As the Ukrainian military and armed citizenry fight against their Russian invaders, political leaders across the West are once again scrambling to respond to a Vladimir Putin gamble. On Friday, President Joe Biden announced a new round of sanctions against Russian banks and entities as the Pentagon sent more American troops to Europe to reinforce NATO along its eastern front. Yesterday, the U.S. and its allies announced major new sanctions on Moscow, including cutting Russia out of the SWIFT financial transaction system and freezing some of its central bank’s assets.
Although sanctions are an important tool for constraining the Kremlin’s resources and ability to exert power, overemphasizing them can be a distraction. Putin has already told us and shown us what he fears, and that is where the U.S. and its allies should focus its attention.
Sanctions are a helpful indicator of international opposition to Russian aggression and, one hopes, a booster to Ukrainian morale, but the most severe sanctions will cause significant collateral damage and destroy any chance of forming a united front against Putin. Preventing Russian entities from exporting oil and gas is the most severe option available, but it will backfire tremendously without crippling Russian finances. Over the past several years, Russia has accumulated about $630 billion in currency reserves, which is enough to make up for Russia’s 2021 oil and gas revenues five times over. Many of those assets have now been frozen, but it is not clear yet to what extent exemptions will allow more flexibility for Moscow’s central bankers. Even so, taking an action that will not yield much effect for some time is not always a bad idea if the long-term benefits are worth it.
In this case, they are not worth it at all. Largely because of a series of bad decisions made over the past half-century, many European countries, including Germany, are utterly dependent on natural gas from Russia to power their factories and heat their homes. Americans get upset when the price of gas increases too much; imagine the political backlash in Europe next winter if Russian gas is not available. Even if the European leaders enacted these sanctions, the result would be to cause immense suffering in Central and Western Europe that would discredit the politicians who enacted the sanctions and make hawkishness toward Russia a political nonstarter. For this reason, even yesterday’s sanctions leave allowances for oil and gas payments. Germany’s decisions to freeze the Nord Stream 2 pipeline and arm the Ukrainians are late, but commendable, and the U.S should encourage Chancellor Scholz to take more productive steps rather than punish him.