Page 48 - BNE_magazine_03_2020 wellness

48 Opinion
bne March 2020
The US is revving up to impose new sanctions on Russia's debt, but they could have unintended consequences.
Market interventions: the case of the US sanctions on Russia
Ben Aris in Berlin
The use of sanctions to pressure countries has become the go-to foreign policy tool but the economic repercussions are still not well understood and unlike previous sanctions regimes on relatively isolated countries like North Korea and Iran, the sanctions on Russia, which is deeply integrated into the global economy, can have unintended consequences, the Institute of International Finance (IIF) said in a white paper entitled “Market interventions: the case of the US sanctions on Russia” released in February.
The paper is timely as the US has two new sets of sanctions on the table that it is threatening to impose on Russia. And despite a lull in the Russiagate hysteria following the release of the Mueller report that debunked the most outlandish of the accusations levelled at the Kremlin, as the presidential election campaign gathers momentum Russia is once again being accused of interference. Sanctions have been used not just as a foreign policy tool, but they are also used to boost politician and party standing on the US domestic political scene. In Russia’s case it has been assumed that imposing sanctions can earn a US or European politician significant political capital by “looking tough” at no political cost. However, the imposition of sanctions already put in place on Russia has clearly shown they do come at a cost, as they
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have a nasty habit of boomeranging back and hurting the issuing country as well.
“The value of sanctions lies in the fact that they are perceived to be a lower-cost and lower-risk way to change another country’s behavior compared to, alternatively, some form of military action. However, sanctions are a form of government
“The value of sanctions lies in the fact that they are perceived to be
a lower-cost and lower-risk way to change another country’s behavior compared to, alternatively, some form of military action”
market intervention and can have significant unintended and uncertain consequences – particularly if they are placed on an economy highly integrated into the global economy and the international financial system,” the IIF team of deputy