Russia has been hit by an unprecedented package of sanctions following its invasion of Ukraine. Sergey Alexeev argues that the current sanctions are only likely to push the country further toward authoritarianism. He suggests that economic transition theories could be used to better optimise sanctions and help foster democratic alternatives

Alexeev, Sergey

English

LSE Research Online

Western	sanctions	are	only	strengthening	Putin’s	gripon	powerRussia	has	been	hit	by	an	unprecedented	package	of	sanctions	following	its	invasion	of	Ukraine.	Sergey	Alexeevargues	that	the	current	sanctions	are	only	likely	to	push	the	country	further	toward	authoritarianism.	He	suggeststhat	economic	transition	theories	could	be	used	to	better	optimise	sanctions	and	help	foster	democratic	alternatives.One	of	the	odd	features	of	international	sanctions	is	that	despite	costing	the	global	economy	trillions	of	dollars,	theyare	rarely	–	if	ever	–	guided	by	a	coherent	theory	or	empirical	evidence	concerning	their	effects.The	sanctions	that	have	been	imposed	on	Russia	following	its	invasion	of	Ukraine	essentially	borrow	from	thecriminological	principles	of	incapacitation	and	deterrence.	Incapacitation	aims	to	isolate	an	offender	from	society	toprevent	future	offending,	while	deterrence	is	focused	on	discouraging	future	offences	by	instilling	fear	over	theconsequences.The	principle	of	incapacitation	has	been	visible	in	attempts	to	halt	foreign	currency	inflows	to	Russia	and	banRussian	exports.	The	purpose	of	these	measures	is	to	erode	the	Russian	government’s	global	purchasing	powerand	prevent	future	malicious	activity.	Incapacitation	is	the	most	expensive	and	the	least	effective	approach	incriminology.	Isolation	prevents	offenders	from	being	productive	workers	and	adversely	affects	those	who	depend	onthem.	But	most	importantly,	a	country,	unlike	a	human,	can	never	be	completely	incapacitated.	The	West	may	stopbuying	gas	from	Russia	in	the	future,	but	then	the	East	will	happily	accept	the	same	amount	at	a	discount.Similarly,	a	recession	might	act	as	a	deterrence	for	democratic	politicians	worried	about	winning	fair	elections.	ButRussia	has	never	had	fair	elections.	Putin	has	little	to	fear	electorally	from	economic	sanctions	and	they	aretherefore	unlikely	to	deter	future	aggression.	Furthermore,	the	success	of	sanctioning	is	predicated	on	rationalityand	an	ability	to	understand	tradeoffs.	Putin’s	capacity	for	rational	thinking	in	this	context	is	debatable,	but	there	arefew	signs	he	will	be	dissuaded	from	pursuing	his	foreign	policy	goals	by	sanctions	alone.Why	the	West’s	sanctions	are	counterproductiveFor	Russians,	the	recession	of	the	1990s,	when	the	economy	underwent	an	unprecedented	structuraltransformation,	is	an	important	benchmark.	At	the	beginning	of	that	transformation,	the	economy	lost	52%	of	itsoutput.	By	comparison,	during	the	Great	Depression,	a	textbook	example	of	economic	collapse,	the	Americaneconomy	declined	by	only	34%.Many	of	Russia’s	ruling	class	have	been	in	power	since	that	period.	Thus,	their	tolerance	for	economic	calamities	isunimaginably	high.	The	inconsequential	sanctions	of	2014	only	reinforced	their	confidence	that	recovery	willinevitably	follow	once	the	economy	adjusts.	Soon	after	the	first	2022	sanctions	were	implemented,	Putin’sgovernment	stated	that	he	expected	the	economy	to	recover	after	a	temporary	increase	in	inflation	andunemployment.But	sanctions	are	not	only	an	inadequate	deterrence	for	Putin	–	they	are	actively	tightening	his	grip	on	power.	Putinlegitimises	his	rule	by	claiming	Russia	is	heroically	withstanding	economic	hardships	caused	by	the	West.	Thismessage	is	compatible	with	the	Kremlin’s	framing	of	the	Ukraine	conflict	as	a	‘denazification’	project	and	with	itsbroader	obsession	with	the	Second	World	War.Many	Russians	view	the	atrocities	perpetrated	by	Nazi	Germany	on	the	Eastern	Front,	the	painful	economictransformation	of	the	1990s,	and	the	current	economic	sanctions	as	a	single	narrative,	with	Putin	continuing	thefight	against	Russia’s	enemies	both	within	and	outside	the	country.All	of	this	underlines	the	futility	of	applying	criminological	principles	such	as	incapacitation	and	deterrence	to	acountry.	While	these	principles	may	be	effective	at	preventing	crimes	carried	out	by	individuals,	they	are	entirelyinadequate	for	preventing	aggression	by	states,	even	thoroughly	personified	dictatorships	like	Putin’s	Russia.	Theyare	also	undermined	by	assigning	collective	blame	to	all	Russians,	who	are	in	many	respects	also	victims	of	thecountry’s	unjust	institutions	and	political	leadership.LSE European Politics and Policy (EUROPP) Blog: Western sanctions are only strengthening Putin’s grip on power Page 1 of 3		Date originally posted: 2022-05-11Permalink: https://blogs.lse.ac.uk/europpblog/2022/05/11/western-sanctions-are-only-strengthening-putins-grip-on-power/Blog homepage: https://blogs.lse.ac.uk/europpblog/Optimising	sanctionsRather	than	applying	blanket	sanctions	that	simply	strengthen	Putin’s	domestic	position	within	Russia,	the	Westshould	aim	to	optimise	sanctions	to	promote	change.	The	best	theoretical	guide	for	accomplishing	this	is	the	largelyforgotten	theory	of	economic	transitions.In	the	1990s,	the	notion	of	setting	economic	agents	free	from	state	control	formed	a	core	part	of	the	understandingof	economic	transitions.	The	theory	was	that	well-being	could	be	achieved	by	encouraging	the	relocation	ofeconomic	resources	from	inefficient	state	companies	to	newly	created	private	enterprises.This	thinking	motivated	the	Russian	reformers	of	the	1990s	to	establish	free	prices,	capital,	and	trade.	As	a	result,after	70	years	of	nonmarket	resource	allocation	that	had	crippled	the	Soviet	economy,	the	newly	established	privatesector	became	a	domain	of	freedom	and	prosperity	to	an	extent	unseen	before	in	Russia.	This,	in	turn,	created	ademand	for	political	freedoms.These	reforms	stopped	soon	after	Putin	came	to	power.	His	authoritarian	rule	now	hinges	solely	on	unreformedSoviet	institutions.	It	is	these	institutions	that	should	be	the	target	of	western	sanctions.	The	aim	should	be	torelease	the	resources	captured	by	these	institutions	and	direct	them	toward	better	ones	to	help	facilitate	positivechange	within	Russia.Unfortunately,	the	current	sanctions	are	not	designed	with	this	objective	in	mind.	Consider	two	examples.	ClosingRussian	state	YouTube	channels	following	the	invasion	of	Ukraine	was	justified,	but	it	is	counterproductive	to	banall	Russians	from	making	money	via	their	YouTube	channels.	After	Putin	shut	down	all	non-state	media,	Russianspoured	into	YouTube	seeking	information.	The	decision	to	ban	all	Russian	residents	from	making	money	fromYouTube	has	effectively	reduced	the	presence	of	alternative	media	sources	that	can	counter	the	Kremlin’spropaganda.Similarly,	sanctioning	state	banks	is	appropriate	because	it	transfers	resources	toward	entities	where	the	state’scapacity	is	reduced.	Russian	state	banks	are	the	main	sources	of	corrupt	income	for	Putin’s	loyalists.	But	banningall	Russians	from	using	their	bank	cards	abroad	simply	played	into	Putin’s	hands.	After	Putin	attacked	Ukraine,200,000	mostly	IT	specialists	left	Russia,	causing	a	panic	in	the	government.	Yet	most	of	them	had	to	return	andwork	because	they	could	not	use	their	funds	outside	of	Russia.Leveraging	institutionsRussia	may	well	lose	the	war	in	Ukraine,	but	there	is	little	evidence	Putin	is	losing	his	hold	over	power.	There	is,however,	one	potential	avenue	for	change.	Russia’s	higher	education	and	science	sectors	have	untapped	potential,but	only	if	sanctions	are	designed	with	the	aim	of	transferring	resources	away	from	state-captured	institutionstoward	better	ones.Russia’s	education	sector	is	relatively	globally	integrated.	This	means	in	the	short	term	it	should	be	responsive	toexternal	impacts.	On	the	other	hand,	there	have	already	been	limitations	placed	on	its	independence.	For	example,the	Russian	Academy	of	Sciences	has	historically	been	a	prominent	critic	of	Putin	and	authoritarianism,	but	reformsover	the	last	decade	have	effectively	dismantled	it	and	brought	its	work	under	closer	government	control.The	Russian	government	harshly	regulates	state-owned	education	and	uses	it	as	a	tool	of	propaganda.	The	deansof	nearly	all	Russian	state	universities	signed	a	letter	supporting	the	war	in	Ukraine.	Students	who	protest	the	warare	expelled,	while	academics	who	do	not	support	the	war	are	discriminated	against.	It	is	also	common	to	seepseudo-historians	and	conspiracy	theorists	as	faculty	members	who	propagate	a	warped	version	of	Russian	historythat	justifies	violence	against	various	minorities,	ex-Soviet	republics,	and	political	opponents.The	opposite	is	happening	in	Russian	private	establishments.	Importantly,	these	establishments	still	have	authoritywithin	society,	and	the	public	does	not	eschew	them	for	being	“unpatriotic”.	Unlike	their	politicians,	Russians	dorespect	and	trust	their	scientists.	After	all,	private	establishments	like	the	European	University	at	St	Petersburg,	theNew	Economic	School,	and	the	Moscow	School	for	the	Social	and	Economic	Sciences	are	at	the	top	of	their	fields.LSE European Politics and Policy (EUROPP) Blog: Western sanctions are only strengthening Putin’s grip on power Page 2 of 3		Date originally posted: 2022-05-11Permalink: https://blogs.lse.ac.uk/europpblog/2022/05/11/western-sanctions-are-only-strengthening-putins-grip-on-power/Blog homepage: https://blogs.lse.ac.uk/europpblog/Harsh	coordinated	sanctions	against	Russian	state	establishments	with	simultaneous	support	for	private	institutionswould	encourage	resource	transfer	toward	the	private	entities	that	can	channel	opposition	against	Putin.	In	thissense,	supporting	the	private	sector	is	as	crucial	as	sanctioning	the	state	one.	In	line	with	theories	of	economictransition,	the	goal	should	not	be	to	punish	Russia	for	its	own	sake,	but	to	encourage	resource	transfers	that	canfacilitate	change.	This	suggestion	is	not	without	an	empirical	basis.	The	causal	empirical	link	between	bettereducation	that	is	free	of	authoritarian	state	capture	and	democracy	is	well	established.The	demand	for	education	will	never	disappear.	Even	if	the	government	removes	the	licences	of	private	universities–	the	worst	outcome	–	these	universities	can	still	issue	certificates.	These	certificates	will	still	be	in	demand	fromstudents	if	businesses	accept	them.	Unfortunately,	the	current	sanctions	regime	is	undermining	this.	We	have	evenseen	examples	of	lectures	by	prominent	scientists	being	cancelled	because	the	speakers	have	an	affiliation	with	aprivate	institute	whose	leadership	publicly	condemns	the	war.	Measures	like	this	can	only	strengthen	Putin’sposition.ConsistencyThere	is	another	reason	why	the	West	should	focus	sanctions	on	Russian	state	educational	establishments.	Theeducation	sector	is	a	critical	factor	during	an	economic	transformation.	A	rapid	change	in	the	availability	of	newtechnology	requires	the	education	sector	to	retrain	labour.	Computers	(or	steam	and	electric	engines	before	them)would	have	been	useless	if	workers	didn’t	know	how	to	use	them.	This	logic	also	extends	to	organisationaltechnologies.In	a	recent	paper,	I	show	that	the	Russian	transition	of	the	1990s	was	a	special	case	of	adjustment	to	neworganisational	technologies.	At	the	beginning	of	the	transformation,	the	recession	was	so	strong	because	theeconomy	lacked	personnel	(law	and	business	graduates)	who	were	able	to	navigate	the	market	environment.	Therecovery	began	only	after	the	economy	was	saturated	with	properly	trained	human	capital.The	sanctions	that	have	been	imposed	on	Russia	will	also	change	the	technologies	available	within	the	Russianeconomy.	Just	as	in	the	1990s,	a	corresponding	change	in	the	labour	market	will	follow.	After	the	education	sectoroptimises	the	skills	of	workers	to	meet	the	challenges	of	the	new	environment,	the	economy	will	recover.	TheRussian	government’s	declaration	of	a	‘Decade	of	Science	and	Technology’	immediately	after	the	sanctions	wereimposed	suggests	it	is	aware	of	this.If	western	sanctions	were	to	target	state	educational	establishments,	they	may	therefore	have	a	significant	deterrenteffect,	while	also	encouraging	resource	transfers	to	private	establishments	that	are	willing	to	oppose	Putin.	Thiscombination	of	measures	would	have	a	higher	chance	of	success	than	broad	sanctions	aimed	at	crippling	theRussian	economy.Note:	This	article	gives	the	views	of	the	author,	not	the	position	of	EUROPP	–	European	Politics	and	Policy	or	theLondon	School	of	Economics.	Featured	image	credit:	kremlin.ru	/	РИА	«Новости»LSE European Politics and Policy (EUROPP) Blog: Western sanctions are only strengthening Putin’s grip on power Page 3 of 3		Date originally posted: 2022-05-11Permalink: https://blogs.lse.ac.uk/europpblog/2022/05/11/western-sanctions-are-only-strengthening-putins-grip-on-power/Blog homepage: https://blogs.lse.ac.uk/europpblog/

Western sanctions are only strengthening Putin’s grip on power

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Western sanctions are only strengthening Putin’s grip on power

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