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With the Russian invasion of Ukraine now officially around the corner (or even underway), I am surprised how minimalistic and non-committal the proposed sanctions are. Even the US "mother of all sanctions" consists of mainly targeted surgical measures like cutting Russia off SWIFT and banning the export of semiconductors and the like. I understand that US doesn't have to show much of an effort since it's a long way from Ukraine to Washington, but I would expect much more resolve from the EU with a war on its doorstep.

EU sanctions against Russia have been ongoing since 2014. However, given their limited nature, Russia doesn't seem to have responded much to them (apart from learning to buy Russian apples instead of Polish ones).

Given that the EU-Russia trade comprises just 5% of all international trade of the EU but almost 40% of all Russian trade, I would naively expect that a total ban on trade and financial transactions would hurt the EU a little but bring Russia swiftly to its knees and Putin to the negotiating table. Of course, losing a third of the gas supply would mean everyone in Europe would have to put on an extra sweater or two and China would also likely step in and pick up part of the slack, but I cannot imagine Russia being able to retarget half of its foreign trade overnight.

(To illustrate my line of thought, consider how we treat bacterial infections with antibiotics. You don't slowly ramp up the dose because that would let the bacteria develop resistance, you hit them with a big hammer right away so they don't get a chance.)

I assume that if the above made a lot of sense economically, politicians would figure out a way to sell it to the general public (after all, they managed to sell things that didn't make any economical sense at all). Is there a serious economic analysis showing that targeted sanctions are more efficient than a total trade ban?

TooTea
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  • I guess they want to wait a bit more and escalate the situation not as quickly as they could to give diplomacy one more chance. You can probably expect more to come in the future though. – NoDataDumpNoContribution Feb 22 '22 at 09:35
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    @Trilarion Well, I don't know much about diplomacy, but "Don't invade or else we'll introduce this batch of mild sanctions that you couldn't care less about!" doesn't sound like a good position to start from. "Don't invade or we'll ruin you!" sounds more likely to register on Putin's radar. – TooTea Feb 22 '22 at 09:51
  • The current amount of sanctions (two banks, three oligarchs) looks a bit like incrementalism to me. And there are quite some disadvantages to it, like people might not be interested so much if the sanctions next week is one bank and two oligarchs more. Attention to small steps might not be given. The sanctions are relatively mild so far, they really must deliberately be holding them back. – NoDataDumpNoContribution Feb 23 '22 at 12:02
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    Bans hurt, both sides. The EU screws their own citizens since all this talk about sanctions greatly increases the gas price. Natural gas is +/- 60% more expensive since May '21. – Mast Feb 24 '22 at 07:09
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    @Mast Let's wait and see how far the sanctions go. Maybe within one week there will be that total trade ban, no matter the costs. One week delay doesn't really matter if you plan for a long time. My guess is still that they wanted to give peace a chance, and maybe there was one. But now it seems that there will be war instead so no reason not to pull all plugs on sanctions. We will see. If sanctions continue to be small, it will be your explanation. – NoDataDumpNoContribution Feb 24 '22 at 09:45
  • Why do you ask about the EU and not about the US? – TaW Feb 24 '22 at 18:46
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    @TaW First because I live in the EU,so I want to understand the decisions of the politicians who I vote for. The second reason is hinted at in the first paragraph: I wouldn't be surprised if the US had little motivation to make any big sacrifices as they might not care all that much about Ukraine, while the EU is directly affected. – TooTea Feb 24 '22 at 19:09
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    "Cutting Russia off from SWIFT" is not a "targeted surgical measure", it's the economic equivalent of a nuclear strike. – Mark Feb 24 '22 at 22:40
  • @Mark Oh,is it? I don't know much about these things,but I assumed it was only going to make transactions with Russia cumbersome and tedious,not impossible. It feels like Russia only needs to set up its own alternative system and as long as trading isn't illegal there will always be banks willing to join it. Worst case,Russia can revert to however things used to be done before SWIFT, I guess couriers with suitcases full of gold? – TooTea Feb 25 '22 at 07:33
  • @Mark Russia knows this, so they've been working with the Chinese on SPFS since 2014. About 20% of their banking traffic already uses this system instead of SWIFT and if I were the Russians I'd be in a hurry to ramp that up a bit. – Mast Feb 25 '22 at 09:17
  • There's also a place for considering that too many sanctions has the potential to trigger all-out warfare; whereas the "slap on the wrist" type sanctions are good at putting the message out that we don't like what they're doing, while hopefully avoiding all out warfare – Andrew Corrigan Feb 25 '22 at 16:07

9 Answers9

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I think there are at least two obvious reasons,

  • The EU profits from trade with Russia. Russia buys a lot of stuff, sells a lot of stuff the EU needs, and also uses the European market for its transactions with other parties, increasing its size and importance. A lot of European companies operate extensive local branches in Russia, such as banks, retailers, consumer goods makers, etc - whose bottom line will not be happy.

  • EU countries can't afford to fire all of their weapons and come empty-handed. Let's assume the EU introduces a full ban on trade with Russia. Let's assume Russia takes over Belarus and Ukraine the next morning and imposes a blockade on the Baltic states. The EU then can't do anything short of a military intervention since it has exhausted its "soft" options.

There are subtle reasons, such as, some EU countries may not be happy about US and/or EU policies, so they would give the necessary lip service and then block the harsh measures because they feel that Russia balances out these parties.

Update: Losing half of Russia's international trade is not a deterrent to stop Putin from trying to rebuild the Russian sphere of influence. The threats of loss of half of the international trade are the deterrent. Once you actually trigger it, the damage is done but it's not a deterrent anymore since there's no downside for Putin to invade whoever he pleases after already suffering the "pre-consequences".

JJJ
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alamar
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The deployment of Russian troops in those regions is not such a big change in the actual situation on the ground. Before they were called volunteers, now they are officially recognised. So, we can't really say that the invasion of Ukraine is around the corner or underway. Tougher sanctions would mean an escalation with unknown consequences.

FluidCode
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    Might want to update that answer, since today Russia is actually attacking Ukraine and bombing cities all over the country. – Olorun Feb 24 '22 at 11:11
  • @Olorun The question is based on the old situation as well. Both of them became history in just few days. Just leave them as it is. The new situation will surely raise new questions. – FluidCode Feb 24 '22 at 11:38
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  1. S&P500 (and other stock indices) is down a few per cents because of the fears of a possible escalation in Ukraine which may or may not lead to serious sanctions on Russian economy. Imagine what nightmare happens if such sanctions are implemented. Also, please consider, how much are regular Europeans ready to pay to save a third world country? Do they really care for Ukraine so much to be willing to pay several times more for gas and lose a considerable share of their life savings because of a fall of the market?
  2. Although Russia doesn't have much leverage, it has some "dirty" "last resort" cards in hand, such as helping Iran with its nuclear program or sparking a conflict in Middle East that will lead to a refuges crisis. Hard to tell what happens in Putin's mind, but given that Russians will consider such sanctions as unfair, you can't leave out a possibility of such response to the sanctions.
kandi
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    Ukraine is technically (and by very definition) a second world country. – MrVocabulary Feb 22 '22 at 20:47
  • If it does not band with Russia and China and fails to get partnership in the West, it is arguably in XXI century's Third World. – alamar Feb 22 '22 at 20:53
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    For several countries in EU Ukraine is a very close neighbor. We see it a bit differently. – Sulthan Feb 22 '22 at 22:12
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    @Sulthan well, I guess Poland and Baltic states "see it a bit differently", and not because of much love of Ukraine (especially Poland, remember Volhynian slaughter), but because of no love of Russia. Also, "see it a bit differently" is a vague statement, let's make it a bit more clear: how much (in terms of your annual incomes) would you and other citizens of these "several countries" be ready to sacrifice for a protection of Ukraine? – kandi Feb 23 '22 at 08:16
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    I guess for Poland and the Baltic states it's not a matter of love but of geographic proximity. They know that if Ukraine falls, they may be next. That probably makes them to want to sacrifice quite a lot of resources. – NoDataDumpNoContribution Feb 23 '22 at 11:09
  • @Trilarion "They know that if Ukraine falls, they may be next" that's a poor understanding of Russian motivation – kandi Feb 23 '22 at 12:46
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    Maybe yes, maybe not. At least it explains Polish and Baltic higher motivation to do something. They were always very much afraid of Russia, whether completely justified or not. – NoDataDumpNoContribution Feb 23 '22 at 13:17
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    @kandi Not really, no. Russia has openly demanded NATO to revert back to where it was in the 90's, thus kicking out countries like Poland and leaving them up for grabs for Russia. Of course Putin might just be bluffing, but unless you can read his mind, you can never be sure. – TooTea Feb 23 '22 at 16:03
  • @TooTea is this demand the only reason that makes you believe Putin might want to invade Poland/Baltic states? – kandi Feb 23 '22 at 18:31
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    @kandi why would you want a country out of a mutual military assistance (sort of) alliance if your plans didn’t involve something that would trigger that alliance? NATO is defensive. It’s not a threat to Russia unless Russia is planning something threatening. – Tim Feb 23 '22 at 21:46
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    @Tim because Russians don't view NATO as truly defensive-only and have reasons for it (you won't call NATO operation in Yugoslavia "defensive", will you?). Also, starting negotiations with overblown demands aiming for something smaller is quite a classical strategy – kandi Feb 23 '22 at 22:25
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    @kandi honestly the Yugoslavia bombing is a difficult one, and too nuanced for a discussion in the comments. I’d lean towards defensive. But aggressive or defensive (or both), it was in response to aggressive activities. So I think the point remains: Russia only need fear NATO if it’s planning something offensive. – Tim Feb 23 '22 at 22:30
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    @Tim I agree that the Yugoslavia case is too complex for a discussion here, but I just wanted to point out how the perspectives differ. Russians (including the political elite, see "Primakov's Loop") honestly view NATO as "bad guys" in that conflict. In addition to that, NATO means military infrastructure, which can in theoretically be used for offense. To generalize, IMO the main problem is that Russia and NATO countries have too few trust and too poor understanding of each other – kandi Feb 23 '22 at 22:43
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Speaking as a moderate European:

consider how we treat bacterial infections with antibiotics. You don't slowly ramp up the dose because that would let the bacteria develop resistance, you hit them with a big hammer right away so they don't get a chance.

The main point here is that we don't really want to kill Russia.

Well, most of us. At least, for now. Sort of.

The main purpose of sanctions is to make things unpleasant for the decision-makers (e.g. by targeting particular people and businesses) and/or make the wrong decisions hard to fulfill (e.g. by depleting the military industry of important supplies).

On the other hand, sanctions can easily become counter-productive. E.g. an economy collapse may consolidate people around the current leader (this works even in more or less working democracies) or make it cheaper for the government to recruit soldiers.

The third consideration is called China.

From the European viewpoint, China is something like Russia squared. We may not like what Russia is right now, but making it more aligned with China is something considered much worse.

p.s.1 : The above is written at 2022-02-23, few hours before the massive Russian attack.

p.s.2 : In regard to the decision-makers, the thinking goes as:

  • Russia is not a democracy (*)
  • The ordinary citizen does not influence the government actions much
  • Then, it is pointless and even somewhat cruel to impose unnecessary burden to the ordinary citizen

If it was a more or less democratic, the much simpler fiddling with international trade regulations and tariffs will do the trick. We see this rather frequently.

(*) Russia not being a democracy doesn't mean that it doesn't have some power process where the general population does influence the decisions of people in power. The process is slow and erratic, but it can still be said that Putin is whatever Russians are OK with (or at least, were OK a while back).

fraxinus
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Several important reasons have been mentioned. Another one that seems to be missing in the discussion is that imposing sanctions is only the beginning. You also need to be able to sustain them or offer a path back to normality without entirely giving up on your demands. That in a context where most of the population and the politician class catering to it do not seem ready to make any great sacrifice.

A sanction package that is not sustainable can backfire badly. In a month or two from now, with Russia not budging, the EU might find itself under pressure from some member states to walk back on some of the sanctions, which would admittedly be even worse than not imposing them in the first place.

Relaxed
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Total trade ban would hamper the humanitarian aid, which may be considered undesirable by some politicians and parts of the general population in the West. Think about the optics of a situation where the Russian efforts to vaccinate its population are thwarted due to total ban on the Western-manufactured enzymes and reagents needed for the production of the vaccine. Russian children would get sick and die, this will be shown on the Russian media, and rebroadcast in the Western media.

Total trade ban would be opposed by the countries in which the ruling elite has considerable ties with the Putin's regime. The larger countries include Germany and France, plus smaller players such as Hungary and Croatia. The list of mostly former politicians with ties to Putin's regime probably starts with Gerhard Schroeder, but includes many other prominent figures (Matthias Platzeck, Matthias Hoehn, Rolf Muetzenich, etc).

V2Blast
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Timur Shtatland
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  • There is an ongoing debate in Germany to withdraw all ex-chancelor privileges for Schröder. – infinitezero Feb 22 '22 at 13:39
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    'In which the ruling elite has considerable ties with Putin's regime' -- you list Schröder as a reference who has not been in power since 2005 and hasn't really held any influence in his party since about that time. He's definitely not ruling anymore and whether he is still part of any elite is questionable at best. Surely you can find better, more appropriate examples to support your claim? – Jan Feb 22 '22 at 14:01
  • @Jan Thank you for the comment, clarify and corrected, added reference. – Timur Shtatland Feb 22 '22 at 14:40
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    I must giggle because after you strip Schröder and Platzeck all that remains is essentially the Left Party and the AfD. – Jan Feb 22 '22 at 14:42
  • @Jan I will add more later. Trust me. – Timur Shtatland Feb 22 '22 at 15:18
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    "this [the results of a trade ban] will be shown on the Russian media" - this assumes an objective, independent media. But Putin can show Russian children dying regardless of what the West actually does. – MSalters Feb 22 '22 at 16:20
  • @MSalters Yes, but the answer also mentions the Western media, which usually can see through the propaganda. – user31389 Feb 22 '22 at 21:20
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The percentages you cited are based on current prices of the goods and services being traded. But the price elasticity of these products varies quite a bit. European energy imports from Russia are hard to substitute. German manufacturers cannot just reduce their oil and gas usage by putting on sweaters. Banning Russian oil would cause European energy prices to skyrocket. Russian luxury goods imports from Europe are high in value right now, but they could more easily substitute these for (say) Chinese knockoffs.

The primary trade retaliation would have to come from the US, related to semiconductor technology. Note that for semiconductors, it was only meaningful to ban ASML (which is Dutch) exports to China, because China is trying to build leading edge fabs. So banning ASML exports to Russia wouldn't be meaningful.

Of course, this answer is a bit of a caricature. Europe (especially Germany) does export hard-to-substitute manufactured products to Russia. However, recall that before the fall of the USSR, it maintained a fairly independent industrial base. The rise of Chinese manufacturing after 2000 has allowed Russia to integrate with the Chinese industrial base. So Russia hasn't had a long period of time over which to develop supply chain dependencies on the West.

Betterthan Kwora
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  • A complete trade ban would hurt Russia primarily because they don't get paid for their gas exports anymore. I seem to recall reading somewhere that this money corresponds to 40% of the Russian governments annual budget. That would be the problem for Russia, not missing a few physical goods that are exported from the EU to Russia. – quarague Feb 23 '22 at 09:10
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    @quarague Gas can be eventually sold elsewhere, such as by LNGing it and hauling to Asia. Short term, Russia has a lot of cash, and gas export restrictions would not hurt consumers and small businesses in Russia that much - the people who you could hope to hurt to create support for political change. It would primarily hurt Gazprom. – alamar Feb 23 '22 at 10:39
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    @alamar The reason why the EU still depends on Russian gas is because it is highly non-trivial to replace the needed quanitities even over a scale of decades. Of course gas can in principle be liquified and sold elsewhere but doing so on the required scale would take a massive effort and a long time to set up. If the Russian government loses 40% of their budget the current Russian state would essentially cease to exist. They would use their significant cash reserves first to prevent that but once they run out they are in real trouble. – quarague Feb 23 '22 at 10:45
  • @quarague Russia has a huge imbalance between how much it earns and how much it spends. Contrary to many countries, it is in the favor of the earning part. In 2021, Russia exported $407B worth of goods but imported just $238B. Most sanctions affect the "spend" pipe (!!) so it's unlikely Russia is running dry in foreseeable future. – alamar Feb 23 '22 at 11:55
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This question is much broader than EU vs Russia. When democracy and autocracy cross their ways, then democracy has to think on so many levels, while autocracy does what the leader says. In an autocracy, the leader is adored by the masses (up to the last point), in democracy leaders are criticized by the masses. So when in autocracy is some opposition, they are pretty silent. While in democracy leader has to count on so many interests to rule the country. Many of those interests have deep roots in this case in Russia. In the EU we have to multiply it all by 27. So until public opinion towards this question is still cool, politicians have to consider more with economic interests.

While the USA has a federal president who has the historical platform to demand from dictators, the EU has no real blunt mechanism to show our power at once. Or do you know who is now High Representative of the Union for Foreign Affairs and Security Policy? Does he speak for EU with Putin? Does Putin care about such a role at all? Do we ourselves?

From my point of view, the main reason the EU acts so toothless is tepid public opinion (compare Baltic states vs Portugal or Ireland) and huge dependence on the Russian market (mostly energy, but so many big EU companies have their branches braid into Russia). This last part is bound with the selfishness of politicians. I can't recall politicians risk for their own careers for the sake of punishing dictators. It seems to be impossible to have 27 countries having real statesmen same time in office...

Democracy needs so much time to act, that (I am afraid) it will cost too many lives.

w.k
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  • Your answer could be improved with additional supporting information. Please [edit] to add further details, such as citations or documentation, so that others can confirm that your answer is correct. You can find more information on how to write good answers in the help center. – Community Feb 23 '22 at 16:57
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It's all extremely simple. Here are spot gas prices.

enter image description here

This chart looks like that because there is no more stock, it's all been consumed, we're down to a few percent on stock capacity. And there is no way to transport enough gas from anywhere on time except through the Russian pipelines.

If Mr. Putin decides to stop exporting gas to Europe, there won't be enough of it no matter the price. This isn't just about wearing an extra sweater, it would cause industries to shut down, massive blackouts, etc. Due nuclear powerplants being shut down and the renewable craze, which requires backup natgas powerplants, EU grid has become quite dependent on natgas.

Basically, without Russian gas, it's over for the EU and most governments in Western Europe would blow very quickly.

However, it would be a breach of contract for Russia to do so, so I don't believe they will. They make it a point to honor their long-term gas contracts to the letter, but they don't sell us anything extra.

This means Europe has a severe gas shortage, which explains the huge increase in price... and Mr. Putin can tell them they can only blame themselves for not reserving higher quantities in the long-term contracts.

Russia built pipelines to sell gas to China, so they don't care about not selling to the Eurozone. Their gas revenues are fine. China also benefits, since that makes it less dependent on imports from US-controlled countries.

In addition, Russia is one of the biggest exporters of fertilizers, so if Mr. Putin says no fertilizer for you, then you're in trouble. Likewise for a few minerals and materials like titanium, palladium, etc.

So... yeah, Russia has the EU completely pinned. They can't do much of anything at all.

bobflux
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  • -1 Sorry, with no references at all, this looks like pure speculation. As a counterexample to your main claim, see The Guardian: Europe could see out winter on gas reserves if Russian imports stop, says German analysis. Similarly, I doubt that there's enough capacity in those gas pipelines to China to take over everything that currently goes to the EU. – TooTea Feb 26 '22 at 19:56
  • Much bad info in this answer, including the claim Russia can substitute gas sales to Europe by switching to China. Not in the short run. Even China can tell you that. Pipeline capacity to Asia is 15-20% of that to Europe. https://www.csis.org/analysis/can-russia-execute-gas-pivot-asia Russia doesn't care much about losing gas sales because they make much more money with oil at current prices, but that's a somewhat different argument. – the gods from engineering Aug 12 '22 at 00:24
  • And as you seem to say you are from France, you should probably know that France hardly imports any Russian gas. Poland and Bulgaria were able to scrap contracts with Russia for nearly the same reasons. There are some EU countries more screwed, incl. Germany. – the gods from engineering Aug 12 '22 at 00:37
  • And Russia was always willing to play the gas embargo card with the smaller countries, like the Baltics; here's Yeltsin doing it in '93 https://www.latimes.com/archives/la-xpm-1993-06-26-mn-7413-story.html So the Baltics were among the first to look for alternatives (and that benefited Poland too in the current crisis.) – the gods from engineering Aug 12 '22 at 00:59
  • @TooTea I was wrong about Mr. Putin not daring to shut down all gas exports. Now that european governments are in full panic mode and talk of rationing on prime time TV, I guess you can remove your downvote, lol. – bobflux Sep 11 '22 at 08:37