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Sanctions against Russia may inflict some pain, Stanford scholars say

Stanford political scientists say new economic sanctions imposed against Russia are unlikely to cause it to scale back its Ukrainian military intervention. But the measures – a second round of sanctions since the intervention began – could weaken an already softening economy as global investors flee Russian markets.

Geert Vanden Wijngaert Vladimir Putin

Russian President Vladimir Putin, shown speaking at a European Commission meeting in January, will probably continue his current policies in Ukraine, according to Stanford political scientists.

With the Ukraine in upheaval, U.S. economic sanctions against Russia may not stabilize events on the ground but they could damage Russia's economy in the long run, according to several Stanford scholars.

"Sanctions will not alter (Russian President Vladimir) Putin's policies," said Stephen Krasner, a Stanford professor of international relations and a senior fellow at the Freeman Spogli Institute for International Studies. "Annexing Crimea and loosening Kiev's control over the eastern Ukraine have strengthened Putin's domestic position."

The United States and European Union have already targeted Russian officials with sanctions for annexing Crimea and for escalating violence in eastern Ukraine. Then in late April, America moved to freeze the assets of key Russian individuals and companies. But energy and commodity exports – central to Russia's $2 trillion economy – have not been targeted so far.

Still, the threat of continued conflict in the Ukraine and harsher sanctions have raised doubts among global investors, said Kathryn Stoner, a Stanford political scientist and senior fellow at FSI.

"Sanctions are always a blunt tool in international politics," she said, "but they can work in some instances. The Russian economy was already in decline prior to the U.S. imposition of sanctions last month, and sanctions as well as the clear threat of Russian armed intervention in Ukraine have clearly shaken investor confidence further in the Russian economy."

Stoner noted that Standard & Poor's last week cut Russia's credit rating to one notch above junk, citing a flight of capital from the country.

"It is hard to say that all of this is a direct result of the EU and U.S. sanctions … but I do think investors like to see stability in places where they invest, and they are signaling that isn't the case in Russia, where confidence was already low," she said.

Stoner does not believe that the world community will isolate Russia as it did a few years ago with Iran when that country embarked on a nuclear program. It would be difficult to get China on board with such severe trade sanctions, she explained, and on top of this, China, like Europe, is a big market for Russian oil and gas.

She suggested that greater pressure could be applied to Putin if the West continued to freeze assets of other wealthy Russians and limited travel visas for all Russians.

"Suddenly being shut out of places where they may have vacation homes or where they simply want to vacation will start reaching people further down the political chain," Stoner said.

Beyond targeting affluent Russians, she said, the United States could extend sanctions to hit average Russians more by focusing on such key sectors of the economy as minerals or consumer products. Then Russian public opinion might begin to turn against the Ukrainian incursion.

European dilemma

The U.S. is working closely with its European allies to project a united front to Russia. But the effort is challenging. Some of the biggest German businesses – with closer links than U.S. firms to Russia – have made their opposition to broader sanctions known in recent weeks.

Krasner said Europe faces a dilemma.

"Europe should lead," he said, "but European dependence on Russian energy supplies will make Europe reluctant to lead."

In the long term, Europe could ease its need for Russian natural gas by increasing its own energy production using new technologies, he said.

Stoner said she believes the EU will continue to support a "ratcheted up economic sanctions" approach. "Much is made of European dependence on natural gas from Russia, but the numbers are lower than the media would have us believe," she said.

According to Stoner, Germany receives about 35 percent of its natural gas supply from Russia, France gets only 16 percent and Britain receives none – the small Baltic states are more dependent than so-called Old Europe.

Another key is the interdependence between the Russian and European economies – the relationship runs both ways, she said. Today, Russia gets consumer electronics from Germany and many other products from the European Union that are critical to its economy.

The Europeans are not without leverage, said Stoner. "And they know it."

NATO and no superpower status

The Baltic states – Estonia, Lithuania and Latvia ­– that were formerly under the Soviet Union's control are clearly apprehensive about the future. While now NATO members, they have large numbers of Russian minorities – just like Ukraine.

What if Russia moves against them one day?

"The West has made it clear," said David Holloway, a Stanford professor of international history and senior FSI fellow, "that it will not use military force in Ukraine. But if Russia were to move against any NATO member state, NATO would be prepared to react with military force."  

Holloway said this is not just Europe's problem. Through NATO's commitment to defend other NATO members from attack, the United States is "intimately involved in European security."

He noted, "This is a deep crisis for the U.S. too, and may affect how other states around the world view it."

While nationalistic chest-pounding may be driving Russia's ambitions in the Ukraine, it may prove counterproductive on many fronts in the long run.

"The Russian action certainly won't restore Russia to Soviet superpower status," Holloway said. "It will weaken it economically, make it more feared in Europe, lead to more repressive policies at home – in fact, it is already doing all of those things."

Media Contact

Stephen Krasner, Political Science Department: (650) 723-0676, skrasner@stanford.edu

Kathryn Stoner, Political Science Department: (650) 736-1820, kstoner@stanford.edu

David Holloway, Political Science Department: (650) 723-1737, david.holloway@stanford.edu

Clifton B. Parker, Stanford News Service: (650) 725-0224, cbparker@stanford.edu