed that it had found a way to threaten Russian companies’ ability to service their massive debt, as well as the health of the Russian economy in the medium and long term. While such damage seems probable, U.S. policy makers did not anticipate that the sanctions would nearly cause the Russian currency to collapse or lead Vladimir Putin to consolidate his authoritarian rule, making the achievement of U.S. objectives more difficult. The Obama administration would be well served to create an interagency working group that closely examines the likely economic and political impact of these new sanctions before imposing them. Yet we must not kid ourselves about our ability to predict effects with great confidence. These sanctions are more powerful than earlier generations of “smart” sanctions precisely because they have a multiplier effect beyond the direct control, and thus beyond the confident predictions, of policy makers.
Third, and most importantly, policy makers should not rely on these tools in place of a strategy, but rather should incorporate them into a broader strategy for safeguarding U.S. interests. In the case of Russia, for example, the Obama administration has seemingly relied on sanctions to impose economic pain on the country in the hopes of convincing it to pull out of Crimea and to cease its support of rebels in eastern Ukraine. But sanctions—even sophisticated ones—are rarely effective alone, and must be used in conjunction with other tools of diplomacy to have much chance of success. Rather than imposing sanctions on target countries and rogue actors and hoping that they can cause enough pain, policy makers should carefully consider how to use sanctions, threats of force, negotiations and other forms of diplomacy in a coordinated way to achieve U.S. objectives.
In the end, sanctions will contribute the most in those cases when any tool of statecraft will be most effective: when the leaders know where they want to go, have a good idea of how to get there and are committed to expending the resources—financial, military, moral and political—to get there. Sanctions will not be sufficient substitutes if the leaders lack such strategic insight and resolve.
Peter D. Feaver is a professor of political science and public policy at Duke University. He is director of the Triangle Institute for Security Studies and director of the Duke Program in American Grand Strategy. Eric B. Lorber is an attorney in the Washington, DC, office of Gibson, Dunn & Crutcher.
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