Failed US Sanctions on Russia

The U.S. mainstream media excludes almost all reporting and analysis that challenges the neocon/liberal-interventionist “group think” about the supposed Russian threat, but once in awhile a backhand acknowledgement of reality slips through, as Gilbert Doctorow was surprised to find.

By Gilbert Doctorow

The newest issue of Foreign Affairs continues to show a significant drop-off of professionalism in the mostly Russia-phobic essays at the flagship American magazine on international relations. Yet as low-grade as these essays may be, one of them is highly damaging to the dominant Washington narrative against Vladimir Putin’s Russia.

Emma Ashford, a visiting research fellow at the neoliberal/libertarian Cato Institute, produced an essay that is a jumble of statistics and arguments, many of them contradictory, and all of them set out without prioritization. The author clearly lacks experience and judgment. But what makes this essay newsworthy is that hit or miss the author is going up against the U.S. establishment and directly calling for an end to U.S. sanctions against Russia.

Russian President Vladimir Putin. (Russian government photo)

Russian President Vladimir Putin. (Russian government photo)

If I may sequence her arguments properly, the sanctions a) have been totally useless in changing Russian foreign and military policy in the directions desired by the U.S., b) they have caused very little damage to the Russian economy but much harm to immediate European and American economic interests, and c) they have caused the Russians to join with other BRICS members in creating institutions and pursuing financial practices that ultimately will undermine U.S. global hegemony, thereby compromising America’s future.

Along the way, Ashford agrees with IMF predictions that “even with continued low oil prices growth will return to the Russian economy in 2016.” This means the sectoral prohibitions have not impaired the economy in the ways intended.

The author notes that Moscow circumvented the sanctions partly by turning to China, where it concluded a $400 billion gas deal, a 150 billion yuan currency swap and other major agreements. Moreover, the sanctions on individual targeted companies have been compensated by largess from the Kremlin so as to attenuate any losses.

And the travel bans and property arrests on targeted members of the elite have only been a minor nuisance, which never provoked them to turn against their president. Looking to the future, Ashford does not expect the sanctions to eventually work, calling that “wishful thinking.”

The essay goes off the rails when Ashford tries to explain the “costs of containment” to the U.S. and its allies in Europe, which she characterizes as “major.” Next we read that in Europe the European Commission estimates that sanctions cut growth by 0.3 per cent of GDP in 2015. Perhaps even she understands that is not much, so Ashford tries again by citing predictions from the Austrian Institute of Economic Research that continuing the sanctions on Russia may cost Europe “over 90 billion euros in export revenue and more than two million jobs over the next few years.”  Predictions about the “next few years” are not the kind of hard data that normally moves politicians.

And she trots out the widely cited figure of 400,000 German jobs that are at risk over sanctions. Still more vaguely, she speaks of how major European banks like Société Générale in France and Raiffeisen in Austria may be destabilized and require state bailouts if their large loans to Russian concerns become uncollectible due to borrowers’ insolvency.  Turning to the U.S., Ashford directs attention to the administrative and legal costs that American banks have to bear as they enforce regulations calling for freezing and managing the assets of sanctioned individuals. They have had to hire additional legal and technical staff to ensure they are in conformity with the myriad of sanctions and thus avoid rippling penalties from the federal authorities for the least error of execution. At what cost? Not a word, although that is obviously a difficult measure to quantify.

Meanwhile U.S. energy companies are suffering foregone (not specified) profits by being unable to pursue the large exploration and production contracts they had concluded with Russian counterparts. And they may possibly lose the multi-billion-dollar investments they made in such projects before the sanctions came into effect. Still, there is no reason to see any of this as crippling punishment for U.S. energy companies.

I think it is fairly obvious that all of the foregoing “costs” for the U.S. and its allies are not much more than mosquito bites. By presenting them as she does, the author shows lack of discernment in what constitutes proof to justify a dramatic change in direction of a fundamental foreign policy stand by the U.S.

But her lapse of professionalism does not end there: Ashford moves on, falling into glaring logical inconsistencies. We are told that the sanctions “may harm European energy security.” Specifically, Ashford cites a prediction from Cambridge Energy Research Associates that as a result of sanctions Russian oil production may drop from 10.5 million barrels a day today to 7.6 million barrels in 2025.

This does not jibe with her remarks earlier in the essay on how the Russians were circumventing sanctions: “Russia has been able to find loopholes .[and] in order to obtain access to Arctic drilling equipment and expertise, Rosneft acquired 30 percent of the North Atlantic drilling projects belonging to the Norwegian company Statoil.”

Nor does this jibe with her assertion at the end of her essay when setting out her recommendations on what punitive measures should replace sanctions if we accept that they have been a failure. There she urges the U.S. to export oil and liquefied natural gas to Europe so as “to provide Europe with an alternative source of energy” and “to starve the Russian state of revenue.” This would, she says “allow European states to wean themselves off Russian oil and gas.”

One of these positions may be correct, but they cannot all be correct, and it should not be up to the reader to choose from this Chinese restaurant menu.

Given the unimpressive nature of Ashford’s arguments against sanctions coming from their past and present economic consequences, her real knock-out blow against sanctions comes in the completely different and unquantifiable area of argumentation that is political and geopolitical. She faults the sanctions for prompting a “rally round the flag” phenomenon in Russia that has, perversely, raised President Putin’s approval rating from 63 percent in March 2014 when Russia took possession of Crimea to 88 percent in October 2015. His power, which theoretically should have been shaken by the U.S. and E.U. sanctions, has instead consolidated.

The sanctions also encouraged Russia to take actions to protect its financial institutions that ultimately will threaten the global economic influence of the United States. These measures include the creation of an alternative international payment system to SWIFT, the creation of a domestic credit-card clearing house that challenges Visa and MasterCard, and the creation of a BRICS development bank that duplicates the World Bank and International Monetary Fund.

The net effect of these actions, once implemented, will be to cause the United States “to have a harder time employing economic statecraft,” by which she means imposing crippling financial sanctions on other states as they succeeded in doing to Iran. In the same vein, Ashford sees a threat in Russia’s shift away from trading in dollars.

Ashford’s recommendation, the true punch-line of the article, is that “the United States should cut its losses and unilaterally lift the majority of the sanctions on Russia.” This advice surely will set off alarms within the Beltway.

In that sense, Ashford’s essay may have dealt even a harder blow against Washington’s “sanction Russia” consensus than did John Mearsheimer’s iconoclastic Foreign Affairs article from 2014, “Why the Ukraine Crisis is the West’s Fault,” a top-drawer essay that caused dyspeptic fits and sparked a lively debate in the follow-on issue of the magazine.

Gilbert Doctorow is the European Coordinator, American Committee for East West Accord, Ltd. His latest book Does Russia Have a Future?(August 2015) is available in paperback and e-book from Amazon.com and affiliated websites. For donations to support the European activities of ACEWA, write to eastwestaccord@gmail.com. © Gilbert Doctorow, 2015

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16 comments for “Failed US Sanctions on Russia

  1. Drew Hunkins
    January 5, 2016 at 6:58 pm

    It’s very simple folks, real simple: the Washington/Israeli power nexus will never ever defeat Russia, ever, period.

    Oh, wait, the only way the Washington/Israeli power nexus defeats Russia per se will be when the entire world is obliterated in nuclear armageddon.

    The days of mother Russia genuflecting and getting on its knees to beg Western investors to come pillage its land, labor and resources and harass its border regions are totally over. Clearly there’s a segment of the Washington-New York elite who simply can’t countenance this prospect whatsoever. The refusal of this wing of our ruling class to face this reality could leave us all in great peril.

    • Angie
      January 7, 2016 at 10:13 am

      Exactly. Bottom line: a tricky poker player can never defeat a chess master!
      Time the crumbling empire admit its miserable failure. Be it in Ukraine, Syria or elsewhere.
      That also applies to the fraudulent FED, time to kiss the petro$ good-bye.

  2. Bob In Portland
    January 5, 2016 at 7:10 pm

    A couple of comments. First, the fascist coup in Ukraine serves US energy interests in jeopardizing the flow of natural gas from Russia to eastern Europe. That was the reason for the coup, not democracy or any other flag-waving cover story. That there have been LNG terminals being constructed on the east coast of the US over the last five years strongly suggests that someone thought it would a good and profitable idea to sell natural gas to someone across the sea. Unfortunately, US natgas is in no way competitive with the cost of Russian gas. It would only make sense if Russian gas were blocked from the European market.
    Nor should the political blockades against Russia to prevent for new gas lines avoiding Ukraine by ignored.
    Meanwhile, the war in Syria would be better understood if the map were compared to natural gas deposits in the Middle East and the proposed pipelines that the war interrupted.
    The ultimate goal for the US is to control the oil and gas of the region, to include the huge pool of energy in Central Asia under direct or indirect control of Russia. You didn’t think that we’ve stayed in Afghanistan for fifteen years to make sure Afghan women get the vote, or some other bull, did you? No, US officials and oil executives have been planning to run a pipeline from Turkmenistan, through Afghanistan and Pakistan, to India (TAPI, look it up) to power the factories where many former American jobs landed. Now it appears that that energy may be supplied by Iran, which is something that the US doesn’t want.

  3. James Anderson
    January 5, 2016 at 7:58 pm

    This article is little more than low-grade drivel from a Kremlin sock-puppet who appears to be desperately striving to sound like a bad Soviet-era propaganda reel. Sanctions have taken the edge off of Putin’s revanchism and shown Russia that there are cosequences to its illegitimate actions in Ukraine. Further, polls show that sanctions are strongly supported by the people of Europe and the US. Purin’s iver-riding cincern is that he holds in to the reins of power in Russia. He will continue to provoke confrontation with the west in order that he can spread more effectively his message of nationalism and paranoia , keep the Russian people compliant and maintain those high approval ratings that this myopic author foolishly finds so laudable.

    • Dmitri
      January 5, 2016 at 8:28 pm

      James Anderson, you better post your comments somewhere on Fox News or something like that. Readers of this site are intelligent enough to not follow your MSM propaganda.
      Would you give any fact like a link to the “polls show that sanctions are strongly supported by the people of Europe and the US”? And how does Putin “provoke confrontation with the West”?

      • James Anderson
        January 6, 2016 at 3:44 am

        Dmitri, you better post your comments on RT where the views of Putin’s brainwashed sycophants are welcome. Not everybody is dumb enough to follow your Kremlin propaganda.

        • Karl
          January 6, 2016 at 8:37 am

          In other news apparently Samantha Power has taken up internet comment section shilling under the alias James Anderson

          • Drew Hunkins
            January 6, 2016 at 11:18 am

            LOL! Good one Karl. Excellent!

          • jo6pac
            January 7, 2016 at 11:51 am

            LOL or may be the cookie monster herself vicky nulander.

          • Andrew Ostapchuk Jameson
            January 8, 2016 at 3:14 am

            Yes, if Samantha the Tourette’s-yokel was instead a person from a region which will inevitably be taken back by the Poles and punished when Uncle Sam isn’t looking ;)

        • bobbyfisher
          January 9, 2016 at 9:57 pm

          James Anderson never developed beyond kindergarten level abuse.
          Blame it on American education system.

          • Gregory Kruse
            January 11, 2016 at 11:13 am

            It deserves much blame.

    • Uncle Sam's comeuppance
      January 6, 2016 at 4:34 am

      Most of all you stated about Russia and Putin, is actually the fact of the matter when looking at the U.S. and our leadership over the last 14 years — most obviously in regards to events in the Middle East post 9-11 and Ukraine since 2014.

  4. Zachary Smith
    January 5, 2016 at 8:20 pm

    Along the way, Ashford agrees with IMF predictions that “even with continued low oil prices … growth will return to the Russian economy in 2016.”

    If this is true, Saudi Arabia is a lot of trouble. Assuming the Russians keep pumping oil as fast as they can, and making up with volume the income they’d normally have with higher prices, they’re going to bankrupt the Saudis. Iran is in roughly the same boat, for that nation is used to living on a limited income, and the lower prices aren’t going to hurt them in the short term either. Besides the harm done to Saudi Arabia, both nations would also be helping drive the US and Canada out of the fracking and oil sands businesses.

  5. Abe
    January 6, 2016 at 1:01 pm

    MH17 Coroner’s Inquest: More Questions than Answers
    By James ONeill
    http://journal-neo.org/2016/01/06/mh17-coroner-s-inquest-more-questions-than-answers/

  6. Robert
    January 6, 2016 at 2:04 pm

    This may be one of the funniest piece if Kremlin proof I have seen…Certainly the most blatant.

Comments are closed.