Were sanctions against Russia effective? KEDISA Seminar findings

The Center for International Strategic Analyses (KEDISA) co-organized with the Embassy of the Republic of Lithuania in Greece a webinar titled: “The challenge of effective imposition of Western sanctions against Russia” on Wednesday, February 21st 2024.

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Speakers of the webinar were Mrs. Renata Jasilionytė, Minister-Counselor, Director of Sanctions, Directorate at the Ministry of Foreign Affairs of the Republic of Lithuania

and Dr. Konstantinos Vergos, Associate Professor of Economics at the University of Portsmouth.

Moderator of the webinar was Dr. Andreas G.Banoutsos, Founder & President of KEDISA.

Introductory speeches were given by Ms. Lina Skerstonaitė, H.E.  The Ambassador of the Republic of Lithuania to the Hellenic Republic and Dr. Andreas G. Banoutsos, Founder & President of the Center for International Strategic Analyses-KEDISA.

The Founder & President of KEDISA Dr. Andreas G.Banoutsos in his short introductory speech cordially thanked H.E. The Ambassador of the Republic of Lithuania in Greece Ms Lina Skerstonaite and the Deputy Head of Mission Mr. Mindaugas Vyskupaitis for their initiative to cooperate with KEDISA and making possible to organize this webinar.  Dr. Banoutsos said that the topic of the webinar was very timely because on February 24th  2024 will mark two years since Russia’s invasion of Ukraine. He then mentioned that in response to the Russian invasion of Ukraine Western countries and their allies imposed massive and unprecedented sanctions against Russia. In particular he underlined that according to the Council of the European Union the EU has imposed massive and unprecedented sanctions against Russia in response to Russia’s war of aggression against Ukraine, which began on 24 February 2022, and the illegal annexation of Ukraine’s Donetsk, Luhansk, Zaporizhzhia and Kherson regions.These supplement existing measures imposed on Russia since 2014 following the annexation of Crimea and the non-implementation of the Minsk agreements.The sanctions include targeted restrictive measures (individual sanctions), economic sanctions and visa measures.The aim of the economic sanctions is to impose severe consequences on Russia for its actions and to effectively thwart Russia’s ability to continue its aggression. The individual sanctions target people responsible for supporting, financing or implementing actions which undermine the territorial integrity, sovereignty and independence of Ukraine or those who benefit from such actions.

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H.E. the Ambassador of the Republic of Lithuania in Greece Ms. Lina Skerstonaitė in her introductory speech reflected on the peaceful fight for freedom and democracy in Eastern Europe over 30 years ago, which led to the fall of the Berlin Wall and the end of the Cold War, initially signalling the triumph of Western values. However, Russian aggression, particularly the full-scale war against Ukraine, has caused doubt and raised questions about why Russian actions in Georgia in 2008 and the occupation of Crimea in 2014 were misread.

The Ambassador emphasized the importance of learning from past events, particularly the Russian invasion of Ukraine that started two years ago in 2022. One of the key lessons learned is the importance of effectively imposing sanctions against Russia: if the collective West had been stricter on sanctions when Russia attacked Georgia in 2008 and Crimea in 2014, the invasion of Ukraine two years ago might not have occurred. Ambassador underscores the significance of sanctions as an instrument for maintaining the rules-based world order, particularly for small countries like Lithuania and Greece.

The Minister-Counselor, Director of Sanctions, Directorate at the Ministry of Foreign Affairs of the Republic of Lithuania Mrs. Renata Jasilionytė in her speech acknowledged the importance of discussing Russian aggression, especially in the context of Lithuania’s concerns. She highlighted the significance of sanctions as a tool of EU foreign policy and stressed the establishment of a special directorate in Lithuania for this purpose. Mrs Jasilionytė outlined two key aspects regarding sanctions: policy and implementation.

In terms of policy, she emphasized the importance of continuous pressure on Russia through ambitious new sanctions and the successful implementation of existing ones. She stressed the need for the EU to maintain this pressure to make the Russian military machine’s operations more difficult and eventually bring an end to the war. The speaker urged for a balanced approach where both the imposition of new sanctions and the strict implementation of existing ones are given equal attention.

Mrs Jasilionytė elaborated on specific areas where she believed sanctions should be targeted, including nuclear cooperation, LNG, exemptions and derogations, aluminium, iron ore, research and technology, and oil price caps. She argued that sectoral sanctions are more impactful than individual ones, although she acknowledged the importance of both.

Regarding implementation, Mrs Jasilionytė underlined the responsibility of each EU member state to ensure full and strict enforcement of agreed-upon sanctions. She stressed the need for uniform implementation across all 27 member states to prevent sanction circumvention. The speaker shared examples of efforts made by Lithuania’s customs authorities to enhance control and enforcement, including denying customs procedures, initiating criminal proceedings, and collaborating with neighbouring Baltic countries to establish a uniform approach to sanctions implementation.

In conclusion, Mrs Renata Jasilionytė reflected on the effectiveness of sanctions on Russia and expressed optimism about their potential impact. She emphasized the importance of EU member states listening to each other, learning from history, and remaining resilient in their efforts to address Russian aggression.

The Associate Professor of Economics at the University of Portsmouth Dr. Konstantinos Vergos took the floor and his main argument was that the Western sanctions imposed on Russia have worked but not as much as the West projected they would. The main sanctions against Russia had to do mainly with the banning of energy products (oil, coal and gas) and defense industry products. The sanctions also included a ban on access to financial institutions, telecoms, media organizations and some travel bans. These sanctions did not really harm the Russian economy. During the first year of the war in 2022, there was an increase of 86% of trade surplus for Russia while exports and unemployment fell. Russian GDP decreased but just by only 1,2%. So, contrary to Western projections, the sanctions were not so effective on Russia. Russia’s growth just slowed down slightly. In 2023 however, with the cap on Russian energy products, there was a significant decrease of the surplus of Russian economy from trade from 227 billion USD in 2022 to just 50 billion USD in 2023. Nevertheless, the Russian economy is still the fastest growing large economy in Europe, exceeding also the growth rate of US, Brazil and Japan.

On the other side, the sanctions had some negative effect for Western countries which witnessed recession. Further, Russia is now more Asia-oriented country that it was before the war. After the sanctions of the West were implemented, Russia’s trade relations with Asian countries increased to more than 300 billion USD. This means that the West’s ability to influence Russia’s behaviour in the future will be decreasing.

After the end of the presentations, questions were posed to the speakers. The Founder & President of KEDISA Dr. Andreas Banoutsos asked whether there will be more sanctions packages towards Russia in order to stop the war on Ukraine and how realistic is this approach. Mrs. Renata Jasilionytė replied that Lithuania is ready to squeeze its efforts for as many sanctions necessary in order to make Russia to stop the war. Lithuania, together with the rest of the EU, is ready for the next set of strong sanctions towards Russia. Dr. Konstantinos Vergos pointed out that the West should find a diplomatic solution to the war and start negotiating again with Russia. As he said, we should use both sanctions and diplomatic efforts towards Russia.

The Senior researcher of KEDISA Mr. George Koukakis asked whether Russian economy will continue to grow despite the sanctions. Dr. Vergos replied that the Russian economy will continue to grow due to its orientation towards Asia and the fast growing Chinese economy. Russia will have a GDP growth this year and the following years.

Dr. Banoutsos asked whether Russian economic growth is the result of increased military production and whether the end of the war will affect negatively the Russian economy. Dr. Vergos said that the Russian economic growth is not the result of military production alone and therefore the end of the war will not affect the Russian economic boost. Russia has a broad range of production in many industrial fields and therefore it will continue growing. Russian economy will only fail if the global economy collapses.

In a question posed by KEDISA’s Senior Researcher Mr. George Koukakis on whether and under which conditions the sanctions agaisnt Russia could be lifted, Mrs. Renata Jasilionytė replied that the sanctions will be lifted only when Russia’s war of aggression stops and Ukraine is paid war reparations. This process is expected to be long though, as international experience shows.

Another question from the participants of the the webinar was if western sanctions are not effective, why the EU is not adopting diplomatic means of solving the issue. Mrs. Renata Jasilionytė said that the EU and the Member States should not be afraid of breaking dependencies and trade relations with Russia. Diplomacy has not achieved anything the last two years. What is needed is increased global pressure toward Russia.

Dr. Andreas Banoutsos asked whether the revenues from frozen Russian assets should be given to Ukraine in order to reconstruct its economy, Mrs. Renata Jasilionytė said that the EU has already decided to do so because it is the right thing to do. This decision is legally sound. However, she insisted that this process will be lengthy. On the other hand, Dr. Konstantinos Vergos argued that there is a high risk with this process. If these assets are used for that purpose, these depositories will lose their reliability. This means that the Chinese depositories will get a significant proportion of money on a global scale.

On a question relating to sanctioning third countries (e.g. China, India) in the process of pressure towards Russia, Mrs. Renata Jasilionytė said that certain enterprises in third countries – which were involved with Russian interests – will be sanctioned and EU companies will not be allowed to trade with these companies anymore.

Finally Mr. George Koukakis asked whether Qualified Majority Voting (QMV) would help the sanctioning process. Mrs. Renata Jasilionytė replied that QMV would not necessarily mean that sanctions would be more effective. Besides, unanimity shows a stronger stand of EU Member States towards Russia. From a quality point of view, unanimity decisions to sanction Russia are stronger.

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