How to Bring Russia (and Belarus) to Its Knees with Sanctions

T he sanctions against Russia in response to its heinous act of aggression against Ukraine are still a work in progress, with the elimination of access for selected Russian banks from the SWIFT network that governs international financial transactions as the latest move. To be sure, the limited actions already taken have roiled markets, but it is far past the time for half measures, especially since financial innovations such as digital currencies have made traditional sanctions less effective. In the Trump White House, the staff spent an enormous amount of time working on and enforcing sanctions against Iran that were remarkably effective. Russia under Putin, clearly, cannot be trusted to stop its aggressions when the Ukraine war is resolved. It is essential that the Trump playbook be opened up and applied to Russia, and Belarus for that matter, for helping to enable the aggression.

If the Iranian sanctions are simply copied this time around, the harm to the Russian economy would rival anything that might be done with active war. In 2012, Iranian GDP was about $700 billion, enough money to fund a nuclear program and all sorts of terrorism across the Middle East. In 2020, when Trump left office, Iranian GDP had dropped all the way to $189 billion. Today’s supply-chain problems in the U.S. are a walk in the park compared with what Iran was experiencing as President Biden took office.

Belarus is clearly complicit in the attack on Ukraine, and a model client state for the Russians. Accordingly, the actions the U.S. and its allies take against Russia for the invasion should extend to Belarus as a signal to other countries to avoid allying themselves too closely to Putin. Before digging into the details, consider the impact on these societies of similarly effective sanctions. Russian GDP in 2021 was about $1.7 trillion dollars, while the GDP of Belarus was a measly $60 billion. If we impose on Russia the same sanctions that Iran experienced, that would drop Russian GDP to $459 billion. Per capita GDP for Russians would shrink from about $11,000 to $2,970.

Since Russia and Iran are oil-based economies with significant agrarian production, it is not out of the question that Russian sanctions could have a similar effect. But the sanctions against Iran devised by the Trump administration were significantly more stringent than anything being discussed today for Russia. In 2018, when Trump withdrew from the Obama nuclear deal, the steps taken against Tehran had a remarkably simple approach. Any firm or country caught doing business with Iran forfeited its right to do business with the U.S. While a few waivers were issued to help oil refineries that depended on Iranian oil find other suppliers, the move stopped Iranian supply chains in their tracks. Brent-crude exports dropped from about 2.5 million barrels a day to a couple of hundred thousand.

The academic literature on sanctions suggests that they tend to lose their effectiveness over time as profiteers find convoluted ways to get products to the sanctioned country. But the Trump administration was dogged in its pursuit of Iran. It enforced its sanctions in multiple ways. Ship traffic was monitored, and tankers or container ships headed for Iran from foreign ports were warned away. Companies that dodged the sanctions were treated harshly. People forget today, but when Ren Zhengfei, the daughter of Huawei’s founder, was arrested in Vancouver, the issue at stake was her violation of U.S. sanctions against Iran. Similarly, scores of other companies were pursued. British bank Standard Chartered forfeited, in 2019, $240 million dollars, and was fined another $480 million for violating sanctions. The list goes on and on.

The roadmap for Russia is clear. Europe should announce that all energy purchases from Russia will end in six months. The civilized world should copy the Trump version of the Iran sanctions and apply them to Russia. The conditions of their easing can be debated. Russian withdrawal from Ukraine might be one approach. My own would be to sanction Russia until Putin is gone.

Russia has a comically small economy and a strong military. This combination is the strongest asset the world has when taking on Putin. Let’s see how the Russian elites and ordinary citizens feel about the cost of having a brutal leader once they see their income drop by 75 percent.