7 March 2022

The invasion of Ukraine: Sanctions how do they work

SANCTIONS

The EU and the US are increasing the economic punishment of Russia as Putin intensifies the attack on Ukraine. But what exactly is the purpose of economic sanctions, now that the threat of them could not prevent the war? We have asked Jens Ladefoged Mortensen, associate professor at the Department of Political Science.

Protests with anti war statements
Photo: pix-4-2-day / Flickr

Economic sanctions are a tool that the US and the EU like to use when a regime acts in a way that to a great extent displeases the unions. An example of a successful use of sanctions are those introduced to the apartheid regime in South Africa over three decades.

However, these sanctions required a strong, joint effort - and that does not exist today, where Russia is overstepping its boundaries, says Jens Ladefoged Mortensen, who researches economic diplomacy and trade wars.

"Russia has been living with sanctions since Putin annexed the Crimean peninsula eight years ago. If sanctions are to have a chance of affecting Putin, financial, cultural and sporting sanctions against Russia must be applied. That was the combination that worked in South Africa,” he recalls.

The sanctions must also be targeted at the Russian elite, says Jens Ladefoged Mortensen.

"We do not want the people of Russia to believe that we are attacking them. It can create a political nationalism and reluctance. Hit some selected people instead. Target Putin and his friends financially. Not the population – that will typically have the opposite political effect."

The day after the invasion, the EU chose to take exactly that step when Vladimir Putin and his foreign minister, Sergei Lavrov, had all their EU based assets frozen.

A double-edged sword

According to Jens Ladefoged Mortensen, research into financial sanctions shows that the threat of them is more dissuasive than the sanctions themselves.

"The total US embargo against Cuba has lasted for 50 years and it has no effect. Sanctions can even have the opposite effect, where the government uses the sanctions to create a clear enemy image and thus consolidate its power over the population,” he says.

In addition, sanctions rarely only hit the target but also the countries it deals with. Currently, Germany is punishing the Russians by slowing down the approval of Nord Stream 2, which will supply gas from Russia to the EU - not least Germany. The harsh course against Russia, which supplies 40 percent of the EU's gas, has caused the price of gas to rise by 30 percent - from an already towering level.

Hoping to get Putin to stop the invasion, sanctions against Russia are increasing day by day. Also in the world of sports, Russia has come into disfavor - here the international football association FIFA has excluded Russia's national teams and club teams from international matches in the near future.

Despite the rapidly growing pressure on Russia, Jens Ladefoged Mortensen cannot imagine Putin stopping the invasion anytime soon. Especially when sanctions cannot be implemented through the UN, where both Russia and China are ready to veto the Security Council.

"It is naive to think that sanctions alone can make Russia change its policy, stop the attack and withdraw from Ukraine. But we need to send a signal,” he says.

SWIFT - the heavy, economic weapon

After two days of war in Ukraine, the United States, the European Union and the United Kingdom agreed to exclude a number of Russian banks from the international payment system SWIFT.

SWIFT, which stands for "Society for Worldwide Interbank Financial Telecommunication", enables the world's financial institutions to send and receive money across national borders. With the exclusion from SWIFT, the Russian banks thus lose the opportunity to make financial transactions.

"The exclusion of Russia from SWIFT is de facto a trade blockade. It is an extensive move, but it is also an extensive conflict that has developed,” says Jens Ladefoged Mortensen.

He does not believe that the exclusion from SWIFT should be the last straw for Putin. Russia's military capability is also not affected by the sanctions here and now. However, the now very large package of sanctions will make life miserable for the Russians if the war drags on.

"SWIFT and the other sanctions are a long-term, economic weapon. The hope is that the people around Putin will eventually change their position and signal that Russia should stop the invasion and seek influence in another way. Whether Putin listens to that signal is the big question, "concludes Jens Ladefoged Mortensen.