• Saturday, July 13, 2024
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BusinessDay

Sanctions should be corrective, not destructive

The West and the rest

Sanctions should never be an “all in” measure to curtail excesses. They should be structured to provide escape routes should the sanctioned entity decide to err, especially if the target holds sufficient economic or political power to cripple global activities.

In a world where global partnership through trade and other diplomatic ties abound, nations have grown to depend on another for one thing or the other, and the downfall of one nation can truly affect the progress of other countries that rely on them.

This is especially true for most developing nations whose trade activities rely primarily on supply flows from their developed counterparts worldwide.

Sanctions are intended to impose restrictions on economic flows. It is usually anticipated that hardening economic situations in the target nation would yield the cooperation of the “enemy” government, who will reverse any unfavourable policy or action thereafter.

Economic restrictions can come in the form of trade limits, capital flow constraints, resource flow limitations or data exchange restrictions.

Also, sanctions can take the form of travel bans, asset freezes and other forms of trade restrictions to suffocate and bend the will of the target government. However, several debates have questioned the efficiency of sanctions in achieving the objectives for which they are imposed.

Mikael Wigell, research director at the Finnish Institute of International affairs, told the World Economic Forum that sanctions work in three distinct stages.

First, there is the threat stage. At this stage, a country or coalition of states issues several warnings to an aggrieved nation to halt whatever intention they have that might compromise the integrity of human coexistence.

This was experienced at the initial stages of the Russia-Ukraine tussle when the Kremlin issued several threats to invade Ukraine. The United States of America issued several warnings, promising a hard slap for any hostile action against Ukraine.

Next is the second stage, which requires limited use of sanctions. Light sanctions are thereafter imposed if the initial stage has been ineffective.

According to Mikael Wigell, this second stage is meant to signal the seriousness of impending warfare against the target nation should the government refuse to withdraw their planned enterprise, which other nations frown on.

Suppose the erring nation ignores the warnings issued in the first two stages, the final stage, which is full-blown economic warfare, will be activated.

A full-scale sanction could include actions that range from full asset freezes, total alienation of the target country from global trade and financial activities, and legal incriminations.

For centuries, sanctions have been used as a weapon of war and diplomacy. Such actions imposed on certain countries to foster global peace and tranquillity have helped in the past to achieve such aims. In South Africa, for instance, sanctions imposed against the country helped to end Apartheid.

However, recent experiences with the Russia-Ukraine scrimmage have aroused growing interest in the capability of full-scale sanctions to drive desired results.

Since it invaded Ukraine on February 24, 2022, Russia has been exposed to heavy sanctions imposed on it by a coalition of world powers, including the US, Japan and the EU.

This series of sanctions imposed on the Kremlin is the most comprehensive and coordinated action taken against a major powerhouse since World War II.

As a result of the heavy blows dashed out to the Russian government by the West, the troubled economy now contends with massive capital flight, crashing GDP, technological regression, currency slumps, trade glitches and military setbacks.

However, Russia alone does not share in this dilemma; countries of the world that depend on Russia and Ukraine in one way or another are beginning to feel the after-effects of the sanctions.

Read also: Russia – Ukraine war and sanctions: Any implications for global supply chains?

Russia’s response to the economic arrows from the West has begun to affect global food production and energy supplies. For instance, Putin’s government has imposed counter-restrictions on major agricultural, energy and critical mineral resources exports.

Hindrances in fertiliser exports have been badly affecting global food production since the imposed counter-restrictions. Also, it is expected that car manufacturing plants, aerospace, semiconductor manufacturers and the European technology production sectors will be badly hit if critical exports from Russia are halted in a retaliatory response to Western economic force.

Also, Russian restrictions on the use of nickel, a critical mineral resource that is used in the making of electric car batteries, will negatively impact the drive for green transformation globally.

On the energy and food scene, it is known that many European and African countries depend heavily on Russia’s massive gas supplies and Ukraine’s wheat exports. Supply restrictions from these two countries will power up the cost of alternative supply options for these two essential products worldwide.

For African economies whose energy and food needs depend heavily on exports from these two countries, it is expected that their respective domestic spaces will experience heating since the cost of alternative supplies will drive up home-based prices through increased imports.

Ultimately, the living standard in the most affected nations will worsen. Therefore, with these unhealthy spillovers either currently experienced or anticipated, it becomes necessary to ask: does economic warfare truly work?

Governments of nations could rethink sanctioning strategies to include buffers or alternative policies in case things go awry so that negative spillovers from restrictions do not overly weigh on dependent economies.

Supply alternatives, fair pricing arrangements with alternative trading partners and tighter diplomatic collaborations with other nations that might become worse off during an economic war should be made possible to ensure that the intention of imposed sanctions is properly and more directly served without constituting a contagion to other nations.

Sanctioning a nation that has sufficient economic and political power should be strategically done in such a way to help achieve the reversal of unhealthy trends on the one hand and to ensure that other dependent nations are thinly affected, at the very worst, on the other hand.

If this can be made possible, then sanctioning erring governments will be a more palatable cause for correcting the boisterous excesses of certain oligarch-like governments in power without constituting a nuisance to other dependent countries around the world.