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Russian Sanctions a "Watershed" Moment in Global Economic History

The barrage of Western sanctions against Russia has moved political and economic systems around the world into uncharted territory. In December, it was already clear that Russian aggression against Ukraine would meet a wave of American and European economic pressure. But although Vladimir Putin’s sudden and brutal invasion shocked us all, the Western economic response has been just as astonishing.

An initial round of sanctions on February 24th targeted Russian banks and technology exports; a second round on February 26th severed access to the swift financial messaging network, seized the foreign wealth of Russian oligarchs and, most significant of all, froze most Russian overseas central-bank reserves. Before this, no g20 economy had ever faced such drastic economic sanctions, nor experienced so many of them in such a short span of time.

European leaders are remarkably forthright about the force of their sanctions. The French finance minister, Bruno Le Maire, has declared that the West will wage ‘economic and financial total war against Russia’. But the significance of this sanctions campaign goes beyond its geopolitical meaning. Already it has galvanised nato, tightened the transatlantic alliance and unified the European Union. Yet it is also a watershed moment in global economic history.

We can look for comparable historical episodes by considering the severity of the sanctions, the size of the target, or the goal: stopping war. In the past two decades, only Iran, Venezuela and Afghanistan have had their external central-bank assets frozen. What sets Russia decisively apart from these cases is its size. As the world’s 11th-largest economy, Russia is a giant compared with the small Afghan economy and the middling ones of the Islamic and Bolivarian Republics.

It is not just the target of the sanctions, but also the ambitions of those using them that are much larger. If the goal of the West’s economic war is to end Mr Putin’s war of aggression in Ukraine, then historical experience suggests different measures will be needed. Sanctions alone have a poor record of halting military adventures. During the 20th century, only three out of 19 attempts to use sanctions as a policy to impede war have been successful: two of these were the work of the League of Nations. It nipped in the bud incipient border wars in the Balkans, between Yugoslavia and Albania in 1921 and between Greece and Bulgaria in 1925. The other successful use of sanctions was American financial pressure on sterling, which forced an end to Britain’s Egyptian military expedition in the Suez war of 1956.

Read entire article at The Economist