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Who really suffers in economic war? A closer look at Western sanctions on Russia

Lucy Gardner

Over the last year, Western governments have been obsessed with the idea that sanctions imposed on R

ussia have presented a new and powerful era in which economic warfare is at the very forefront of strategy. However, this over-simplified view is often a misconception, for several major reasons.

One of the greatest mistakes Western – particularly American and Western European – governments imposing sanctions and export embargoes on Russia made was overlooking the basic economic fact that any company faced with a similar choice will always seek to minimise losses.

For Western companies such as McDonald’s operating in Russia, this means auctioning off supply chains, facilities and properties as quickly as possible for as cheaply as possible, as a longer stay in Russia in pursuit of a fair price may harm domestic and Western trade for the company. This means that any start-up entrepreneur seeking to fill a sudden gap in the market can invest in scrapped business parts such as now-vacant but still functional restaurant buildings for far below the market value, turning a tidy profit at a low cost.

Furthermore, governments failed to realise that ideas and intellectual property which had already entered Russian markets, particularly those that emerged during Perestroika so had time to root themselves into modern Russian culture, would be missed. Nostalgia is often a powerful motivation, and simply copying a brand which no longer exists but retains demand is a cheap and easy business practice.

These two factors are undoubtedly some of the biggest contributing factors in the rise of home-grown Russian-Western hybrid businesses, such as McDonald’s replacement Vkusno i Tochka (Tasty and That’s It!), which includes an almost identical menu, packaging, brand ideology, business practice, ordering system, and advertising system.

This is just one way of showing just how little Western sanctions have worked, and just how poorly thought out the initial ‘call to arms’ of economic warfare, particularly for western Europe and the US.

Furthermore, what democratic governments should have realised from the start was the difference in Western and Russian political systems – in Russia, public opinion does not translate directly into political power, as it does in democracy. This is particularly true because of the efficiency of state-controlled media and social media in promoting propaganda, especially through very popular Putin-friendly media such as Chanel One’s Navosti na Vremya, one of the country’s most popular news channels, whose pro-Putin line includes misreporting the effect of sanctions, spreading Western animosity, and hiding major anti-Putin news breaks, for example the recent Prigozhin coup. The coup in particular shows the hold over reporting Putin has – on the 25th of June, the top stories reported mostly related to new rockets being launched in the Ukraine war, and the coup itself was reported with the headline ‘in the unity of strength’, suggesting a significant downplay.

Why is this significant to sanctions? The media in both Russia and the West controls the perception of the outside world – for Russia, this meant that the initial shortages of basic necessities such as sugar and buckwheat could be blamed on the West, creating further animosity towards Western powers and creating more support for the war in Ukraine, which was seen as a ‘fight for freedom’ against Western neo-imperialism.

This again suggests that instead of being a new and powerful force of economic warfare and a show of strength, Western sanctions have in fact backfired and created more public support for Putin and the hostile government.

Not only this, but this was achieved through great personal suffering for not just Russians, but European - particularly Eastern European - citizens. The rising prices of food in Russia immediately after sanctions were implemented, and the shortages of basic necessities, undoubtedly had mental and physical health implications.

For non-Russian Eastern Europeans, particularly those committing to the EU sanctions line such as Hungary and Slovakia, the reality has been even worse. The counter-sanctions Russia imposed, most significantly the embargo on raw material exports such as oil and gas meant that energy prices – and subsequently the prices of everything else – skyrocketed, prompting the government to implement a strict price cap. The risk of shortages that resulted from this was so severe that Hungarian Prime Minister Viktor Orban implemented a state of emergency in December 2022.

What this suggests is that instead of a quick and effective campaign to cut off the essentials to Russia to bring down the government, the economic war on Russia has been long and difficult for the real people in society, and comparatively plain sailing for the oligarchs in charge. There has been no personal cost, apart from a few symbolic yacht seizures right at the start of the war, because wealth in Russia has such a cushioning effect against the real financial issues facing many ordinary Russians.

The reputation of so-called tough and effective sanctions is made even worse by the effect lost export revenue and retaliatory measures have had on Europeans in particular.

Instead of the tough-guy muscle-flexing of economic powerhouses in the West, Russia has simply replaced the biggest losses like McDonald’s and learnt to live without the smaller ones. The new and effective way of waging war which was supposed to minimise real-life casualties has turned out to be the opposite – real people are suffering as a result while oligarchs continue in lives of luxury and wealth hidden from view, and several have profited nicely from the new start-ups and the demand for mercenaries and armaments.

While Russia might not be winning either the ground war in Ukraine, or the economic war being fought in export and import markets all around the globe, it certainly isn’t losing it.

Image: Getty Images

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