The Impact of 2014 U.S Economic Sanctions on Russian Public Welfare and Public Opinion

The use of economic sanctions as an alternative to military conflict can be traced back to Pericles’ issuing of the Megarian Decree in 432 B.C.[1] While the exact reasoning for the sanctions is still debated, historian Donald Kagan contends the decree was issued to address a problem in a moderate manner that honored the Thirty Years Peace and prevented violence.[2] Since the Peloponnesian War, economic sanctions continue to be seen as an alternative to military conflict carrying smaller economic, political, and military costs.[3]

A majority of sanctions over the past century have originated from the United States.[4] Most recently, the US has imposed economic sanctions on Russia to deter actions threatening Ukraine’s democracy and sovereignty.[5],[6],[7] A significant body of scholarship argues that 2014 US Russian sanctions have successfully eroded Russian public welfare and swayed public opinion against Vladimir Putin’s government.[8],[9],[10],[11],[12] In this study, US sanctions against Russia will be further deconstructed: in all, although US sanctions have negatively impacted Russian public welfare, they have yet to negatively affect Russian public opinion toward the Putin administration.

While much research exists on the effects of US sanctions on Iran, Iraq, and North Korea,[13] little work exists on their effects in Russia. In Section One, I will examine literature that addresses economic and political theories on the effects of sanctions on citizens in targeted states. In Section Two, I will examine the 2014 US economic sanctions on Russia, using an empirical evaluation of their effect on general welfare and public opinion. In Section Three, I will analyze data from January 2014 to March 2015 to address how the Russian government has retained support in spite of American sanctions.

Section One:

There has long been scholarly debate about the exact definition of economic sanctions. Scholar Dave Baldwin has established a well-recognized definition that will be used in this study: “an economic instrument which is employed by one or more international actors against another, ostensibly with a view to influencing that entity’s foreign and/or security policy behavior.[14]” Other scholars posit broader definitions containing references to punishment or preventive action,[15] but the above definition sufficiently addresses the wide scope of economic sanctions in its use of the term “influencing.”

International relations scholar Dale Copeland argues that a disparity exists between perceived and actual effects of economic interdependence on international security. Liberalism contends that increased interdependence decrease conflict and heighten the value of trade. Contrary to these views, realist views posit that increased economic interdependence will increase the likelihood of war as a means of controlling greater pools of resources. Copeland argues that both liberalist and realist perspectives contain flaws, introducing a theory of future trade expectations: if there is an expectation for low or decreased future trade then realist theory will prevail, as dependent actors are likely to initiate war. If expectations for future trade are positive, war may be less likely.[16]

Copeland’s theory leads one to consider the negative impacts economic sanctions may have on economic interdependence. US-imposed sanctions on Russia indicate an expectation of less future trade. Because Russia’s dependence on the US economy is greater than that of the US toward Russia, Copeland’s theory suggests the latter is inclined to initiate conflict in response to its threatened economic future. Similarly, Hufbauer et al. argue that sanctions are more effective when applied to countries that are typically allies, the opposite of what we find with the US and Russia in 2014.[17] As states issue sanctions it is critical to understand the implications that limiting economic relations may have on overall international security.

Political science literature identifies four primary methods to apply economic sanctions: 1) impose trade controls such as embargos and selective tariffs, 2) suspend technical assistance such as via credit facilities, 3) freeze financial assets, and 4) blacklist companies.[18] All have been applied in the recent case of US-Russia sanctions.[19],[20],[21] Additionally, it is critical to understand how sanctions affect the general public in targeted nations. Targeted sanctions may impose negative economic consequences on all citizens of a state regardless of who is targeted. Similarly, freezing financial assets or blacklisting companies may primarily affect the general public instead of economic or political leaders.

In recent years there has been “heightened attention to targeted sanctions” to prevent lower class citizens from extreme suffering.[22],[23] Johnston and Weintraub identify four principal concerns when evaluating the morality of economic sanctions: 1) comprehensive sanctions should be considered only in response to aggression or grave injustice, 2) the harm caused by sanctions should be proportionate to the good likely to be achieved, 3) there is a need to consider humanitarian exemptions, and 4) sanctions should ultimately aim to find “an effective political solution to the injustice.[24]” Furthermore, the UN Inter-Agency Standing Committee noted that economic sanctions “often directly affect the poorest strata of the population.[25]

Finally, Susan Allen finds that economic sanctions increase antigovernment activity, yet this activity is often mitigated by political structures in more autocratic states.[26] While sanctioning actors recognize sanctions’ generally negative impact on the general public, they do so with the expectation that it will cause a change in public opinion; if public opinion is not impacted, the rationale behind sanctioning tactics merits reexamination.

Section Two:

The effectiveness of sanctions on Russia will now be examined, taking into account variables representing the general welfare of Russian citizens as well as public opinion toward the government after the 2014 sanctions. Previous research conducted by Hufbauer et al. analyzes the success of past sanctions via variables such as the duration of policy and if the purpose of the sanctions was achieved.[27] Neuenkirch and Neumeier identify that a significant body of research exists as to the humanitarian affect of economic sanctions, but empirical research on economic consequences is sparse.[28] Furthermore, there has been no research that uses empirical economic data, humanitarian statistics, and public opinion surveys to study the recent effects of the 2014 sanctions on Russia.

To conduct the empirical study, six variables will be used to determine change in Russian public welfare, along with data collected from opinion polls since January 2014. While these variables cannot completely measure overall public welfare, they are representative of variables used in recognized indices such as UNDP’s Human Development Index (HDI), the Index of Sustainable Economic Welfare (ISEW), and the Genuine Progress Indicator (GPI).[29] Previous studies have used similar methods to determine overall public welfare and public opinion.[30], [31],[32],[33]Variables used incorporate economic welfare and social welfare data on Consumer Price Index, Russian Ruble Exchange Rate, Food Inflation, Employment, Consumer Sentiment, and Social Sentiment taken from Trading Economics and the Levada Center.[34]

The empirical study measures the change in Russian public welfare and public opinion in relation to the implementation of US sanctions. One should also note that European Union sanctions toward Russia were issued in 2014, but for the purpose of this study only US sanctions will be addressed. Refer to Hufbauer et al. and Elliot et al. for methods to control for confounding variables and the Levada Center and Trading Economics for explicit descriptions of the data and polling collected.[35],[36],[37]

The US government issued multiple Executive Orders imposing a variety of targeted sanctions on Russia such as travel bans and asset freezes. For this study, I will group these sanctions into three chronological groups. A series of sanctions were initially imposed in March 2014, followed by additional rounds in July 2014 and December 2014.[38],[39],[40] Within this study, specific sanctions will not be investigated; they will instead be generalized as ‘targeted sanctions’ on major Russian companies and Russian leaders who maintain close relationships with President Vladimir Putin. Additionally, it is important to note that conclusions do account for delayed sanction effects. Selected numerical and graphical data can be found in Appendix A.

Section Three:

Russian welfare and public opinion data demonstrate significant decreases in Russian general public welfare yet increases in approval ratings. Food inflation increased over 350% from January 2014 to March 2015. Sanctions in March 2014 and July 2014 had little direct effect on food inflation demonstrated by the consistent increase from January 2014 to November 2014, but we find that the December 2014 sanctions dramatically affected food inflation. Similarly, the Ruble maintained its value until the December 2014 sanctions, at which point the exchange rate ballooned from 50.5 to 72 Rubles per US dollar over a two-month period.

The Consumer Price Index, which measures changes in the price of a basket of typical consumer goods, was not significantly affected by the sanctions. Data on employed persons demonstrates that from early 2014 to the first set of US sanctions, the number of employed persons grew. After March 2014, however, employed persons decrease steadily until February 2015, suggesting that 2014 US economic sanctions may have played a role in decreasing employment.

Also studied was consumer sentiment and social sentiment that measures the attitude of the Russian general population. Both consumer and social sentiment followed similar trends where an initial increase in sentiment was seen from January 2014 to March 2014; March 2014 to March 2015 both saw consistent decline. In all, the data suggest that the six variables representing Russian general public welfare were generally negatively affected by US sanctions.

Data on Russian public opinion demonstrates that US sanctions have not urged Russian constituents to alter their political preferences. Putin saw a 33% increase in approval from January 2014 to March 2015. Interestingly, month-by-month data show that in both March 2014 and July 2014 (when the US announced targeted sanctions) Putin’s approval rating almost immediately increased. While December 2014 sanctions did not result in increased public approval ratings, the decrease was negligible. We see a very similar trend with sharp increases in approval after March 2014 and July 2014, more so than the increase in approval toward Putin.

Examining the relationship between the average percentage change of public opinion toward Putin and the Russian government against the average percentage change of consumer and social sentiment, we see regression trends in opposite directions. While public opinion was increasing in favor of Putin, variables central to general welfare, consumer and social sentiment, were decreasing. From this we can determine that the decreased public welfare did not translate to decreased public opinion and increased likelihood of rebellion toward Putin as the US desired. From here it is clear that 2014 US economic sanctions saw limited results from January 2014 to March 2015 because 1) public opinion toward Putin has increased, 2) the Russian government has not altered its policy positions on the Ukrainian conflict, and 3) the Russian middle and lower classes have suffered disproportionately from the sanctions. Although the observed correlations cannot lead to the direct conclusion that US sanctions caused an increase in public opinion Putin’s administration, the monthly basis of the data reduces the likelihood of confounding variables.

A potential concern is that Russian opinion polls were inaccurate and public opinion toward Putin has actually decreased. Yet the detailed methodology and anonymity of survey responses reduces the likelihood of this scenario.[41] Furthermore, only certain datasets were available for this investigation due to the need for monthly data and the recent nature of American sanctions. Hence, it is reasonable to assert that sanctions have negatively impacted the general welfare of the Russian public, yet the Russian government has sought to mitigate the effects and maintain public opinion.

The Russian government has devised three major strategies to address the sanctions’ effects. First, Russian law expert Eric Lorber noted that Putin’s administration has used short-term loans to prop up companies that can no longer access western debt financing. Yet these actions by the Russian Central Bank in part drove inflation and the devaluing of the Russian Ruble, which collectively decreased the public’s purchasing power (as seen in Appendix A). Second, Lorber suggests that the Russian government has redirected resources away from social programs and concentrated assets with more conservative oligarchs historically aligned with the government. While these claims are difficult to prove in the absence of financial data on Russia, such views are consistent with Putin’s recent restructuring of inner circle of advisors.[42] Third, Putin has employed media campaigns that have boosted his public image and eroded citizens’ views toward western influence.[43]

Conclusion:

The 2014 sanctions have yet to net a positive political impact for the US, as the Russian government has not changed its policy positions on the Ukrainian conflict.[44],[45] Although welfare dropped after the 2014 rounds of sanctions, public opinion toward the Russian government increased during that same period and has since remained significant. Overall, data suggest that sanctions are correlated to high public opinions of Putin despite decreased welfare; to this end, the goals of US sanctions have yet to be reached.[46],[47],[48],[49],[50]

Collins and Bowdoin recognize that “nearly all unilateral sanctions fail nearly all of the time” and with an increasing globalized world, the need to understand sanctions’ effects is imperative (Collins and Bowdoin, 1999).[51] Moving forward, Russian mechanisms to mitigate sanctions could be considered to formulate improved sanctions that more forcefully call for Russian policy change or more strongly invite the Russian citizenry to oppose the incumbent government. Russia’s continued presence in Crimea calls for consideration as to how US-Russia relations will evolve.

Future research could continue using recent data to investigate longer-term effects of the 2014 sanctions. Modeling and theories of network analysis, for instance, may help identify trends that contribute to scholarly work on conflict dynamics. The availability of newer data will allow for broader analyses of general welfare and mechanisms used by Russian elites to retain support and minimize the effect of American sanctions.

 

Chase Moyle (’17) is a junior at Duke University.

 

Appendix A

Chart1

 

 

 

 

 

Chart2

 

 

 

 

 

Chart3

 

 

 

 

 

 

Chart4

 

 

 

 

 

Chart5

 

 

 

 

 

 

Chart6

 

 

 

 

 

 

Chart7

 

 

 

 

 

Chart8

 

 

 

 

 

Chart9

 

 

 

 

 

 

 


Works Cited

Allen, S. H. “The Domestic Political Costs of Economic Sanctions.” Journal of Conflict Resolution 52, no. 6(2008): pp. 916–944. doi: 10.1177/0022002708325044.

Bachrach, D. The Crimean War. San Diego, CA: Lucent Books, 1998.

Campbell, J. C. and Renwick, R. “Economic Sanctions.” Foreign Affairs 61, no. 1(1982). doi: 10.2307/20041365.

Collins, J. J. and Bowdoin, G. D. Beyond Unilateral Economic Sanctions: Better Alternatives for US. Foreign Policy. Central for Strategic and International Studies, 1999.

Copeland, D. C.  “Economic Interdependence and War: A Theory of Trade Expectations.” International Security 20, no. 4 (1996). doi: 10.2307/2539041.

Danilishin, B. M. and Veklich, O. A. “Genuine progress indicator as an adequate macroeconomic indicator of public welfare.” Studies on Russian Economic Development  21, no 6(2010): pp. 644–650. doi: 10.1134/S1075700710060080.

Doxey, M. P. and Royal Institute of International Affairs Staff. Economic sanctions and international enforcement. New York: published for the Royal Institute of International Affairs, by Oxford University Press, 1971.

Elliott, K. A., Hufbauer, G. C. and Schott, J. J. Economic Sanctions Reconsidered. Peterson Institute for International Economics, 2008.

Galtung, J. “On the Effects of International Economic Sanctions, With Examples from the Case of Rhodesia.” World Politics 19, no. 03 (1967): pp. 378–416. doi: 10.2307/2009785.

Gulina, O. “Humanitarian Migration from Ukraine.” Russian Analytical Digest, p. 157, 2014.

Hufbauer, G. C., Schott, J. J. and Elliott, K. A. Economic Sanctions Reconsidered: History and Current Policy. Washington, DC: Institute for International Economics, 1985.

Indexes | Levada-Center (2015) Available at: http://www.levada.ru/eng/indexes-0 (Accessed: 20 April 2015).

Jacobs, G. and Slaus, I. “Indicators of Economic Progress: The Power of Measurement and Human Welfare.” Cadmus 1, (2010).

Johnston, D. and Weintraub, S.  Altering U. S. sanctions policy. Washington, D.C. : Center for Strategic and International Studies, 1999.

Journalism/Works: Putin: Power, Persuasion and Propaganda (2015) Available at: http://www.newseum.org/event/journalismworks-putin-power-persuasion-and-propaganda/ (Accessed: 21 April 2015).

Kagan, D. On the origins of war and the preservation of peace. New York: Bantam Doubleday Dell Publishing Group, 1994.

Lindsay, J. M. “Trade Sanctions as Policy Instruments: A Re-Examination.” International Studies Quarterly 30, no. 2 (1986). doi: 10.2307/2600674.

Lopez, G. A. and Cortright. The Sanctions Decade: Assessing UN Strategies in the 1990s. Boulder, CO: Lynne Rienner Publishers, 2000.

Lorber, E. (2015) 10 April. Interview with Chase Moyle.

Merriam-Webster (2015) Welfare. Available at: http://www.merriam-webster.com/dictionary/welfare (Accessed: 21 April 2015)

Miyagawa, M. Do economic sanctions work?. New York, NY: MacMillan Publishing Company, 1992.

Naylor, R.  Patriots and Profiteers: Economic Warfare, Embargo Busting, and State-sponsored Crime. 2nd edn. Montreal & Kingston: McGill-Queen’s University Press, 2008.

Neuenkirch, M. and Neumeier, F. “The Impact of UN and US Economic Sanctions on GDP Growth.” SSRN Electronic Journal (2014). doi: 10.2139/ssrn.2417217.

Nossal, K. R. “International sanctions as international punishment.” International Organization 43, no. 02(1989). doi: 10.1017/s0020818300032926.

Obama, B.  “Executive Order 13660: Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to the Crimea Region of Ukraine.” Federal Register 79, no. 46 (2014).

Obama, B. “Executive Order 13661: Blocking Property of Additional Persons Contributing to the Situation in Ukraine.” Federal Register 79 (2014).

Obama, B. “Executive Order 13685: Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to the Crimea Region of Ukraine.” Federal Register, 79, no. 247(2014).

Peeters, T. and Fratianni, M. U. Economic sanctions and international enforcement. London: Published for the Royal Institute of International Affairs by Macmillan Press, 1978.

Peksen,  D. “Better or Worse? The Effect of Economic Sanctions on Human Rights.” Journal of Peace Research 46, no. 1(2009): pp. 59–77. doi: 10.1177/0022343308098404.

Peksen, D. “Economic Sanctions and Human Security: The Public Health Effect of Economic Sanctions.” Foreign Policy Analysis 7, no. 3 (2011): pp. 237–251. doi: 10.1111/j.1743-8594.2011.00136.

Russian Public Opinion Research Center (2015) Available at: http://www.wciom.com/index.php?id=61 (Accessed: 18 March 2015)

Rutland, P. “The Impact of Sanctions on Russia.” Russian Analytical Digest 157 (2014).

Shehabaldin, A. and Laughlin, W. M. “Economic sanctions against Iraq: Human and economic costs.” The International Journal of Human Rights 3, no.4 (1999): pp. 1–18. doi: 10.1080/1364298990840684.

Strachan, H. “Strategy in the Twenty-First Century.” The Changing Character of War (2011): pp. 503–523. doi: 10.1093/acprof:osobl/9780199596737.003.0028.

Taylor, B. Sanctions as Grand Strategy. Abingdon, Oxon: Routledge, for the International Institute of Strategic Studies, 2010.

Trading Economics API (2015) Available at: http://www.tradingeconomics.com/analytics/api.aspx?source=chart (Accessed: 18 March 2015).

 


Endnotes

[1] Bachrach, D. The Crimean War. San Diego, CA: Lucent Books, 1998.

[2] Kagan, D. On the origins of war and the preservation of peace. New York: Bantam Doubleday Dell Publishing Group, 1994. P. 50.

[3] Peeters, T. and Fratianni, M. U. Economic sanctions and international enforcement. London: Published for the Royal Institute of International Affairs by Macmillan Press, 1978.

[4] Lopez, G. A. and Cortright. The Sanctions Decade: Assessing UN Strategies in the 1990s. Boulder, CO: Lynne Rienner Publishers, 2000.

[5] Obama, B.  “Executive Order 13660: Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to the Crimea Region of Ukraine.” Federal Register 79, no. 46 (2014).

[6] Obama, B. “Executive Order 13661: Blocking Property of Additional Persons Contributing to the Situation in Ukraine.” Federal Register 79 (2014).

[7] Obama, B. “Executive Order 13685: Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to the Crimea Region of Ukraine.” Federal Register, 79, no. 247(2014).

[8] Allen, S. H. “The Domestic Political Costs of Economic Sanctions.” Journal of Conflict Resolution 52, no. 6(2008): pp. 916–944. doi: 10.1177/0022002708325044.

[9] Galtung, J. “On the Effects of International Economic Sanctions, With Examples from the Case of Rhodesia.” World Politics 19, no. 03 (1967): pp. 378–416. doi: 10.2307/2009785.

[10] Campbell, J. C. and Renwick, R. “Economic Sanctions.” Foreign Affairs 61, no. 1(1982). doi: 10.2307/20041365.

[11] Lindsay, J. M. “Trade Sanctions as Policy Instruments: A Re-Examination.” International Studies Quarterly 30, no. 2 (1986). doi: 10.2307/2600674.

[12] Nossal, K. R. “International sanctions as international punishment.” International Organization 43, no. 02(1989). doi: 10.1017/s0020818300032926.

[13] Shehabaldin, A. and Laughlin, W. M. “Economic sanctions against Iraq: Human and economic costs.” The International Journal of Human Rights 3, no.4 (1999): pp. 1–18. doi: 10.1080/1364298990840684.

[14] Taylor, B. Sanctions as Grand Strategy. Abingdon, Oxon: Routledge, for the International Institute of Strategic Studies, 2010. P. 10.

[15] Miyagawa, M. Do economic sanctions work?. New York, NY: MacMillan Publishing Company, 1992. P. 7.

[16] Copeland, D. C.  “Economic Interdependence and War: A Theory of Trade Expectations.” International Security 20, no. 4 (1996). doi: 10.2307/2539041.

[17] Hufbauer, G. C., Schott, J. J. and Elliott, K. A. Economic Sanctions Reconsidered: History and Current Policy. Washington, DC: Institute for International Economics, 1985.

[18] Doxey, M. P. and Royal Institute of International Affairs Staff. Economic sanctions and international enforcement. New York: published for the Royal Institute of International Affairs, by Oxford University Press, 1971.

[19] Obama, B. “Executive Order 13660.”

[20] Obama, B. “Executive Order 13661.”

[21] Obama, B. “Executive Order 13685.”

[22] Naylor, R.  Patriots and Profiteers: Economic Warfare, Embargo Busting, and State-sponsored Crime. 2nd edn. Montreal & Kingston: McGill-Queen’s University Press, 2008. Pp. xiii – xv.

[23] Peksen, D. “Economic Sanctions and Human Security: The Public Health Effect of Economic Sanctions.” Foreign Policy Analysis 7, no. 3 (2011): pp. 237–251. doi: 10.1111/j.1743-8594.2011.00136.

[24] Johnston, D. and Weintraub, S.  Altering U. S. sanctions policy. Washington, D.C. : Center for Strategic and International Studies, 1999.

[25] Lopez, G.A. and Cortright. The Sanctions Decade: Assessing UN Strategies in the 1990s. P. 25.

[26] Allen, S. H. “The Domestic Political Costs of Economic Sanctions.”

[27] Hufbauer, G. C. et al. Economic Sanctions Reconsidered: History and Current Policy.

[28] Neuenkirch, M. and Neumeier, F. “The Impact of UN and US Economic Sanctions on GDP Growth.” SSRN Electronic Journal (2014). doi: 10.2139/ssrn.2417217.

[29] Jacobs, G. and Slaus, I. “Indicators of Economic Progress: The Power of Measurement and Human Welfare.” Cadmus 1, (2010). Pp. 64-65.

[30] Ibid.

[31] Danilishin, B. M. and Veklich, O. A. “Genuine progress indicator as an adequate macroeconomic indicator of public welfare.” Studies on Russian Economic Development 21, no 6(2010): pp. 644–650. doi: 10.1134/S1075700710060080.

[32] Peksen, D. “Economic Sanctions and Human Security: The Public Health Effect of Economic Sanctions.”

[33] Shehalbadlin, A. et al. “Economic sanctions against Iraq: Human and economic costs.”

[34] Trading Economics API (2015) Available at: http://www.tradingeconomics.com/analytics/api.aspx?source=chart (Accessed: 18 March 2015)

[35] Hufbauer, G. C. et al. Economic Sanctions Reconsidered: History and Current Policy.

[36] Elliott, K. A., Hufbauer, G. C. and Schott, J. J. Economic Sanctions Reconsidered. Peterson Institute for International Economics, 2008.

[37] Indexes | Levada-Center (2015) Available at: http://www.levada.ru/eng/indexes-0 (Accessed: 20 April 2015).

[38] Obama, B. “Executive Order 13660.”

[39] Obama, B. “Executive Order 13661.”

[40] Obama, B. “Executive Order 13685.”

[41] Indexes | Levada-Center (2015) Available at: http://www.levada.ru/eng/indexes-0 (Accessed: 20 April 2015).

[42] Lorber, E. (2015) 10 April. Interview with Chase Moyle.

[43] Journalism/Works: Putin: Power, Persuasion and Propaganda (2015) Available at: http://www.newseum.org/event/journalismworks-putin-power-persuasion-and-propaganda/ (Accessed: 21 April 2015).

[44] Rutland, P. “The Impact of Sanctions on Russia.” Russian Analytical Digest 157 (2014).

[45] Gulina, O. “Humanitarian Migration from Ukraine.” Russian Analytical Digest, p. 157, 2014.

[46] Allen, S. H. “The Domestic Political Costs of Economic Sanctions.”

[47] Galtung, J. “On the Effects of International Economic Sanctions, With Examples form the Case of Rhodesia.”

[48] Cambell, J. C. et al. “Economic Sanctions.”

[49] Lindsay, J. M. “Trade Sanctions as Policy Instruments.”

[50] Nossal, K. R. “International sanctions as international punishment.”

[51] Collins, J. J. and Bowdoin, G. D. Beyond Unilateral Economic Sanctions: Better Alternatives for US. Foreign Policy. Central for Strategic and International Studies, 1999.

Leave a Comment

You must be logged in to post a comment.

YRIS is a student publication, and Yale University is not responsible for its content.