As the war in Ukraine unfolds, trade policy is being weaponized further as part of the new sanctions regime against Russia. The explicit objective is to cut off Russia from international markets, isolate it economically, and … then what? Imposing sanctions on the aggressor may make one feel morally superior – especially when such measures entail real economic costs for the countries that impose them – but that doesn’t mean they will bring an end to the war.
Trade sanctions have a long history. The West has used similar measures against Cuba, Iran, North Korea, Venezuela, and Afghanistan. In each case, sanctions hurt the people in the countries they targeted but showed little sign of limiting the power or changing the behavior of the countries’ political leaders.
The sanctions against Russia will certainly cause hardship there, impoverishing an emerging middle class that could become a force for reform. If the goal is to topple Putin, history suggests that this is unlikely to happen in the near term. Putin’s domestic position may even be strengthened as Russia’s disenfranchised middle class turns inward and embraces nationalism, as has happened in Western democracies over the past decade. More broadly, sanctions are likely to strengthen the Russia-China alliance, deepen global polarization, and hammer the last nail into the coffin of multilateralism.
The weaponization of trade will also have costs for the wider world, owing to Russia’s importance in energy and food markets. The economic consequences of various scenarios are difficult to predict, because the reallocation of trade flows and the resulting price movements will depend not only on market forces but also on political decisions. Still, one thing is certain: as with the trade war between the US and China, there will be political as well as economic costs. Concessions to current pariah countries (such as Iran or Venezuela) may be inevitable; and even then, the trade sanctions may end up being self-defeating.
Another certainty is that weaponizing trade will not end the conflict. Western leaders must recognize this and double down on diplomacy. Russia needs a face-saving way out. One question that is rarely considered fully in the West is why Russia invaded Ukraine. Certainly, it is about more than one power-hungry autocrat’s delusional ambitions (the standard line in the US). Miscalculation on both sides contributed to the escalation of conflict: Ukraine believed that NATO and EU membership were feasible in the short run and that it could count on the Alliance’s military support; Russia, extrapolating from its largely bloodless annexation of Crimea in 2014, underestimated Ukrainian resistance. Finding some common ground might seem impossible at the moment. But a negotiated solution is probably the only way to avoid a long-term disaster that would destabilize the entire region, if not the world.
The weaponization of trade is a convenient way for governments to deflect attention from real problems like the economic fallout from the pandemic, widespread demoralization and reluctance among workers, spiraling mental-health crises, and rising debt levels. There are no easy remedies to these problems. So, why bother with them when you can direct people’s attention to graphic images showing the plight of those who have it worse? Ultimately, the biggest winners of the war in Ukraine may be self-interested politicians around the world who have found a convenient way to avoid dealing with problems at home.
By Pinelopi Koujianou Goldberg for Project Syndicate
Goldberg is a former World Bank Group chief economist and editor-in-chief of the American Economic Review and a professor of economics at Yale University.
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