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A year into a conflict with Russia, are sanctions working? A year into a conflict with Russia, are sanctions working?
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MOSCOW — When it comes to inflicting economic pain on Russia, the Kremlin may be doing a better job than Western sanctions.MOSCOW — When it comes to inflicting economic pain on Russia, the Kremlin may be doing a better job than Western sanctions.
Just don’t tell that to the Russian people, who overwhelmingly blame the West for a deepening recession that has parts of central Moscow starting to look like a ghost town.Just don’t tell that to the Russian people, who overwhelmingly blame the West for a deepening recession that has parts of central Moscow starting to look like a ghost town.
Prices are soaring. The ruble is dropping. And Russian living standards are falling even as citizens on Wednesday celebrated the first anniversary of the annexation of Ukraine's Crimean Peninsula. Prices are soaring. The ruble is dropping. And Russian living standards are falling a year after the annexation of Ukraine's Crimean Peninsula.
Many economists say the problems would have erupted even if there were no sanctions. But the wave of Western penalties against the Russian economy has inadvertently given the Kremlin political cover with its own people, analysts say. Many economists say that problems would have erupted even if there were no sanctions. But the wave of Western penalties against the Russian economy has inadvertently given the Kremlin political cover with its own people, analysts say.
A year after the annexation, the West has been able to do little to alter President Vladimir Putin’s battlefield calculus. Russia is still fueling a bloody conflict in eastern Ukraine that has cost more than 6,000 lives, U.S. officials say. Putin denies involvement in Ukraine, and he shows little sign of backing down. His popularity at home is sky high even as his nation’s economy is in turmoil.A year after the annexation, the West has been able to do little to alter President Vladimir Putin’s battlefield calculus. Russia is still fueling a bloody conflict in eastern Ukraine that has cost more than 6,000 lives, U.S. officials say. Putin denies involvement in Ukraine, and he shows little sign of backing down. His popularity at home is sky high even as his nation’s economy is in turmoil.
Although sanctions have hurt, much of Russia’s current economic weakness has to do with the 45 percent drop in the price of oil since June, analysts say. But most Russians are pointing their fingers toward the White House. Sanctions, the West’s primary tool to try to sway Kremlin policies, have become a punching bag. Although sanctions have hurt, much of Russia’s current economic weakness has to do with the 48 percent drop in the price of oil since June, analysts say. But most Russians are pointing their fingers toward the White House. Sanctions, the West’s primary tool to try to sway Kremlin policies, have become a punching bag.
The effectiveness of the sanctions is becoming a burning question as Obama comes under growing bipartisan pressure to arm Ukraine if a shaky cease-fire falls apart. He could also ramp up sanctions. Some in Congress have floated cutting off Russia from the international bank-transfer system, a possibility that Russian officials said would be tantamount to an act of war. The effectiveness of the sanctions is becoming a burning question as President Obama comes under growing bipartisan pressure to arm Ukraine if a shaky cease-fire falls apart. He could also ramp up sanctions. Some in Congress have floated cutting off Russia from the international bank-transfer system, a possibility that Russian officials said would be tantamount to an act of war.
The options have split Russia’s weakened ranks of Kremlin critics, who were also deprived of a charismatic ringleader, Boris Nemtsov, after his murder two weeks ago. Some opposition leaders say mounting economic woes will eventually turn Russians against Putin. But so far, the main anger the sanctions seem to have fueled here is anti-Americanism, which is reaching heights not seen since Stalin, some observers say. The options have split Russia’s weakened ranks of Kremlin critics, who were also deprived of a charismatic ringleader, Boris Nemtsov, after he was gunned down last month. Some opposition leaders say mounting economic woes will eventually turn Russians against Putin. But so far, the main anger the sanctions seem to have fueled here is anti-Americanism, which is reaching heights not seen since Stalin, some observers say.
“The full financial force of the West is concentrated on attacking us,” Nikolai Starikov, a pro-Kremlin pundit given heavy rotation on Russian state TV, told a seminar as the ruble swooned in December. “What they are doing is smashing the foundations of a great geopolitical construction that will become their competitor.”“The full financial force of the West is concentrated on attacking us,” Nikolai Starikov, a pro-Kremlin pundit given heavy rotation on Russian state TV, told a seminar as the ruble swooned in December. “What they are doing is smashing the foundations of a great geopolitical construction that will become their competitor.”
Western leaders have long said the main target of their sanctions is the Kremlin, not ordinary Russians, and they have tried to dole out economic pain with pinpoint precision. Most Russians shrugged off the first several rounds of sanctions, which targeted people and institutions close to Putin.Western leaders have long said the main target of their sanctions is the Kremlin, not ordinary Russians, and they have tried to dole out economic pain with pinpoint precision. Most Russians shrugged off the first several rounds of sanctions, which targeted people and institutions close to Putin.
But after the July shoot-down of a civilian jetliner over eastern Ukraine, the West struck harder, and Russia retaliated with import bans on most Western food products. The Russian countersanctions have hurt European farmers, but they may have affected Russians most of all: Food prices soared afterward. The ruble’s plummet, which accelerated in November, only made things worse.But after the July shoot-down of a civilian jetliner over eastern Ukraine, the West struck harder, and Russia retaliated with import bans on most Western food products. The Russian countersanctions have hurt European farmers, but they may have affected Russians most of all: Food prices soared afterward. The ruble’s plummet, which accelerated in November, only made things worse.
The price of cabbage has almost doubled in the past year. Pork is up nearly a third, and potatoes a quarter. Late last month, Russia’s biggest grocery chains posted signs in their stores announcing temporary price freezes on key products, but many items are still getting costlier by the week.The price of cabbage has almost doubled in the past year. Pork is up nearly a third, and potatoes a quarter. Late last month, Russia’s biggest grocery chains posted signs in their stores announcing temporary price freezes on key products, but many items are still getting costlier by the week.
The Russian economy is now expected to contract up to 6 percent this year, fueled by the dropping price of oil. The ruble has lost nearly half its value since the beginning of 2014. By some estimates, almost a third of Moscow restaurants will close by the end of this month, leaving storefronts empty across the city. The Russian economy is now expected to contract up to 6 percent this year, fueled by the dropping price of oil. The ruble has lost nearly half its value since the beginning of 2014, although it has strengthened in recent days. By some estimates, almost a third of Moscow restaurants will close by the end of this month, leaving storefronts empty across the city.
Ordinary Russians are also feeling the pain. Julia Lebedeva, 46, said her refrigerator has slowly gotten emptier in recent months. Her pay as a customs broker was cut by a third even as prices have spiked.Ordinary Russians are also feeling the pain. Julia Lebedeva, 46, said her refrigerator has slowly gotten emptier in recent months. Her pay as a customs broker was cut by a third even as prices have spiked.
“I eat fewer tomatoes, fewer cucumbers, less lettuce. We just don’t have them,” she said. Cauliflower, once a standby, is now a rare treat.“I eat fewer tomatoes, fewer cucumbers, less lettuce. We just don’t have them,” she said. Cauliflower, once a standby, is now a rare treat.
The worst thing is the fear of the future, she said: “Today I can say things aren’t great. They aren’t bad. But tomorrow they might turn really awful.”The worst thing is the fear of the future, she said: “Today I can say things aren’t great. They aren’t bad. But tomorrow they might turn really awful.”
The vast majority of Russians — 91 percent — say their biggest concerns are now economic, according to a January poll from the independent Moscow-based Levada Center. Many people fault the West. The vast majority of Russians — 91 percent — say their biggest concerns are now economic, according to a January poll from the independent Moscow-based Levada Center. Many people fault the West.
“The main explanation is that the West and America is to blame for everything,” said Natalya Zorkaya, a pollster and analyst at the Levada Center. The economic anxiety is doing little to inspire Russians to push their leaders for policy changes, she said. “The main explanation is that the West and America is to blame for everything,” said Natalya Zorkaya, a pollster and analyst at the Levada Center. The economic anxiety is doing little to inspire Russians to push their leaders for policy changes, she said. In December, Putin blamed 25 to 30 percent of Russia’s economic woes on the sanctions.
The Western sanctions are having a clear economic effect, even if they may not be the main drivers of Russia’s overall slowdown. Some of Russia’s biggest banks, hit by borrowing restrictions from the West, have limited their lending at home and turned to the government for aid. State-controlled Rosneft, Russia’s largest oil producer, also was sanctioned and has sought billions in state loans. The Western sanctions are having a substantial economic effect, even if they may not be the main drivers of Russia’s overall slowdown. Some of Russia’s biggest banks, hit by borrowing restrictions from the West, have limited their lending at home and turned to the government for aid. State-controlled Rosneft, Russia’s largest oil producer, also was sanctioned and has sought billions in state loans.
At the same time, more than $150 billion flowed out of Russia last year. At the same time, more than $150 billion flowed out of Russia last year.
The effects of the sanctions on Kremlin policymaking are difficult to assess, analysts say, since there is no way to know whether the economic pressure helped avert an even bloodier fight in Ukraine. Kremlin critic Alexei Navalny said in an interview that sectoral sanctions had held Putin back from rolling far deeper into Ukraine, but he said only wider sanctions against Russia's elite would force further policy changes. Violence has quieted in eastern Ukraine since a cease-fire reached in mid-February. But U.S. officials say Russian tanks continue to flow over the border. The effects of the sanctions on Kremlin policymaking are difficult to assess, analysts say, since there is no way to know whether the economic pressure helped avert an even bloodier fight in Ukraine. Kremlin critic Alexei Navalny said in an interview that sectoral sanctions had held Putin back from rolling far deeper into Ukraine, but he said only wider sanctions against Russia’s elite would force further policy changes. Violence has quieted in eastern Ukraine since a cease-fire reached in mid-February. But U.S. officials say Russian tanks continue to flow over the border.
Secretary of State John F. Kerry this month said that sanctions were responsible for much of Russia’s current economic pain and that the administration stood ready to modify them based on Putin’s actions. Secretary of State John F. Kerry said this month that sanctions were responsible for much of Russia’s current economic pain and that the administration stood ready to modify them based on Putin’s actions.
“It’s obviously had a profound impact, but not sufficient that President Putin has decided that he isn’t going to pursue his particular strategy,” Kerry said.“It’s obviously had a profound impact, but not sufficient that President Putin has decided that he isn’t going to pursue his particular strategy,” Kerry said.
“We’re not doing this to hurt the people of Russia ," he said. "We're doing this to try to affect the choices that their leaders are making in order to uphold the norms of international law.” “We’re not doing this to hurt the people of Russia,” he said. "We're doing this to try to affect the choices that their leaders are making in order to uphold the norms of international law.”
With Russia apparently still active in Ukraine and anti-Americanism fierce among the broad population, some analysts and investors are increasingly questioning whether the sanctions make sense in their current form.With Russia apparently still active in Ukraine and anti-Americanism fierce among the broad population, some analysts and investors are increasingly questioning whether the sanctions make sense in their current form.
“If you’re fighting this battle, then pick the weapons that get the result you want. I don’t think sanctions are the right weapon for this fight,” said Bernard Sucher, a Moscow-based American investor long active in Russia. He said sanctions were most likely to hurt smaller businesses that cannot turn to the Kremlin for assistance.“If you’re fighting this battle, then pick the weapons that get the result you want. I don’t think sanctions are the right weapon for this fight,” said Bernard Sucher, a Moscow-based American investor long active in Russia. He said sanctions were most likely to hurt smaller businesses that cannot turn to the Kremlin for assistance.
For now, the Obama administration appears likely to catch flak in Russia no matter what it does. After news reports in the past week that Obama remained skeptical about sending weapons to Ukraine, one prominent Russian television journalist, Mikhail Leontyev, said he was a coward.For now, the Obama administration appears likely to catch flak in Russia no matter what it does. After news reports in the past week that Obama remained skeptical about sending weapons to Ukraine, one prominent Russian television journalist, Mikhail Leontyev, said he was a coward.
“That spineless peacemaker Obama is doing all he can to dodge rabid pressure exerted by those trying to force him to openly supply lethal weapons to Ukraine,” Leontyev said.“That spineless peacemaker Obama is doing all he can to dodge rabid pressure exerted by those trying to force him to openly supply lethal weapons to Ukraine,” Leontyev said.
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