2014 Sanctions Against Russia Failed, is the Second Time the Charm?

The Kremlin in Moscow Russia Photo by Larry Koester.

When Vladimir Putin invaded Crimea in March of 2014, the West imposed severe economic sanctions designed to force Russia to withdraw and punish the Russian government for breaching Ukraine’s sovereignty. However, these sanctions were largely considered to have failed in deterring Russian advancement in Ukraine because the Russian economy was not sufficiently impacted to change the Kremlin’s foreign policy. The Russian government skillfully mitigated the damage through banking policies and purposefully devaluating the Russian currency.

On February 21, 2022, Russia sent troops through the territories of Donbas in Ukraine and stationed approximately 190,000 Russian military troops across Ukraine’s border, marking again that the deterring intention of the 2014 sanctions failed to materialize. In light of these circumstances, the West needs to learn from the failure of the 2014 sanctions, reconsider how they implement their sanctions, and anticipate responses to attempt to make sanctions more effective in the future. 

In August of 2014, approximately 2,000 Russian troops began seizing the Crimean Peninsula, part of the sovereign state Ukraine. This brazen act was the first European annexation since World War II. In response, the Western world imposed sanctions in July of 2014 in order to provide protection to Ukraine’s sovereign rights, prevent a war, and deter further aggression. The European Union and the United States imposed two types of sanctions on Russia: targeted and sectoral. Targeted sanctions are asset freezes and visa bans focused on individuals and industries with close ties to President Vladimir Putin and powerful Russian institutions such as the European Parliament Think Tank. These sanctions were widened by the EU and the US after Russian proxies shot down the Malaysian Airlines passenger jet flying over Eastern Ukraine in July 2014. This widely condemned incident instigated the second round of sanctions known as sectoral sanctions, aimed primarily at Russia’s energy firms and state-owned corporations in the defense and financial sectors. 

The effects of these sanctions are hard to determine because of simultaneous, unrelated collapses in oil prices. Nevertheless, according to the International Monetary Fund, Russian GDP has declined between 1% to 1.5% due to sanctions–only a moderate decrease. The Central Bank of Russia had 500 billion USD foreign exchange reserves, which had helped Russia mitigate the damage of sanctions to GDP as a form of economic maneuvering. Another reason that these sanctions were not impactful was because of the fear many European nations have in their economically beneficial ties to Russia. 

Sanctions are a double-edged sword, as all parties involved are often economically harmed as a result of severing mutually beneficial financial and industrial ties. The former American ambassador to Ukraine, Steven Pifer noted in an online panel hosted on February 15, 2022 by the Harvard Undergraduate Foreign Policy Institute that on a scale from one to ten, with ten being complete isolation of Russia on all fronts, the sanctions implemented in 2014 were at a three. Due to their moderate effects, these sanctions did not have an immediate effect in altering Russian policy decisions in Ukraine. 

The difference between the current sanctions and the 2014 sanctions is that there has been a unified front from the West to cripple Russia’s economy. Australia, Canada, the European Union, Japan, Great Britain, and the United States, have all collaborated in imposing sanctions against Russia. Cutting certain Russian banks from accessing  the Society for Worldwide Interbank Financial Telecommunication (SWIFT) was a striking and previously unconsidered move to harm and isolate Russian financial markets. In another remarkable move, Germany canceled the licensing of Nord Stream 2 ,an already completed gas line between Germany and Russia, signaling to Russia that the EU will no longer prioritize its economic relations over a humanitarian crisis. These new sanctions also include sectoral sanctions on Russian banks and high-tech exports as well as targeted sanctions of Russia’s elite and oligarchs within Russia and abroad. These economic efforts will isolate Russia more than any sanctions have previously, but they can still be further escalated to send a message to the Kremlin. 

The main lesson that has been learned from 2014 is that in order for sanctions to burden the Russian economy, there must be targets aimed at the central bank. In preparation for the 2022 sanctions, the Russian central bank saved $630 billion in foreign reserves, just like they did during the 2014 to 2016 financial crisis after illegally annexing Crimea. The West has plans to freeze approximately $400 billion of those reserves. However, in June 2021, Russia diverted these foreign reserves from being held in dollars to be held in greenbacks, euros, gold, and Chinese yuan which circumvented the West from freezing all of its assets. Despite this, foreign reserves are harder to access because gold is difficult for the Russian central bank to liquidate into cash. Such efforts make the new sanctions more effective than the 2014 sanctions because they are curtailing Russia’s ability to manage the economic crisis. 

Until now, sanctions have not put Russia in enough financial pain to alter the Kremlin’s motives in Ukraine. The initial sanctions implemented in 2014 were targeted towards behavioral change in their objective to deter Russia from Ukraine, but now they should be aimed at severing financial and economic ties to defund the war. In the current stage, sanctions demonstrate solidarity with Ukraine. In order to prevent further atrocities, the West needs to weaken Putin’s domestic base of support as the soft sanctions of 2014 have not worked. With harsher sanctions, Putin will at some point have to recognize that the quality of life for the average Russian citizen has significantly decreased and the Kremlin cannot afford to continue invading its neighboring sovereign nations. New economic sanctions have the potential to change the Kremlin’s policy towards Eastern Europe. However, average Russians, who do not necessarily support the government’s actions in Ukraine, will suffer regardless. The cost that individuals will have to pay brings into question how closely tied governments should be to their central bank and how much direct influence the government should have on them because of how taxing sanctions are on the general populace. 

Lara Geiger (Barnard ‘25) is a Staff Writer at CPR and will likely pursue a joint major in Political Science and Economics.