The United States, the European Union, and countries around the world have cut Russia out of the global economy. Moscow’s central bank is struggling to support the ruble. Russian financial institutions are blocked from the global payments system. Far-reaching import and export bans have choked off trade to and from the country. Russian markets have seized up. Will these sanctions pressure Vladimir Putin to withdraw the Russian military from Ukraine? Or will their main effect be to hurt Russian civilians and damage the world economy?
This week, I put those questions to Nicholas Mulder, a historian at Cornell University who recently published The Economic Weapon: The Rise of Sanctions as a Tool of Modern War. The book traces the history of sanctions from the Peloponnesian War to today, with particular focus on the development of modern sanctions in the period between the two world wars.
Mulder finds that sanctions have always proved controversial, given their capacity to immiserate, impoverish, and injure civilians. He also shows that sanctions have often failed to achieve their desired political outcome, for all the damage they cause. Indeed, in the 20th century, sanctions were partially successful or wholly successful just one-third of the time, with their efficacy degrading as their use has expanded in recent decades. “The history of sanctions is largely a history of disappointment,” he writes.
We discussed what makes sanctions successful, what makes them harmful, what Washington might want, and what Moscow might accept. Our conversation has been edited for length and clarity.
Annie Lowrey: The United States has sanctioned Moscow’s central bank. Other financial institutions have been kicked off SWIFT, part of the global payments system. PayPal, Visa, and Mastercard are no longer working in the country. The economy is collapsing. How unusual are these sanctions, from a historical perspective?
Nicholas Mulder: We’re in totally new territory. The speed, the sweep, and the size of the sanctions, or the size of the targets of the sanctions—those three factors make them extraordinary. An intense sanctions package came together—supported not only by the U.S. but by the entire European Union and a number of Asian allies as well—within four or five days of the Russian invasion of Ukraine. And there’s potentially more coming.
Before this, the states that were targeted by sanctions tended to be U.S. adversaries or adversaries of the West, but many of them were small- or medium-sized—Iran, Venezuela, North Korea, also the Taliban government in Afghanistan. They are significant actors in their regions, but they’re not hugely important in terms of the global economy.
Lowrey: Right, Russia is both large and very interconnected with its neighbors and the world.
Mulder: On top of the government sanctions, there is an enormous global private-sector reaction. It’s a divestment wave. To some degree, that process is people overreacting to sanctions, or acting beyond the scope of the sanctions.
The fact that we have these combined state and private-sector sanctions means that they are hitting not only the Russian government, but Russian civil society and the private economy as well. It’s a major shock for them. It makes the discussions about whether the sanctions are working or are going to work much more difficult, because we are seeing the economic effects being caused by private actors, not just by governments anymore.
I’ll note: The fact that PayPal and Mastercard and Visa are no longer working there has enormous implications for the large number of liberal Russians who are fleeing the country now, who can no longer access their money, their savings. I know of many people who have fled to Central Asia, Georgia, Azerbaijan, Finland, Uzbekistan. None of them can actually access their savings anymore, because their bank cards just don’t work. The private-sector response is hitting Russian civil society really hard.
I am sure that there are people who think this adds to the total pressure, but it is hitting the people who we would want to be a backbone of the anti-war position in Russia.
Lowrey: Looking historically, would we expect as comprehensive and serious an economic blockade as this one to be effective?
Mulder: I wouldn’t want to ascribe everything that’s gone wrong with Russia in the last few years to the sanctions [that have been in place since 2014]. But it’s clear that our [preexisting] sanctions haven’t solved the problem. That should make us a little bit more circumspect. We have tried this at a lower level of intensity. But that doesn’t mean that increasing the intensity is going to fix the problem.
The idea behind sanctions is that we apply pressure in ways that make countries do what the West would like them to do. But that requires a specific set of circumstances. The situation isn’t always right. And when you apply sanctions, it can happen that countries move in the opposite direction.
Lowrey: There’s surely concern about Putin feeling backed into a corner and like he has nothing to lose. So how do you structure these sanctions to give the best shot at changing Russia’s behavior?
Mulder: The important thing is to have clarity about the aims of the sanctions. Our governments in the West have said the end of Russian aggression against Ukraine, the withdrawal of all troops and equipment, and respect for the territorial integrity and independence of Ukraine is the goal. But in imposing the new sanctions, they haven’t reiterated it. There is not a common, clearly shared U.S.-European position.
That fosters speculation about the goal maybe being regime change. If you are a paranoid Russian nationalist right now, that would be a very plausible interpretation. That raises the stakes. It makes it existential. It increases the chance of [the Kremlin] having an adverse response.
Lowrey: What steps could you imagine the United States and Europe laying out to start to bargain and de-escalate?
Mulder: The key model for success here is the Iran deal that [Barack] Obama and [former Secretary of State John] Kerry negotiated. It’s the most successful use of American sanctions in the 21st century so far.
The nuclear-nonproliferation treaty outlawed Iran’s pursuit of nuclear weapons. But it did say Iran had the right to civilian nuclear energy. [Obama and Kerry] made it very clear they were making a concession on that. They said: We know that many people are uncomfortable with anything that has nuclear and Iran in the same sentence. You have the right to civilian nuclear reactors, not nuclear weapons. If you pursue the latter, we will impose sanctions, but if you give that up and make your stockpiles of nuclear fuel inspectable by a neutral UN international agency, we will remove the sanctions in stages.
Given that Russia is even more powerful and is a nuclear-armed state, we should make clarity, to the degree that we can, the absolute priority. We just can’t afford errors or a major escalation.
Lowrey: Can you only get to the point of negotiating the removal of sanctions—if you do X, we will lift Y and provide Z—once the invasion is over?
Mulder: Tying conditions to the lifting of sanctions could already be happening. If you stop bombing, you stop advancing, you stop shooting, you cease offensive military operations, we can unfreeze part of the central-bank reserves. If you withdraw to the positions you had before Thursday, the 24th of February, before the invasion, we can roll back another tranche. If you remove support for the separatists in the Donbas, then we can reconnect you to SWIFT.
If there is a perception in the world, or on the part of Russia, that these are going to be permanent and they’re going to be there no matter what Russia does, they will just be a weapon to wreck Russian society and the economy with. I don’t think that will lead to the kind of longer-term international situation that we want to pursue.
Lowrey: In the sense that destroying the Russian economy is not in and of itself the goal?
Mulder: It is not the consensus position in Western governments, but some people support sanctions as a form of long-term economic war. They’ve given up on the idea that we can ever change Russian behavior. To them, the point is simply to degrade Russian capacity to do harm.
There are four ways we can think about sanctions working. First, there’s the deterrent function. That was what we tried from December until two weeks ago, then the war happened. Second, there’s the compellent function: We are going to try and force Putin out of Ukraine and force him to end this war. Third, maybe we can cause regime change or a change in government. That’s a pretty ambitious goal. The fourth one is this: Behavioral change is impossible. You’re never going to change behavior. So deterrence and compellence are moot, basically, and it is futile to try them. Instead, this is purely the long-run degrading of Russian power. This is attrition, exhausting them as an adversary.
Right now, it’s not really clear whether our goal is two, three, or four. It’s only clear that No. 1 didn’t work, because the war happened.
Lowrey: The Afghanistan sanctions are much less prevalent in the minds of Americans. But it does feel like they might fall into that last category, at least in part. We’re in the midst of causing a devastating humanitarian crisis we are simultaneously trying to ameliorate with aid.
Mulder: The conditions we’re imposing—it’s not that the Taliban cease the war, because they’re in control now. It’s about human-rights issues, about the treatment of women. The thing that makes the Afghanistan situation different is because it’s so insignificant to the world economy; the issue is almost purely a moral and a humanitarian one.
There are a whole bunch of other rationales and dilemmas going into the Russia sanctions … the threat of nuclear escalation, the issue of global economic stability. Russia is a massive commodity exporter. The sanctions are already having large effects on markets and on commodity prices. Then there’s the efficacy concerns. Russia is doing something actively awful that we want to stop as soon as possible. There are utilitarian, rational arguments at play—it’s one of the problems that comes with using such measures against a much larger, much more interconnected society.
I consider sanctions that inflict damage on entire populations and their economic life to be morally fraught, and the essential reason is this: If we embark on policies premised on the idea that bad governments and their people are one, then we have bought into a way of thinking that comes perilously close to how ultranationalists and fascists see the world. If total economic sanctions are the weapon to which liberal internationalism resorts to defend itself, then in a sense the totalitarians will have won. To my mind, any liberalism worth its name should support and defend individual dissent and resistance against oppressive and dictatorial governments, not punish those unfortunate enough to find themselves living under such regimes.
Lowrey: Are there technological or technocratic innovations in this sanctions package we should be watching?
Mulder: This ban on high-tech components exported to Russia. That’s one part of the sanctions supported not only by the U.S. and the EU, but also by Singapore, Japan, South Korea, and Taiwan—the major semiconductor-manufacturing hubs of the world.
It’s a very big one because it’s going to have a medium-to-long-run effect on the capacity of the Russian economy to keep up its productivity growth and its ability to source components and hardware for its military industry. But it also has real elements of a dry run for using this sort of measure against China—that’s why those Asian countries are part of it, I think. It’s a diplomatic exercise: If we can do this with Russia, could we do it in the future with China?
It also includes something called a foreign-direct-product rule, which basically forbids the export or trade of products made in the United States or made using U.S. software or intellectual property. The U.S. will put sanctions on any Singaporean trying to sell these chips manufactured in Singapore, because the intellectual property for them was designed in Palo Alto.
Lowrey: What kind of economic impact could we expect that to have?
Mulder: Technological innovation matters only in the medium-to-long run. No country is going to collapse immediately when you cut off the supply of microchips. People can still eat. They can still warm their houses. They can still put ammunition in their guns and fuel in their tanks. But it is going to be a problem when you have to build new tanks and new airplanes, or when you want to design a 5G network. The U.S. had already imposed sanctions like this against Huawei, the Chinese 5G firm, back in 2019. But now we’re seeing these used against Russia by a much larger group of countries.
Technological innovation is a double-edged sword, because when you cut off people’s access to it—if there’s one thing we know about the history of innovation, it’s that when you try and monopolize something, people are going to try and find ways of improving on it that are not covered by the monopoly.
Lowrey: What about crypto as a technological tool for sanctions evasion? Is it just the new gold, a way for people to get money in and out? Or has it changed something more profound?
Mulder: I think its viability as an alternative global reserve currency is exaggerated. It offers some evasion possibilities, but not at the scale where an economy the size of Russia’s is going to be able to derive great benefit from it. That has to do somewhat with the fact that the practical case for crypto, for bitcoin as a currency you pay with on a day-to-day basis, has diminished. It’s a speculative asset, a store of wealth, but I don’t think anyone seriously—even the big crypto firms that have gone public on Wall Street, like Coinbase—believes it’s going to be displacing the dollar.
Lowrey: There were some stories about Russians buying things like Prada handbags and gold as stores of value and ways to get rubles out. Yachts and apartments in London seem a less secure way to do that, given that the U.S. and European countries are going after the oligarchs’ property assets.
Mulder: The assets of very wealthy people aren’t off the table. That has interesting implications for other policy discussions we’re having. For years, we heard about how impossible it is to find offshore, hidden wealth—it’s too hidden. But it turns out we can just take people’s yachts.
This has happened before, and this was key to economic warfare in World Wars I and II, particularly in World War I. Before 1914, the fin de siècle world economy was extremely globalized. Lots of people had foreign investments. World War I was the first time you had total war in economies with large overseas-wealth concentrations. That wealth became fair game. All the countries expropriated enemy property within their own jurisdictions. When they did it again in World War II, by that time, under the Nazis, Germany had become much more inward-focused and self-sufficient. It was no longer this globalized, wealthy society as it had been before.
Lowrey: The oligarchs clearly felt the need to get their money out of Russia and into dollar or euro assets. Now what do they do?
Mulder: In Putin’s regime, the essential, implicit bargain made between him and the oligarchs was: If you want to be wealthy and have all this property, do not meddle in politics. Especially not in foreign policy. There’s this running joke: One of the oligarchs goes to Putin and says, “I have had $4 billion out of my $5 billion in wealth seized!” And Putin responds, “Would you like to keep the remaining billion as well?” That’s the dynamic: They are suffering from these expropriations, but it’s not clear they can translate that into sway over the policy-making process.