Kazimierz Dadak Hollins University, Roanoke, United States
Price of Aggression: The Impact of Sanctions on the Russian Economy
Introduction In late February of 2014, president of Ukraine, Viktor Yanukovych, a staunch ally of Russia, lost power. This event sent into motion a sequence of events that pitched Russia against its neighbour and the West. Faced with the loss of influence, if not control, over Ukraine, Vladimir Putin immediately took steps that, in his mind, were to secure the interests of his country. First, in March 2014, Russia seized and annexed Crimea; soon afterwards a Russian-inspired rebellion engulfed eastern Ukraine. These measures drastically increased Putin’s popularity at home, but made him a pariah abroad. Initially, the West, including the European Union, imposed diplomatic sanctions1. They had no effect on Russian behaviour and, in July, the West expanded punitive measures to the economy2. President Putin did not budge, and in September, the United States and the European Union increased the pressure by imposing additional sanctions on the financial sector3. As a result, Russian companies, including large banks, were effectively cut off from western financial markets. Past experience, such as the U.S. led sanctions on Iran, shows that this type of punishment is very effective and this paper illustrates that they exacted a price on the Russian economy as well.
1
U.S. Department of State, Ukraine and Russia Sanctions, http://www.state.gov/e/eb/tfs/spi/ukrainerussia/
2
US Department of the Treasury, Directives 1 and 2 Pursuant to EO 13662, 16 VII 2014, http://www.treasury.gov/ resource-center/sanctions/Programs/Pages/ukraine.aspx, European Union, Highlights, EU sanctions against Russia over Ukraine crisis, http://europa.eu/newsroom/highlights/special-coverage/eu_sanctions/index_en.htm. 3 US Department of the Treasury, Announcement of Expanded Treasury Sanctions within the Russian Financial Services, Energy and Defense or Related Materiel Sectors, 12 September 2014, http://www.treasury.gov/press-center/ press-releases/Pages/jl2629.aspx, European Union, Highlights, op. cit.
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