Wishful thinking and empty gestures are the bane of western foreign policy. The sanctions imposed on Russia by Britain, the EU and the US are a good example. After umpteen rounds of escalation since the full-scale invasion of Ukraine two years ago, they have now (according to a handy dashboard from the consultancy Castellum.AI) targeted more than 11,000 individuals and 4,600 businesses. They include oil and banking, imports and exports, financial transactions and physical shipments. The aim was to cripple the Kremlin’s war machine. They have not worked, any more than the 2,600 measures taken in previous years deterred the onslaught.
Reasons abound. Financial sanctions were too narrow. They excluded Russian banks that we deal with when buying gas, oil and coal. We merely shuffled assets from sanctioned to non-sanctioned banks. Russia runs an export surplus, so hitting its ability to borrow has not hurt much. Trade sanctions are full of blurry categories and exemptions. The oil price cap imposed by the EU was easily dodged by wily Greek and other shipowners. Crude oil is supposedly sanctioned but Britain and other countries still import refined products. German exports to Russia have plunged but, implausibly, exports to countries such as Kazakhstan, Armenia and Kyrgyzstan have rocketed.
Even now, a new study by the US-based Center for Defense Information and our own Royal United Services Institute shows, Russia imports millions of dollars’ worth of nitrocellulose, vital in making ammunition, from Nato countries and their partners (notably Germany, Turkey, Spain and Taiwan)
The latest rounds of British and American sanctions are no better. Banning the bosses of a Siberian jail from visiting Britain, supposedly in response to the murder of the anti-corruption campaigner Alexei Navalny, may sound good but it makes no difference. The deeper reason sanctions do not work is that we make them soft on purpose. We pretend to hurt our enemies but without hurting our own interests. Everyone involved in these posturing policies knows this. Nobody cares.
Worse, performative sanctions distract from measures that would really work. By far the most effective response to Russian aggression would be to give weapons to the people fighting it: the armed forces of Ukraine. They, not the cowed fragments of the opposition inside Russia, pose the only effective challenge to Vladimir Putin. If we had started two years ago ramping up our ammunition production, and given Ukraine the long-range missiles, air defences, fighter jets and other equipment it begged for, the war would look different. Our delay has shattered countless homes, lives, limbs and minds. Our policymakers seem astonishingly indifferent to this.
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But better sanctions, not the Potemkin efforts we have seen so far, could make a difference too. We could seize the $300 billion in Russian central bank assets held abroad and frozen for the past two years. The legal and political obstacles to this are trivial set against the danger we are in if Ukraine loses. Yes, other dictators may think twice in future about holding their assets in dollars, pounds and euros but in reality alternatives are few: the North Korean won, perhaps? Or Cuban pesos? Even Chinese yuan (also not fully convertible) have their drawbacks: being subject to the political whims of the Chinese Communist Party comes at a price. Rishi Sunak now (belatedly) backs this idea.
We could hit the western firms who keep the Kremlin’s war economy going. Britain, shamefully, is the biggest insurer of Russia’s international oil trade, to the tune of more than £100 billion in the first 18 months of the war. Nothing illegal here: insurers are allowed to rely on “attestations” that the cargos comply with the G7’s price cap.
Some multinationals have even preserved operations inside Russia. Mondelez, one of the world’s biggest snacks companies, says it condemns the war but cannot pull out of Russia, which makes up 2.8 per cent of its global revenues, because of obligations to customers, 2,700 staff and suppliers, including 10,000 farms. Boycotts in Sweden, Norway and Ukraine of products such as the Wispa bar have made little impact. The obesity firm’s chief executive Dirk Van de Put, who holds Belgian and US citizenship, told the Financial Times last week that the company’s shareholders did not “morally care” about its business in Russia.
He may be right but it might concentrate his mind if he were unable to visit Britain. Any country can ban bankers, lawyers, accountants, company directors and others from the rest of the world who keep the wheels turning for the Kremlin. The plutocratic elite is accustomed to frictionless globetrotting but only because we allow it. Even the faintest prospect of landing on a “no-fly” list of enablers would be an alarming prospect.
Another tactic would be to seize the anonymously owned property and other assets that still infest our financial system and property markets. A simple start would be to say that every property tax payment (council tax in this country) must be accompanied by proof of the identity of the ultimate beneficial owner: not a shell company in the Caribbean, but a real human. Failure would mean the asset was frozen and then auctioned.
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Don’t like it? Go to court, but that will mean revealing your identity. Send the proceeds to Ukraine.
