What are wise sanctions

Economic sanctions work

Anyone who claims that sanctions against Russia are expensive and useless is wrong. Alone they will not induce Russia to change policy, but they are a means of pressure to bring Moscow to the negotiating table. Sanctions and dialogue are by no means mutually exclusive, say Sabine Fischer and Janis Kluge.

Suddenly there is another cross-party debate in Germany about the sense and nonsense of the Russia sanctions. In January, East German minister-presidents from the CDU to the SPD to the left complained in a letter to the Chancellor, and the eastern German states in particular suffered from the economic consequences. The AfD and the left run against the "anti-Russia" policy of the federal government in the Bundestag. A generational conflict over the new Foreign Minister Heiko Maas' policy towards Russia has flared up in the SPD, which is searching for meaning. Here, too, there is a dispute about the sanctions, which, according to the common argument of the critics, cause high costs, but would "bring nothing".

This debate is detached from reality in many ways. First, it is detached from the knowledge of economics. There is a big gap between the state of economic research and the perception of the damage in the German debate. Again and again, EU sanctions, Russian sanctions and American sanctions are lumped together.

It is undisputed that the import embargo imposed by Russia on agricultural goods has led to export losses. A study by the Kiel Institute for the World Economy shows, however, that Germany's exports suffer less than those of Lithuania, Poland or the United States, for example. Russia itself is most affected by the Russian sanctions. The Kremlin has been pursuing a protectionist industrial policy for some time, in which the import embargo was seamlessly integrated in autumn 2014. The Russian agricultural industry has benefited. The consumers pay the bill.

Hardly any reliable data on the costs of various sanctions for Germany

On the other hand, there is hardly any reliable data for Germany on the costs of EU sanctions. When designing the restrictive measures, attempts were made to minimize both the damage to the EU and the broad impact in Russia. In some cases, German exporters are uncertain as to whether their products are subject to the export ban on goods that can be used for military purposes. However, this effect can hardly be measured. Some studies therefore attribute all German export losses to EU sanctions across the board and point to possible indirect consequences of the sanctions. Their results should be viewed with caution.

The new American sanctions are a real problem for the German economy. In 2017, the United States turned its back on the sanctions policy coordinated with the Europeans and is now pursuing an autonomous approach. In contrast to the very targeted EU sanctions, the new measures against Russian oligarchs lack predictability: reasons for sanctions are mixed up, criteria for their lifting are blurred. Due to the extraterritorial effect, the American sanctions can also become costly for Germany. However, it is still too early for an economic analysis of these costs.

Second, the new German debate is moving away from the historical events that prompted Europeans and Americans to impose sanctions in 2014 and 2015. Russia annexed Crimea in violation of international law in March 2014.

In the summer of 2014, regular Russian troops turned the course of the war in eastern Ukraine against Kiev. Since then, Moscow has supported the de facto states that emerged in Donetsk and Luhansk politically, militarily and economically. This radical break with the European security order is increasingly being disregarded. Moreover, the more detailed the critics talk about the sanctions, the less they seem to be talking about Ukraine.

Thirdly, along with the reasons, the debaters also lose their connection to the goals, context and success of the EU sanctions since 2014. The relevant Council decisions indicate that, in view of developments in Ukraine, the European Union took restrictive measures »to increase the costs of Russia's actions which undermine the territorial integrity, sovereignty and independence of Ukraine, and to seek a peaceful settlement to support the crisis «.

It was always clear that the sanctions alone would not induce Russia to change policy. Rather, they are an instrument and leverage that should be used to bring Moscow to the negotiating table. The critics' assertion that sanctions and dialogue are mutually exclusive is wrong.

Some of the sanctions against Russia have achieved their goals

Against this background, if one asks the question of the success of the sanctions, a picture emerges that differs significantly from the rumored impression. The sanctions in 2014 and 2015 increased the cost of aggressive behavior for Russia. In this way they helped to prevent the war in Donbass from escalating further and to enter into a dialogue with Moscow in Minsk.

With the sanctions, the European Union demonstrated for the first time that it is capable of collective action vis-à-vis Russia - and thus caused the Russian leadership an unpleasant surprise. It can be assumed that this knowledge still has an anti-escalation effect on the Russian side. In other words: the sanctions achieve some of the originally set goals and are therefore already partially successful even before the Minsk agreements are fully implemented.

The fourth and perhaps most dangerous loss of reality in the current sanctions discourse, however, relates to the future: The criticism of the sanctions suppresses the possible effects of a dismantling of the sanctions, which is decoupled from the implementation of the Minsk agreements. Such a step could have a disinhibiting effect on both parties to the conflict: on Russia and the separatists it supports in eastern Ukraine, because there would no longer be any consequences for aggressive action; on Ukraine, because the perceived loss of Western support could lead Kiev to short-term desperate acts. At least as serious is the fact that the EU would lose both internal coherence and any credibility as a foreign policy actor. At a time of major international challenges, not just from Moscow, this damage would quickly eclipse all economic costs of the sanctions.

Critics of the EU sanctions policy would do well to be aware of this risk. Instead of questioning sanctions across the board, they should do everything possible to protect the EU's moderate and sensible sanctions policy from being devalued by the new American sanctions. Dissolute criticism of America is not the method of choice. Rather, it is important to get Washington back on board with the sanctions.

Published as a guest article in the Frankfurter Allgemeine Sonntagszeitung, May 6, 2018, p. 24.