’The sanctions are massive and unprecedented’

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Many countries have imposed massive sanctions on Russia in response to its invasion of Ukraine. Norbert Robers spoke to economic historian Dr. Ulrich Pfister, Professor of Social and Economic History at Münster University, about historical analogies and the effectiveness of what are often described as ’historic’ sanctions.

Currently, the word ’historic’ is often being used with regard to the Russian invasion of Ukraine - as well as in connection with the economic sanctions against Russia. Is the word ’historic’ justified in this context?

In their range and impact, the current sanctions are something new and, from that point of view, also historic. They are only possible as a result of our globalised world. The current extent of worldwide economic ties is unprecedented, which makes it impossible to point to any similar example in history. The most we can say is that there are historical parallels - the two World Wars, in which attempts were made to block the enemy’s supply lines...

So the current sanctions are what in earlier times was referred to as causing supply lines to dry up?

Yes, it can be seen that way. But the greatest difference between the second phase of modern globalisation, which began in about 1980, and the first phase, which lasted up to about 1910, is the intensive global financial interaction. And that is why the decision was now made to primarily impose financial sanctions, because they work fast and have a strong impact. Previously, it was physical trade that restrictions were imposed - which is still true today in the case of the sanctions against Iran. But today the priority is to cripple any transfers of money. The aim is to use this method to exclude Russia from supplies of technology and, overall, from the supply chain.

Is it possible, in our globalised world - in which all countries are dependent on, and trade with, one another - to influence dictators and warmongers with such massive economic sanctions?

Absolutely - in the long term, at least. But - we don’t yet know whether President Vladimir Putin factored all this as collateral damage into his brutal visions of Russia as a great power. What is certain, however, is that the international community is uncoupling Russia from international trade and technological progress - which will have considerable negative consequences for Russia for years, if not decades, to come...

... and especially for ordinary people?

Unfortunately, yes. For this reason, I think it’s entirely plausible that the thinking behind punishing the super-rich and freezing their accounts in the West was to achieve a kind of poetic justice. At the same time, though, we should remember that the oligarchs’ foreign assets comprise a considerable part of Russia’s national wealth - possibly close to half.

When will the sanctions begin to take effect?

Because they were so massive, the sanctions against Russia began to be felt from day one. The measures had an impact right from the beginning, with many people unable to withdraw as much money as they wanted at ATMs, for example. One example of the long-term effects is that in about three years’ time, there will be mostly decrepit cars on Russia’s roads because supplies of spare parts will dry up for years. The fact that it will no longer be possible to carry out proper maintenance work on Russian aeroplanes will quickly have a negative impact on both international and domestic flights.

What is your assessment of the fact that enormous foreign currency reserves held by Russia in western countries have been blocked?

It reminds me of 1931, when Germany slipped into insolvency. Russia is on its way to a system of foreign exchange controls, with private citizens and companies no longer able to freely buy foreign currencies, i.e. euros and dollars; instead, they will be allocated foreign currencies, on the basis of administrative decisions, after needs have been taken into consideration. Conversely, exporters are already having to largely exchange their foreign-currency revenues into roubles.

No more dealings with the Russian central bank, banks’ assets, exclusion from the international ’SWIFT’ system of payments: how long can Russia endure this?

That’s difficult to predict, but the country can hold out for a long time. Nevertheless, there is no doubt that this process will make future growth difficult. The OECD has calculated that if sanctions are kept up for one year, Russia’s economic output will decline by about ten percent.

There is also a series of ’personal sanctions’ against President Putin, Foreign Minister Lavrov and numerous oligarchs. Are these sanctions just as effective, or are they more of a symbolic nature?

These measures have not only an economic background, but a political one too. The aim is to use them to bring about the fall of the government. It’s all about a destabilisation of the elite.

How do you see the role of China? Can Russia ’save itself’ with Chinese help?

That, too, is very difficult to predict. The Chinese economy also has strong international ties - with the result, for example, that Chinese state banks registered in Singapore have stopped doing business with Russia.

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