Staunton, March 2 – One of the chief factors limiting the West’s imposition of sanctions on Russia is now being lifted, Liliya Shevtsova says. Up to now, the EU and the US have been reluctant to impose more because each sanction they place on Russia imposes costs on themselves given the amount of Russian money in their countries.
But now by promoting broad new transparency in their banking systems – and so far, the EU is far ahead of the US in that – the West can far better track Russian money flowing through its countries and thus be in a better position to defend against Moscow using that as leverage to limit sanctions, the Russian analyst says (echo.msk.ru/blog/shevtsova/2798912-echo/).
That is not to say that this is the only limiting factor in Western decision making about sanctions – it is also worried about creating a situation in which Russia could easily become even more unpredictable and aggressive – but it is an important one, she says, and matters because despite Moscow’s claims, sanctions hit Russia hard. And more sanctions will hit it still harder.
“The inevitable has happened,” Shevtsova begins. The US has followed the EU in imposing sanctions on Moscow for its treatment of Navalny and his supporters. But these sanctions have been limited because the West is finding it increasingly difficult to combine three “incompatible” things – containment, isolation and dialogue.”
Western democrats don’t want to push Russia to the wall lest it collapse or become even more aggressive. They have to impose sanctions to show their own populations that they are reacting, but they don’t want to make the price of those sanctions for Russia so high that it will cripple Russia or, perhaps worse, hurt their own economies, the analyst says.
Despite all of the Kremlin’s bravado, sanctions have hit Russia hard, reducing its GDP by perhaps eight percent. But while they have made the Kremlin more careful, they have not forced Moscow to change its policies toward Ukraine, split the Russian elite, or prevented the powers that be from increasing repression inside Russia itself.
Imposing sanctions on Moscow is hard for two additional reasons. First, the EU and the US must negotiate first within themselves and then within each other as to what these sanctions should be. And second, both the EU and the US want to make sure that sanctions on Moscow don’t hurt their already troubled domestic economies.
At a strategic level, of course, it isn’t the economic impact of sanctions on Russia that is the most important thing, Shevtsova continues. Instead, it is that the imposition of sanctions undermines Russia’s status on the world stage and on its ability to have and maintain “its own spheres of influence.”
The sanctions that have been imposed do affect the ability of Russia to modernize, by depriving it of investments and technology; they increase its isolation; and they generate revanchist attitudes among Russia’s leaders. “Consequently,” the Russian analyst says, “sanctions instead of producing cooperation intensify [Moscow’s] aggressiveness.”
What is worse in some respects is that ordinary Russians bear more of the burden of sanctions than do Russian leaders who have figured out how to end run sanctions regimes and to force the population to subsidize the key allies of the regime. This too has increased pessimism in the West that Russia will ever change, something that reduces the willingness to pay a price to try to make it do so.
This is having an impact on Western governments which, first in Europe and then in the US, are working to make financial flows more transparent so that everyone, including their own populations will know where the enormous amount of Russian money, much of it illicit, is flowing. And that will make it easier to impose sanctions without domestic political costs.
Already in 2018, the EU adopted the Fifth Anti-Money Laundering Directive, something that will be completely put in place this fall. That will affect Russian money in Europe, and it will be a model for what many in the United States are likely to insist upon going forward, Shevtsova says.
That means that the West is likely to feel even freer in the future to impose more sanctions on Moscow and that Russian elites are going to lose what has been something very important to them, their ability to keep their money abroad and the possibility of moving there if the situation in Russia gets worse.