Amid insistence that U.S. sanction on Russia have had only a minor effect, some have pointed to evidence to the contrary. Particularly, Russia’s currency is in poor shape and capital has lately flowed out of the country to a worrying extent.
However, as Peter Baker and Andrew E. Kramer point out in a recent NYT article:
Russia’s economic downturn predated any action by the United States or Europe and, to some extent, predated the Ukraine crisis. Specialists said the volatility surrounding Ukraine has clearly aggravated Russia’s economic problems by sapping international confidence, punishing its credit standing and increasing investor wariness, but it is not clear how much of that stems specifically from the sanctions.
There are two distinct points here. First, the Russian economy was in trouble before Ukraine began dominating the international news cycle. Second, the events in Ukraine wreaked havoc on Russia’s credit and investment before the sanctions were put in place.
What the sanctions have mostly done is added to the uncertainty about Russia’s economy that is causing credit agencies and investors to lose confidence. Further, the possibility of future sanctions that may have a greater effect piles on further uncertainty. In this sense, it is not the direct economic effects of the sanctions that is most concerning for Moscow, but their indirect psychological effects.
With the White House claiming the sanctions are having a “significant impact”, one might wonder if Washington knowingly planned to free ride on Russia’s existing economic concerns. Like a navy gunner belatedly firing on sinking ship, Washington can exacerbate Russia’s situation while claiming responsibility for the problems as a whole.
Again, this is not to trivialize the sanctions’ overall effects (direct and indirect effects taken together). The symbolic significance of these two rounds of sanctions is major, as it makes real the possibility of stronger measures in the future. It is this fear of the unknown that Russia must now contend with, while the U.S. has barely begun to spend its ammunition.