Our View: Sanctions will hit us all, but there was no alternative

Western countries justifiably unwilling to join the war in Ukraine have decided to wage a steadily escalating economic war against Russia. This involves imposing severe sanctions that has cut Russia from the global financial system and is designed to devastate its economy as well as the freezing of the assets of oligarchs who are believed to be on good terms with President Putin and therefore complicit in the invasion.

The unity shown by the West in waging this economic war has been unprecedented. It has frozen the assets of the Russian central bank and suspended it from the Bank of International Settlements, to stop it using its services. Many Russian banks have been removed from the Swift international payments system, while the EU has said it would target 70 per cent of the Russian banking market and big state-owned companies. Restrictions have been placed on products that can be sold to Russia by the US, EU and UK, which have also banned all Russian flights from their airspace.

Apart from governments, big international businesses like Starbucks, McDonald’s and Coca-Cola have halted their operations in Russia, because of mounting pressure. They could not be seen to generate profits from Russia. “It was affecting their share price and the feeling was that it was just utterly inappropriate to continue to do so,” a fund manager told the BBC. International food companies such as Nestle as well Procter & Gamble have stopped investment while big international retailers have suspended sales. Even the big four accounting groups decided to close their members firms in Russia.

The EU, however, will carry on buying natural gas from Russia which accounts for 40 per cent of Europe’s gas consumption and 25 per cent of its oil supplies. It has said it will end Europe’s dependency on Russian oil, gas and coal by 2027, but for now it will carry on buying Russian gas even though this means it would carry on helping fund Putin’s war in Ukraine, which in a way defeats the main purpose of sanctions. There were limits to the harm the EU was prepared to inflict on its members, even though the EU is threatening tougher economic sanctions in the event President Vladimir Putin made a move against Kyiv.

The reality is that economic sanctions of the unprecedented severity imposed on Russia will also cause problems for the economies of Western countries. Oil and gas prices, which have been on an upward path because of supply chain problems caused by the pandemic, are expected to keep on rising because of sanctions, pushing up prices all over the world. And people will also be faced with higher food prices as supply from Ukraine and Russia, which accounts for 25 per cent of the world’s annual wheat trade, has been disrupted. Prices of fertilisers have also soared.

People everywhere will suffer from sanctions in the form of higher prices which are described as the unintended cost. Having decided, quite rightly, they would not join the war in Ukraine, the West opted to fight with sanctions, but as The Economist wrote, “it has wielded them savagely.” It added: “No major economy in the modern world has ever been hit so hard by such weapons.” This was inevitable given that the sanctions imposed on Russia over the annexation of Crimea in 2014 were little more than a slap on the wrist for Vladimir Putin and proved woefully inadequate at stopping his aggressive expansionism as we have seen.

Severe sanctions that would have a heavy cost for the economy and affect Russians’ living standards were deemed the only effective way to punish Putin’s invasion, as well as act as a deterrent for future attack on neighbouring countries. Will they work? They do not seem to have had much impact apart from hardening his resolve. If anything, Russia’s war operations in Ukraine have been escalated and the ferocity of the assault increased, even though this may have more to do with the invading army’s failure to make enough headway during the first couple of weeks of the war than it does with the escalation of sanctions.

Although one of the objectives of the sanctions was to turn Russians against Putin for causing the economic hardship, they have had the opposite effect, fuelling nationalism and rallying support around him. His support has, reportedly, reached 70 per cent and this cannot be exclusively attributed to the propaganda of state-controlled media. Sanctions support Putin’s narrative about the West’s unrelenting hostility towards Russia and his claims of an “anti-Russia created by the West”.

In the end, the West had no choice but to impose sanctions, as western governments had no wish to enter a war with Russia. That people everywhere will suffer the economic effects to varying degrees is not in doubt, but Putin could not have been left to wage his war, described by the Versailles declaration as “a tectonic shift in European history”, without consequences.