What Impact Have Ukraine-Related Sanctions Had on Russia?

Emanuel Pietrobon

Six years after the implementation of the Ukraine-related sanctions regime it is time to recognize its failure: it didn’t achieve any of its economic and political goals; instead, it has been making Russia stronger and gave impetus to the transition to a multi-polar world order.

Russia Returned to Being an Agricultural Powerhouse

This scoop comes from the prestigious news agency and intelligence-gathering firm Bloomberg: the Russian economy is benefiting from the sanctions regime, more specifically, its agribusiness industry is thriving and is conquering the worldwide food market.

The best way to depict this phenomenon is to show what is going on in Egypt: recently the state buyer booked 530,000 tons of Russian wheat, the single-highest purchase from the country since the 2012-13 season, and overall its purchases from Russian producers now comprise up to 80% of the national supplies for this season.

Russian wheat is so competitive in terms of price and quality that Egypt “hasn’t booked wheat from countries outside Russia since early August, and offers from the European Union have been scant in recent months”. Interestingly, according to the Russian Grain Union there are indications that this “trend may continue for a while” and not only in Egypt.

Russia’s food exports are growing worldwide and the West is to credit.

Isolating Russia from the EU Market Motivated New Thinking in Moscow

Indeed, the sudden isolation from the EU food market prompted Russia not only to find fast new partners with which to replace the main sellers but also gave impetus to the rediscovery of the believed-to-be-buried centuries-old status of agricultural powerhouse.

The quest for autarchy in the time of globalization ceased to be a taboo and the state ordered the agribusiness sector to raise the output and to bring the unproductive and underused massive kilometers-long lands to productivity.

It worked.

Russia is the World’s Top Grain Exporter

Six years after the sanctions-regime Russia has achieved food self-sufficiency for several crops; it is now the world’s top grain exporter and is on the path to break new records in the export of many other products, like seafood, meat, fats and oils, as it is in the world’s top ten of agricultural exporters.

Bloomberg notes that EU countries like France are getting severely hit by Russia’s competitiveness, which is in part due to the ruble’s weakness against the euro, whereas other sources emphasize how the country in 2019 earned more from the grain exports than the arms exports.

The watershed year was 2014: that is when the West introduced the sanctions regime and the EU in particular started to decouple its economy from Russia’s. Starting from that year the agricultural output rose by more than 20% and the agribusiness got “to capture more than half of the global wheat market”, a tremendous achievement.

The partnership with China played a fundamental role in prompting the Russian agribusiness to raise the production: the country opened its billion-people market to Russian food, especially poultry and dairy products. The bilateral food trade grew by almost 30% in 2018 for a value of more than $5 billion.

It’s a very noteworthy amount considering that Russia’s overall food exports worldwide neared $26 billion that same year.

No Political Goal Achieved by Sanctions

It’s not only Russian agribusiness that has thrived, even other strategic sectors are experiencing autarchy-driven booms partly boosted by the partnership with China: from high-tech and mining to energy and defense.

The United States itself has admitted the failure of the sanctions-regime in the latest report published by the Congressional Research Service, dated January 2020: “In terms of economic impact, studies suggest that sanctions have had a negative but relatively modest impact on Russia’s growth. Changes in world oil prices have had a much greater impact on the Russian economy. After oil prices rose in 2016, Russia’s economy began to strengthen even as sanctions remained in place and, in some instances, were tightened”.

The sanctions-regime was designed with the goal of damaging the Russian economy up to the critical point to oblige the establishment to rethink its foreign policy agenda for budgetary issues and retreat from Ukraine and other countries, like Syria. It didn’t work: Crimea is still under Russian sovereignty, the Donbass is still Kremlin-remote controlled, and Russia got to circumvent the potentially-lethal isolation by returning to its long-forgotten Asian dimension.

Brzezinski’s Nightmare Come True

More importantly, Trump’s decision to keep active Obama’s anti-Russian containment and to open a new front against China worked contrariwise and it made Zbigniew Brzezinski’s nightmare true: the two countries forged a fragile-but-solid multisector strategic partnership and they even started to support Iran, although very timidly.

In short, the US exposed itself to the risk of an imperial overstretch by clumsily trying to fight two great powers at the same time without taking into account the worst case scenario: their eventual survival-driven rapprochement.

Trump’s efforts to strategically retreat from the Middle East by delegating the American agenda to Israel and the Gulf monarchies and the growing disinterestedness for influence in non-Asian theaters are a try to fix the mistakes committed in the last six years by devoting extensive resources to the Cold War 2.0.

In this race against time the goal is no longer to force Russia out of Ukraine: it is to prevent the Moscow–Bejing axis from turning into a formidable alliance. But the only way to avoid such scenario is to put an end to the sanctions and to restart a constructive dialogue with the Kremlin; the problem is that nobody with enough power seems interested in doing this.