World is realising that economic sanctions work
After Volodymyr Zelenskyy told off the Americans after their offer to ferry him to safety, with: “I want ammunition, not a free ride”, the Ukrainian President and his cause have been gaining traction. The first lot of sanctions announced by the US and the EU was more symbolic. But what has followed in the last few days is hurting Russia. Together with the slowing advance of Russian troops, there has been a second set of economic sanctions. Dropping its previous hesitation, the US and Germany joined other EU allies in disconnecting big Russian banks from the international payment messaging system called SWIFT. The allies have also isolated the Russian Central Bank and frozen its assets, thus hobbling its efforts to stem the rouble’s downward spiral despite the bank’s $630 billion reserves.
Other measures include: oil major BP exiting Russian oil company Rosneft in which it had an 18% stake; a Western task force set up to identify and freeze assets of Russian oligarchs in Europe and the US; closing of airspace to Russian aircraft by Europe and Canada; and Germany and the EU reversing a half-a-century old ‘neutrality’ vow, and agreeing to arm Ukraine. Even Google and Twitter have joined private efforts to isolate Russia.
Economic sanctions, especially the crippling of Russian banks, seem to be working. In a burst of anger on Monday, Russian President Vladimir Putin put his nuclear forces on high alert. The Kremlin has also agreed to talks. There is another aspect to the Ukraine sanctions. The US and the EU see Ukraine as an extension of Europe, and its people as culturally close to the West. No wonder the US-EU axis is willing to extend itself. The same was not true when Chechnya in 2000 and Georgia in 2008, two old Soviet republics, tried to break free from the Russian hold. They found no support. That said, in a financially integrated global system, the world is discovering economic sanctions work splendidly in isolating those who break international law. If the whole gamut of sanctions are used, albeit sparingly, the danger of destructive wars may become that much remote.