Why Economic Sanctions Continue Despite Their Failure
Sanctions have become very fashionable in the United States, which currently imposes them on over 15,000 individuals and entities, three times more than anyone else, in 20 countries with 2.5 billion people, i.e., 31% of all humans on planet Earth. From use sparingly in Cuba (since 1962) to Iran (1979), sanctions have proliferated this century and exploded under the Biden Administration.[1] Given their near-total lack of success, why do we continue imposing sanctions and expect a different result?
Sanctions, even if they do not work, offer politicians a way to be seen as “doing something” to right a horrible wrong in the world. Politicians thus signal their virtue to those with whom they seek to curry favor, particularly various ethnic groups whose members (voters) desire a certain outcome and corporate sponsors who stand to gain economically.
Sanctions are also stronger than diplomatic protests or public condemnations, which could have no effect and appear weak. They are also less aggressive than declaring war or undertaking bold covert action, which could have disastrous consequences, particularly against a strong target.
Additionally, US sanctions signal what to do. Allies, particularly NATO countries, are expected to not only blindly implement US sanctions but also impose their own in solidarity, even when it hurts their own people and economies.
After the government in Kyiv was toppled, in which the United States played no small role, sanctions were imposed on Russia and exploded in number and severity when the hot phase of the war began in 2022. Sanctions have targeted the oil and gas sector to limit revenue to finance the war as well as industries key to its prosecution. Oligarchs and ordinary citizens alike were to suffer and, in response, rise up and overthrow their leaders in favor of those more amenable to US policy goals.
However, the Russian people have responded to the West’s economic warfare by rallying around their leaders. Sanctions have not only failed to stir up political dissent sufficient to force changes in Russian policies but have also increased support for the very policies they were intended to quell.
Economic punishment intended to coerce Russia into retreat simply failed to materialize. After a small contraction in 2022, the Russian economy expanded in 2023 by 3.6% to ₽171 trillion ($5 trillion at PPP) as military production accelerated and social spending increased to soothe the home front.[2] Sanctions have led to difficulty in procuring spare parts and luxury goods, but these qualitative changes are insufficient to fuel widespread discontent that could lead to a transformation in political course.
In the United States, politicians continue to signal their unwavering support for punishing Russia. This signal, amplified by large swathes of the media, has been positively received by voters who have ethnic attachments to that part of the world. Corporate interests who profit from ongoing hostilities and those who stand to benefit from a Russian defeat have also reacted positively.
The United States maintains sanctions because its economy is not negatively affected by them. Revenues of companies that export liquified natural gas (LNG) have boomed as Europe scrambles to replace Russian gas lost to pipeline sabotage and closures. However, because US LNG is more expensive, European gas prices are triple that of US gas prices.[3]
This, in turn, translates into higher electricity prices. Not only is this bad for industry, which has come under pressure, but also consumers face higher bills or consume less electricity, i.e., lower their standard of living.[4]
Many poorer countries, especially in the Global South, have been squeezed out of the market as Europe and North Asia bid up the price of LNG cargoes. In some countries, this has led to shortages and energy rationing, which in turn has sparked unrest.
Since there is a very strong relationship between quality of life and energy consumption, leaders in developing countries seek to secure as much energy as possible for their people at the best price. Rising prices for LNG, as well as other fuels due to sanctions, lead developing countries to burn more coal, which is inexpensive and can be sourced globally.
Over the last 25 years, the share of coal in developed markets’ electricity output declined from 46% to 24%, but in developing markets, coal’s share rose from 24% to 42%.[5] This trend is set to intensify, led by China. In 2023, China brought 47 GW of coal-fired capacity online to 1,137 GW or 53% of the world total.[6] To appreciate this truly colossal scale, in 2023, China alone consumed 60% of the world’s coal.[7]
However, burning coal is dirty and leads to more cases of lung cancer, heart disease and asthma globally, the opposite of what Western policies are intended to achieve. To suggest that people remain in poverty to achieve the West’s foreign and environmental policy goals is a most anti-human stance.
In general, China, India, and the Global South continue to trade with Russia and have further distanced themselves from the United States due to its arm-twisting. Doubling down on these failed policies and pressuring others is likely to backfire and fuel social unrest and animosity toward the United States.
A better alternative would be to alter US policy toward Russia with a view toward cessation of hostilities and restoration of trade and energy flows. This would be more conducive to our foreign policy goals, improve our standing in the world, and contribute to the well-being of people everywhere.
Editor’s note: For more on this topic, see Scott Semet’s working paper Economic and Political Implications of Disrupting Russian Energy Flow.
Endnotes
[1] Author calculations based on 2021 WHO population data and sanctions list from “How four U.S. presidents unleashed economic warfare across the globe,” July 25, 2024, The Washington Post.
[2] “Росстат представляет первую оценку ВВП за 2023 год,” Rosstat.
[3] Author-calculated average price, November 2023-January 2024, using IMF Global Commodity Price data.
[4] Scott Semet, “Who Suffers More From Gas Warfare in Europe,” RealClear Energy, August 15, 2022.
[5] “Statistical Review of World Energy 2023,” The Energy Institute. Calculations by author.
[6] “Global Coal Plant Tracker,” Global Energy Monitor, January 2024.
