Some thoughts on sanctions regime towards Russia

The discussions on the effectiveness or not of financial and trade sanctions against Russia in response to the invasion of Ukraine often seem, whatever the conclusions, to come up against three methodological pitfalls.

·????? Confusion or lack of definition of what we measure by the effectiveness of sanctions: do we measure the impact on economic indicators such as the trade balance or foreign investment flows, or on financing capacity? and access to financial markets, or on the war economy (we still need to define what we mean by this term; I guess we can expect various interpretations), and over what period this measurement is made (before or since 2014 or since 2022).

·????? A strong silo or prism effect, depending on whether the analysis is carried out from a financial, economic or geopolitical point of view. While these sanctions are not the only ones in this context of conflict. We are faced with the need for a systemic analysis, with the interaction between several factors which complicates the analysis. The measurement of the impact of sanctions is "polluted" by other effects, which should be isolated and measured; for example, the circumvention effects, by purchasing dual technologies under embargo in other circuits, Russia circumvents the sanctions but must modify its logistics and has an additional cost in its value chain, according to the authors we can read that the sanction is ineffective or on the contrary very effective.

Another example is the mobilization, or exile of the labor force which has an effect on the production tool and therefore on the economic performance indicators; or the social and economic cost of war casualties or that of population displacements in the border districts of Ukraine; the last example is the cost of conversion to a war economy (and one day the potential cost of reconversion). We are outside the scope of sanctions here, and we should identify these effects when we look at changes in economic indicators, and not consider that sanctions alone cause them to fluctuate.

·????? The fact that sanctions regimes are most often graduated over time, and are part of a dynamic pattern; a countermeasure will respond to a measure, then another sanction will attempt to respond to this countermeasure; this continuous play of sword and armor; we can think for example of the recent extension of the US Treasury sanctions regime which makes it possible to hit non-Russian foreign banks participating in the commercial circuits of the Russian military industry, or of Russian attempts to create an alternative to the SWIFT payment system, circuit from which Russian banks have been excluded, which despite certain speeches from non-financials is generally not a factor facilitating transactions.

We will retrieve here all the issues surrounding sanctions evasion, such as the export circuits for raw materials which are the bases of the Russian economy, or the new import circuits to obtain certain technologies or simply arms and munitions. . It is therefore reductive to establish the effects of measures at a given moment, without contextualizing which measures have been in place and since when and which countermeasures have appeared on this date.

We are at risk of erasing or at least minimizing the cost (or the benefit in some perspective) of the effects of adaptation and "deviation "that Russia was able to implement in its logistics circuits; and to reduce the time horizon to a year-to-year comparison (while the conflict, depending on the point of view, extends from more than ten to more than two years, and will continue in 2024) and what can be analyzed are interested in the aftermath of "sanctions" (if one form or another of agreement allows them to be lifted, how the reconversion and reorientation of trade flows will take place or not).