Sanctions ‘a tool not a strategy’

So said former Deputy National Security Advisor for International Economics and Deputy Director of the National Economic Council, Daleep Singh, addressing the US Senate Banking Committee’s Hearing on Advancing National Security and Foreign Policy Through Sanctions, Export Controls, and Other Economic Tools, 27 February – in the context of the measures imposed on Russia since the invasion of Ukraine.

Singh said that the collective actions of the US, EU and aligned countries had had ‘five channels’ of impact – the first being ‘the delivery of a capital account shock unlike any seen in modern economic history.’

He said that though the ‘hit’ to Russia’s GDP was lower than he had expected, apparent resilience was no more than a ‘Potemkin façade’ – a fabrication.  He said, ‘To limit the depth of the current recession, Putin has sacrificed Russia’s long-term growth potential. Capital controls arrested the freefall of the ruble but at the cost of Russia’s isolation from the global economy.’

As to the point that ‘sanctions are a tool – not a strategy,’ he opined:

‘We don’t impose sanctions as an end to themselves. Sanctions work when they’re embedded in a broader strategy – alongside doing all we can to support Ukraine’s fight for freedom, doing all we can to help the rest of the world deal with the food and energy spill-overs of Putin’s war, coming together to welcome the millions of refugees fleeing Ukraine, helping Europe to end its reliance on Russian energy as fast as possible, and working with partners to finance Ukraine’s future as a successful and stable alternative to Russian-style kleptocracy. Executing on all those fronts gives us our best chance of shaping Putin’s calculus, and staying the course is how we’ll create leverage for Ukraine if and when it chooses to negotiate a diplomatic settlement.’

Speculating on the eventual impact of the ‘collective leverage,’ he said:

‘Even an autocrat like Putin has a social contract with the Russian people…[If] tens of thousands of bodybags are being sent back to Russia, if hundreds of thousands of your best and brightest are fleeing the country, if over a thousand private companies have already exited, if Russia is shunned as a global pariah in bankruptcy and default – is this really the endgame Putin is playing for, and how does he weigh that endgame against the costs of pulling back from the brink?’

For the full statement, and others see the Committee website at:  

https://www.banking.senate.gov/imo/media/doc/Singh%20Testimony%202-28-23.pdf