Measuring The True Weight Of Economic Sanctions

Empirical research suggests that economic sanctions are at best ineffective and at worst counterproductive. But Russia may yet pay a hefty price for its Ukraine aggression.

In Cuba's Port of Mariel
In Cuba's Port of Mariel
*Farid Kahhat

LIMA — Empirical evidence is clear that generalized economic sanctions, such as the United States' trade embargo on Cuba, typically don't achieve their intended results. After all, the U.S. hasn't managed to end the communist regime in Cuba. And though partial sanctions targeting a specific sector with particular objectives are more likely to be successful, those too are largely ineffective.

What's more, it turns out that generalized sanctions are also counterproductive. Research by Daniel Drezner suggests that authoritarian regimes are able to redistribute the impact of sanctions in such a way as to ensure that weaker social groups (or regime opponents) will bear their cost. Meanwhile, revenues generated as a byproduct of sanctions — through smuggling of goods that can no longer be legally imported, for example — tend to benefit allies and prolong their loyalty.

Another study by economist Ronald Wintrobe contends that the adverse economic effects of sanctions may also increase the likelihood of a regime resorting to repression in response to the loss of social support sanctions may cause.

Observing these consequences initially led to what have been termed "intelligent sanctions" — essentially those that affect the outside interests of particular companies and individuals, such as the freezing of assets or bank accounts. They seek to ensure that sanctions are primarily shouldered by those they target.

Still, certain problems persist. When sanctions target policies that are viewed as a matter of national interest — Russian policies toward Ukraine, for example — the regime might prefer to tolerate very high costs rather than change them. Reaching the set objective might then require harsher sanctions than earlier envisioned, which is risky given the considerable interdependence of states both applying and suffering sanctions. Russia supplies 30% of Europe's energy, for example.

I presume this is what President Vladimir Putin had in mind when he first threatened his own sanctions against European powers. All that achieved was the hastened flight of capital from Russia. Depending on the calculation, the net value of private investment leaving Russia so far this year is between $50 billion and $70 billion (or betweeen 2.5% and 3.2% of the Russian economy). That provoked a roughly 15% devaluation of the Russian ruble in the first months of 2014, which in turn pumped the annually adjusted inflation rate up to 7.2% in April.

To curb inflation and mitigate capital flight, the monetary authority sold $35 billion in reserves on the markets and raised the primary interest rate from 5% to 7%, then to 7.5%. That move, however, merely reinforced the downward trend in economic growth. Moody's changed its initial prediction of economic growth from 2% in 2014 to -1%.

Even if sanctions don't assure policy changes, their influence on investor expectations are presenting the Russian economy with a very hefty bill. And that may wind up carrying a political price tag for the Putin government that can't be measured in rubles alone.

*Peruvian Farid Kahhat is an international analyst and professor of the Department of Social Sciences at Peru's Pontifical Catholic University.

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A Mother In Spain Denied Child Custody Because She Lives In Rural Area

A court in Spain usurps custody of the one-year-old boy living with his mother in the "deep" part of the Galicia region, forced to instead live with his father in the southern city of Marbella, which the judge says is "cosmopolitan" with good schools and medical care. Women's rights groups have taken up the mother's case.

A child in Galician countryside

Laure Gautherin

A Spanish court has ordered the withdrawal of a mother's custody of her one-year-old boy because she is living in the countryside in northwestern Spain, where the judge says the child won't have "opportunities for the proper development of his personality."

The case, reported Monday in La Voz de Galicia, has sparked outrage from a women's rights association but has also set off reactions from politicians of different stripes across the province of Galicia, defending the values of rural life.

Judge María Belén Ureña Carazo, of the family court of Marbella, a city on the southern coast of 141,000 people, has ordered the toddler to stay with father who lives in the city rather than with his mother because she was living in "deep Galicia" where the child would lack opportunities to "grow up in a happy environment."

Front page of La Voz de Galicia - October 25, 2021

Front page of La Voz de Galicia - Monday 25 October, 2021

La Voz de Galicia

Better in a "cosmopolitan" city?

The judge said Marbella, where the father lives, was a "cosmopolitan city" with "a good hospital" as well as "all kinds of schools" and thus provided a better environment for the child to thrive.

The mother has submitted a formal complaint to the General Council of the Judiciary that the family court magistrate had acted with "absolute contempt," her lawyer told La Voz de Galicia.

The mother quickly accumulated support from local politicians and civic organizations. The Clara Campoamor association described the judge's arguments as offensive, intolerable and typical of "an ignorant person who has not traveled much."

The Xunta de Galicia, the regional government, has addressed the case, saying that any place in Galicia meets the conditions to educate a minor. The Socialist party politician Pablo Arangüena tweeted that "it would not hurt part of the judiciary to spend a summer in Galicia."

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