Does It Hurt Yet?

It is now some six months since the EU and other Western states imposed sanctions on Russia. The sanctions were - at least officially - intended to force Russia to stop the war against Ukraine. Now - half a year later - we can evaluate the effect of those sanctions as some of the results are in.

Firstly, have the sanctions stopped the war, reduced its severity, or limited its scope? No. Not even close. It has, however, thrown Putin’s Russia into the arms of Communist China which does not support any sanctions. It has also heralded the beginning of an era in which countries are seeking to create more self-sufficiency in energy and food supplies so as better to be able to impose and withstand sanctions in the future. The latter is immensely damaging to the long-term prospects of the world economy as basic economic wisdom has it that products and services are best produced in the countries that have a competitive advantage in those specific products and services, irrespective of national borders. That is the basis of international trade, which will be eroded to the detriment of everybody.

Secondly, have the sanctions damaged the Russian economy? Not only have they not had any serious effect, the reduced gas supplies from Russia mean that global gas prices have increase by about 1,000 per cent since September 2021. So of course the limited quantities of gas that Russia still sells command prices that produce significant revenue for the Russian suppliers. Thus, The Centre for Research on Energy and Clean Air (CREA), a Finnish think tank, has calculated that Russia has earned revenue of EUR 163 billion for sales of oil, gas, and coal since the invasion of Ukraine. Over the same period, they estimate that Russia has spend around EUR 100 billion on the invasion of Ukraine. So Russia is not about to run out of money to finance the war.

It is likely that the Western politicians knew perfectly well that the sanctions were never going to work. The sanctions were pure virtue-signalling designed to please the media and the voters who were baying for Putins blood at the time of the invasion. Also, one could be forgiven for suspecting that the politicians introduced the sanctions well knowing that they would cause sky-rocketing energy prices and therefore create an artificial need for governments to intervene with more “generous” government handouts (of people’s own money), more government borrowing, and - eventually - more government taxation, thus expanding the scope of the state yet again. I.e., in much the same way as the government-induced pandemic lockdown panic did. But perhaps that is giving the politicians too much credit as their ability to predict obvious consequences may not be all that impressive.

It is certainly a fact that the scope of the state is rapidly increasing due to the sanctions. France is now completely nationalising EDF, the major French energy company, and price caps, rationing, and subsidies proliferate as if we were already in World War 3. The expansion of renewable but heavily taxpayer-subsidised energy sources such as wind and solar power is accelerated, using self-sufficiency and lack of Russian fossil fuels as pretexts. All this in the holy name of sanctions that are not fit for purpose, and that cause untold suffering and pain to the civilian populations and businesses at both ends of the sanctions, i.e. both in the East and in the West.

In addition to being ineffective and even counterproductive, the immorality of the sanctions are on such a scale that it beggars belief. Almost the entire world population - not just the populations of the sanctioned and sanctioning countries - are suffering under eye-watering gas prices, fuelling rampant inflation that quickly erodes the value of people’s hard-earned assets. Sanctions are the collective punishment of innocent people for the purpose of ‘sending messages’ to national leaders. Messages that are happily ignored by people such as Putin who will personally suffer no adverse consequences of the sanctions. On the contrary, he is understandably very happy that it gives him an opportunity to manipulate the energy markets and earn billions for deliveries of much less gas.

So what to do about Ukraine? They way to go would seem to be continued support for the Ukraine by voluntary groups and organisations that should be allowed to send the Ukrainians any supplies needed to continue the resistance against the Russian forces, including weapons. One could then hope that Russia eventually tires of the war in the same way that the Soviet Union (and later the US) tired of war in Afghanistan, leading to withdrawal. But as it should be painfully obvious from the above, sanctions are clearly not the answer.