Economic Sanctions On Russia Would Be Worse Than Futile

By Ike Brannon

President Obama is naturally distressed about Russia’s reprehensible behavior in Ukraine, and would like to punish Russia and nudge President Vladimir Putin to de-escalate the situation. Most of Congress shares his distress.

But there is little the United States — despite its economic hegemony — can do by itself that would meaningfully impact Russia. Unilateral sanctions simply don’t work: the economic pain they inflict is borne mainly by the domestic businesses transacting commerce with the country ostensibly being punished. They constitute little more than a temporary inconvenience to the country being sanctioned.

In a big world like our own, there are few monopolists: a country cut off from goods or services provided by companies in one country can find reasonable substitutes elsewhere. And they will: companies in Western European nations have been quietly (or in some cases, not so quietly) pressuring their governments to refrain from going along with the U.S. in imposing broad sanctions in order to pick up business that U.S. corporations may be forced to forego. The German company Siemens has already let Russia know that they would be more than willing to replace Caterpillar should U.S. sanctions prevent it from operating in Russia.

The problem with multilateral sanctions is the same as dating: the least interested party dictates the nature of the relationship. If the U.S. is ready to quarantine Russia but Japan won’t do anything but keep the five richest men of Moscow from visiting Tokyo, that’s going to be the limit of the sanctions.

 

This article originally appeared at Real Clear Markets. Click here to read the full article.