Why The Economic War Against Russia Has Failed

This week, there was widespread amusement in the West as Vladimir Putin’s Victory Day parade featured only one tank – a museum artefact – rolling through Red Square. The implication is that Russia’s military prowess has been significantly diminished due to the loss of military equipment in Ukraine, rendering it a mere shadow of the superpower it once was during the Soviet Union era.

While it is true that Russia has suffered heavy losses in its military hardware during the ongoing conflict in Ukraine, it is important not to be complacent about the situation. The West’s strategy of not engaging in a direct military conflict but supporting Ukraine with weapons and other military equipment has been successful to some extent, but the plan to wage an economic war with Russia has not gone according to plan.

The West’s approach of imposing sanctions and boycotts on Russia in an effort to cripple its economy has not been successful as hoped. While Europe has paid a high price for implementing a partial boycott of Russian oil and gas, Russia has simply increased its exports to China and India, both of which have been willing to buy oil at a discount and have not taken a stand against the invasion of Ukraine. Furthermore, some of the Russian oil exported to India has been siphoned back to Europe, with a rise in the number of ships taking refined oil from India through the Suez Canal.

There has also been a disturbing growth in exports to countries bordering Russia, such as Germany’s motor vehicle exports to Kazakhstan, which rose by 507% between 2021 and 2022. Sales of electrical and computer equipment to Armenia are up 343%. The importing of chemical products to Armenia increased by 110% and to Kazakhstan by 129%. While it is not clear what happens to these goods once they reach these former Soviet republics, it is likely that they end up in Russia as diverted trade flows. Even if such commodities are not formally being re-exported, many Russian citizens retain visa-free access to those countries and are able to take goods across the border.

The West’s strategy of trying to target wealthy Russians in particular with economic sanctions has not been successful either. Ironically, these are the people who can most easily access Western goods through diverted trade, and who can afford to travel abroad to shop for luxury goods. Short of a wholesale global boycott against Russia, it is very difficult to prevent Western-made goods from reaching the hands of wealthy Russians.

The West has overestimated its own influence around the world and underestimated the reluctance of non-western countries to impose sanctions on Russia or Russian oligarchs. The results of this miscalculation are evident. While the Russian economy has suffered some harm from Western sanctions, it has not been destroyed. In fact, the economy has been reconfigured to look eastwards and southwards, rather than westwards.

While the economic war on Russia was not necessarily a wrong move, it is clear that relying solely on economic means to fight wars without bombs or bullets is a mistake. The West’s military equipment has allowed Ukraine to avoid annexation by Putin, but economic sanctions have not been effective as intended. A new approach will need to be taken if the West hopes to succeed in future conflicts.

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