In late June 2022, NPR asked me to do a new way of assessing sanctions effectiveness – scoring them. Rather than focused on intensity of impact (on Russian economic or financial markets), effectiveness needs to also consider change in policy or change in capacity not just economic strain. This is also difficult given the fact that sanctions, export controls and related measures build on each other, especially as they are scaling up and muscle memory of banks and corporate entities and statekholder pressure can amplify, as was the case in Feb/March 2022, but seems to have been fading to some extent.
See excerpt below or read/listen to the whole thing here.
HIRSCH: We asked Rachel Ziemba to score these sanctions for us.
RACHEL ZIEMBA: Sure, sure. We can give it a try. Yeah.
HIRSCH: She’s an economic and political risk specialist at the Center for a New American Security. She graded a number of sanctions between one and 10 – one being who cares and 10 being, yikes, this is so painful that maybe we should actually think about pulling our troops out of Ukraine because that, after all, is the end goal of these sanctions.
MA: So we started with the sanctions on Russia’s finance and banking sectors. Those sanctions denied Russia access to billions of dollars in foreign reserves outside of Russia, and it also locked certain banks out of the SWIFT system. That’s the system that allows banks to move money around the world.
HIRSCH: These sanctions also sanction individual banks and bar investors from buying Russian sovereign debt. Rachel gave these measures an overall score of about 5 out of 10.
ZIEMBA: The central bank sanctions and the associated ones on major Russian banks had an initial sizable shock and impact that was greater than Russia and many actors thought, and it was amplified by the fact that Russians wanted to get their money out of the country any way they could. However, that tail effect of those measures has faded.
MA: Rachel says one big factor bringing down the score of these sanctions is that certain key parts of Russia’s finance and banking sector have managed to avoid them.
ZIEMBA: There still are some important banks, particularly the Gazprombank, that is not sanctioned. And then there are other banks for which there are some loopholes.
HIRSCH: Loopholes – they’re like gaps in a poorly stitched fishing net, full of openings that let certain institutions and people slip through. There are often good reasons for the loopholes. For example, Gazprombank got its pass because it processes payments for Russian gas, which Europe relies on.
MA: So that’s the finance and banking sanctions. The next broad area that sanctions were aimed at is business and trade. So these sanctions include bans or partial bans on buying Russian goods – think everything from oil and gas to caviar and vodka. It also includes bans on the use of Russian airspace, which effectively stops the movements of any goods to and from Russia by the air.
Ziemba Insights 