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The German debate on Russia sanctions is out of touch

It is a fallacy to claim that sanctions against Russia are costly and futile. On their own, they will not force Russia to change its policy; but they do create leverage for bringing Moscow to the negotiating table. Sabine Fischer and Janis Kluge argue that sanctions and dialogue are not mutually exclusive.

Point of View, 15.05.2018 Research Areas

It is a fallacy to claim that sanctions against Russia are costly and futile. On their own, they will not force Russia to change its policy; but they do create leverage for bringing Moscow to the negotiating table. Sabine Fischer and Janis Kluge argue that sanctions and dialogue are not mutually exclusive.

There is renewed cross-party debate in Germany on the point – or pointlessness – of sanctions against Russia. In January, East German premiers ranging from the CDU to the SPD and Left Party complained in a letter to Chancellor Merkel that the eastern Länder bore the brunt of the economic consequences. In the Bundestag, the AfD and Left Party rail against the federal government’s “anti-Russia” policy. In the SPD, which is searching for its raison d’être, a generational conflict has broken over the Russia policy adopted by the new Foreign Minister Heiko Maas. Here too argument rages over the sanctions which, according to a frequent criticism, are costly but “achieve nothing”.

This debate is out of touch with reality in many ways. First, it does not take into account the insights from economics. There is a significant gap in the German debate between the perceived damage and current research in the economic sciences. EU sanctions, Russian sanctions and American sanctions keep getting lumped together.

What is not in doubt is that the import embargo on agricultural goods imposed by Russia has led to a loss of exports. A study by the Kiel Institute for the World Economy shows, however, that Germany’s exports have suffered less than Lithuania’s, Poland’s or the US’s. The largest impact of the Russian embargo is on Russia itself. The Kremlin has pursued a protectionist industrial policy for some time; the import embargo of autumn 2014 neatly aligns with it. Russian agribusiness has certainly profited – at the expense of consumers.

Lack of verifiable data on the costs of EU sanctions

However, there are few verifiable data on the cost to Germany of EU sanctions. The sanctions were designed to limit both the damage to the EU and any widespread impact in Russia. In some cases, German exporters are unsure whether their products come under the export prohibition on goods with potential military use. However, this margin is almost impossible to measure. Some studies therefore ascribe German export losses wholesale to the EU sanctions and point to possible indirect consequences. These results should be interpreted cautiously.

Undoubtedly problematic for the German economy are the new American sanctions. In 2017 the US turned its back on the sanctions policy coordinated with Europe and now pursues its own policy. Contrasting with the precisely targeted EU sanctions, these new measures against Russian oligarchs are unpredictable: reasons for sanctions are amalgamated, and the criteria for lifting them are blurred. The American sanctions could become costly for Germany too, via extraterritorial effects. It is still too early, however, for an economic analysis.

Second, the renewed German debate tends to forget the historical events that motivated the sanctions imposed by Europe and the US in 2014 and 2015. In March 2014 Russia annexed Crimea in violation of international law.

In the summer of 2014 regular Russian troops swung the course of the war in East Ukraine to the detriment of Kiev. Since then, Moscow has provided political, military and financial support for the de-facto states that emerged in Donetsk and Luhansk. This radical departure from the European security order is increasingly falling from view. Even worse: the more detailed the critics’ discussions of the sanctions are, the less they seem to mention Ukraine.

Third, as well as the reasons for the EU sanctions since 2014, debaters have also lost sight of their objectives, context and success. The relevant Council resolutions show that, faced with developments in Ukraine, the European Union resorted to sanctions “with a view to increasing the costs of Russia's actions to undermine Ukraine's territorial integrity, sovereignty and independence and to promoting a peaceful settlement of the crisis”.

Regardless, it was always clear that sanctions alone would not force Russia to change its policy. Rather, they are an instrument and lever for bringing Moscow to the negotiating table. Critics claiming that sanctions and dialogue are mutually exclusive are wrong.

Bringing Moscow to the negotiating table

If we look more closely at whether the sanctions have been successful, the picture is quite different from the anecdotes being circulated. In 2014 and 2015, the sanctions drove up the costs to Russia of its aggressive conduct. They thus helped to prevent further escalation of the war in the Donbas, and to promote dialogue with Moscow in Minsk.

For the first time, the European Union proved with its sanctions that it is capable of acting collectively against Russia – which gave the Russian leadership a nasty surprise. We should assume that this realisation has continued to prevent escalation on the Russian side. In other words: the sanctions have met several of their original objectives and have thus been partly successful even before the complete implementation of the Minsk Accords.

However, the final – and possibly most dangerous – way in which the current discourse on sanctions is out of touch concerns the future. Criticism of the sanctions disregards the potential impact of dismantling them with no reference to the implementation of the Minsk Accords. Such a move could have a disinhibiting effect on both parties involved in the conflict: on Russia and the separatists that it supports in East Ukraine, since they would no longer fear any consequences for aggressive behaviour; and on Ukraine, since the perceived loss of Western support for Kiev could tempt it into sudden desperate measures. Equally grave, the EU would lose both internal coherence and all credibility as an actor in foreign policy. In a time of great international challenges – not only from Moscow – that damage would quickly dwarf the economic cost of the sanctions.

Critics of the EU sanctions would be well-advised to take these risks into account. Instead of casting wholesale doubt on the EU’s proportionate and reasonable sanctions policy, they should spare work tirelessly to protect it from being devalued by the new American measures. Excessive criticism of America cannot be the tool of choice here. The real challenge for the sanctions policy is to bring Washington back on board.

This Point of View was first published in German in Frankfurter Allgemeine Sonntagszeitung (May 6th 2018, page 24).