Why sanctions always fail – Spoils of War

Early in the Ukraine war, President Biden boasted on twitter that thanks to “unprecedented” sanctions, the “Russian economy is on track to be cut in half” and the ruble had been reduced to “rubble.”  All instruments of economic warfare had been deployed against Ukraine’s invader, from the freezing of central bank reserves to sanctions on Russian cats. Today, the cats may be still at home, but the ruble is at a seven year high, Russian interest and inflation rates are headed downwards, and industrial production is ticking up. Meanwhile Russian forces steadily advance in Ukraine.

Objective: “Hunger, Desperation, Overthrow of Government.”

All this represents a much larger defeat for sanctions than is usual in such offensives.  In a memo on Cuban sanctions back in 1960 a state department official named Lestor Mallory described the purpose of such measures with unusual frankness (the memo was of course secret.) The aim, he wrote, was  “..to bring about hunger, desperation and overthrow of government.” Twenty years later, again cloaking honesty in classification, the CIA intelligence directorate studied the record and concluded that “economic sanctions…have not met any of their objective” and had furthermore strengthened the regime, providing Castro with “a scapegoat for all kinds of domestic problems.” That pattern has endured: hardship for the sanctioned population, as exemplified by the half-million toll on Iraqi children during the 1990s, or the ongoing mass hunger in Afghanistan, while the ruling elite escapes unscathed and diverts any possible local disaffection among the immiserated populace in the direction of the sanctioning powers.  This time around, the effect of sanctions has of course been double-edged. Not only has the Russian economy not collapsed, the sanctioneers, principally the Europeans, are themselves in an accelerating economic downslide, marked by rising inflation, in particular the catastrophic energy costs consequent on sanctions against Russian oil and gas.

Sanctions Work Just Like Bombing – Badly.

To understand why the economic weapon so consistently turns out to be ineffective, it is worth reflecting on another instrument of strategic coercion that has long beguiled western powers, especially the U.S., one that has displayed a similar record of failure for what may be similar reasons. Strategic air power, deemed capable of inflicting defeat on an enemy independently of ground action, first found institutional expression with the creation of the RAF in 1918.  Since then, whether expressed in the form of 2,000 lb bombs dropped from Lancaster bombers over Germany, or the eight-year U.S. air war against Vietnam, or precision strikes with Hellfire missiles against enemy commanders in Afghanistan, independent air power has consistently failed to deliver promised results.  German war production steadily increased through 1944; the Vietnamese never showed the slightest inclination to quit; despite the steady elimination of successive leaders, Taliban determination never apparently faltered.

Both strategic bombing and economic warfare share the underlying assumption that the enemy’s system, both economic and political, can be totally understood, including all the ways in which the enemy will adapt to the attack. For years during the Vietnam war, for example, the US strove relentlessly to destroy the Thanh Hoa bridge in North Vietnam, deeming it absolutely key to the enemy supply system. Finally, in 1972, they succeeded, only to discover that the North Vietnamese had stopped using it years before, rerouting supply lines to a convenient river ford a few miles away. We have seen exactly the same adaptive processes at work in response to sanctions.  Efforts to choke off Iranian and Venezuelan oil exports have led to the appearance of a “ghost armada,” a hundred or more supertankers absent from any official registry or reporting system plying the high seas. As one report on the phenomenon explained: “[v]essels use tactics including switching off or ‘spoofing’ their AIS systems, faking documents, regularly changing registries and using shell companies.”  In the current conflict with Russia, the economic intelligence failure has been of spectacular dimensions. Sanctioning Russian oil exports was supposed to choke off a support system vital to Putin’s war effort. But Russian oil exporters soon found a receptive market in India, where refining companies have been taking the oil at a healthy discount, refining it into diesel, and selling it to Europe at a colossal markup, thereby exacerbating the sanctioning countries’ inflation woes. In the apparent belief that Putin relies on the support of a select circle of entrepreneurs – the infamous oligarchs – the latter have been relentlessly targeted, and their assets, including yachts, seized in TV-friendly displays of sanctions-theater.  However, it seems that it matters little to Putin what happens to his friends’ yachts, even if they are his friends. Oleg Deripaska, for example, is currently sanctioned by the British as “a prominent Russian businessman and pro-Kremlin oligarch” who is “closely associated with the government of Russia and Vladimir Putin.”  But a friend of Deripaska’s complained to me in 2019 that “Oleg has not been able to see Putin in two years,” suggesting that the likelihood of his persuading Putin to pack it in so that he can get his London property back is slim. (In an instructive example of bombers and sanctioneers thinking alike, the U.S. deployed the same approach, known as “crony targeting,” against Slobodan Milosevich’s alleged inner circle in the 1999 air war against Serbia, energetically bombing their houses and businesses, with similar lack of results.)

The Wrong Lesson from World War 1

The misplaced belief in the efficacy of sanctions as a weapon may partly be traced to what is generally considered to have been their greatest triumph, the British blockade of Germany in world war 1 that supposedly starved the Germans into submission, a “very perfect instrument” in Keynes’ words.  But as the late great Norman Stone pointed out, German food shortages were almost entirely due to government mismanagement, although the blockade, as usual, provided a convenient scapegoat. Nevertheless, following the war, “this economic, peaceful, silent deadly remedy,” as Woodrow Wilson approvingly termed it, retained its place in the armory of nations powerful enough to use it, preserved in international law as a mechanism for dealing with recalcitrant foes.

Too Many Live Off Sanctions to Stop Now

Just as an unpromising record has not apparently affected the air power’s lobby’s power and prosperity, there is little likelihood that the sorry example of Russian sanctions will deter future deployment of the same weapon. Sanctions, at least in the U.S., now have a firm institutional base in the bureaucracy, thereby allowing the U.S. Treasury to become a major player at the expense of the State Department in national security affairs, while their ever-widening scope has spawned a growing army of compliance lawyers across banks and corporations.

Of course, assuming that sanctions continue in failing to provoke “hunger, desperation, overthrow of government” in this case Putin, Biden may be tempted to reach for the other strategic weapon discussed above. Let’s hope that someone remembers how well that one has worked.

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Spoils Of War