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How will Biden’s additional sanctions affect the Russian economy?

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President Joe Biden stands at a podium in the East Room of the White House.

President Joe Biden announced additional sanctions against Russia on Thursday following its invasion of Ukraine. This follows a tranche of sanctions earlier this week. Drew Angerer/Getty IMages

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Russia launched a full-scale invasion of Ukraine this morning, targeting towns, villages and major cities including the capital, Kyiv. According to Ukraine’s health minister, 57 people have died and more than 160 people have been injured in the attacks so far.

Russian markets plummeted today and the ruble hit a record low against the dollar. President Joe Biden said this afternoon that the U.S. and its allies were enacting new sanctions against Russia in response to the invasion. These sanctions include restrictions on Russian banks and bans on technological exports, moves specifically targeted at Russian elites and President Vladimir Putin’s inner circle.

Eddie Fishman, a nonresident fellow at the Atlantic Council, says that these sanctions are the “swift and severe consequences” Biden previously warned about. “Marketplace” host Kai Ryssdal asked Fishman whether or not these sanctions will have their intended effect on Russia’s economy. The following is an edited transcript of the conversation.

Kai Ryssdal: So you watched the president, I’m sure. Big picture, what’s your sense of the effectiveness of this round of sanctions?

Eddie Fishman: Kai, this is the swift and severe consequences that Biden had warned about in recent weeks. I think there were some questions about whether the United States was actually prepared to really inflict significant damage on the Russian economy. What we’re seeing in terms of the sanctions today are unprecedented in terms of sanctions against Russia. They include a real hammer blow to the Russian financial sector. Sberbank, the largest bank in Russia, is going to be cut off from all U.S. dollar transactions. And VTB, which is the second-largest bank in Russia, is having all of its assets frozen and is completely blocked from the U.S. financial system. I think what is surprising though, Kai, is that these sanctions went well beyond the financial sector and really cut across the commanding heights of the Russian economy, including mining, minerals, energy, transportation — really no sector of the Russian economy was left untouched by today’s sanctions.

Ryssdal: Did I miss oil and gas? Because that, obviously, is the big energy thing. But I don’t recall the president talking about that specifically.

Fishman: He did not talk about it much. But that was included in the package. Gazprom was actually cut off from debt and equity transactions in the United States and I think that’s a very significant action. And it’s demonstrating that the Biden administration is not, of course, going after oil sales directly, or gas sales, but they are willing to target Russia’s oil and gas companies directly.

Ryssdal: What sanctions are supposed to do, really, is take the place of war, right? And we’re clearly not sending troops into Ukraine, United States troops, the president has said that. So here’s the follow-up sanctions question: In war, there are collateral damages and, oftentimes, civilians and innocents are killed. What effect do you think these sanctions will have on everyday Russians? Or does that not matter?

Fishman: These sanctions will definitely impact everyday Russians, Kai. And I think that’s part of the purpose. You know, the point of sanctions is to demonstrate that Putin’s imperial delusions have a cost. If the Russian people can just go about their lives and have no consequences from Putin’s unprecedented invasion, brazen invasion of Ukraine, I think that would be a problem. So there will be a substantial decline in living standards in Russia. But you mentioned things like humanitarian costs and humanitarian crisis. We are nowhere near that in Russia. I think that, again, is a bit of a red herring. There is no way that the sanctions are going to create a humanitarian crisis in Russia. Russia is a relatively wealthy country. So they’re not, you know, on the brink of that level of pain and suffering amongst the population. But I do think the sanctions will decrease living standards, and I do think that’s part of the purpose. The other thing, though, Kai, is that the sanctions are also very sharply targeted at the commanding heights of the economy. So I think even more than impacting everyday Russians, they’re going to impact the Russian government, the Russian government’s ability to generate hard currency, the Russian government’s ability to finance its military machine. And I think that’s really the headline of sanctions today.

Ryssdal: OK. Last thing and then I’ll let you go. I had a question from a friend of mine today. And well, in fact, he asked all of Twitter, but I’m just going to steal it from him and I’m going to ask you the question. He wanted to know, and I’m sure everybody else does, too. We’re talking about sanctions all the time. We very rarely see them have lasting and profound effects. And so the question is: Is there a way to do economic and diplomatic sanctions in a severe enough way that they match the horribleness of this invasion and what Putin is doing?

Fishman: The short answer, Kai, unfortunately, is no. There are no sanctions that can be proportional to Russia’s unprecedented and brazen invasion of Ukraine. It’s just not possible, right. There’s nothing economic that’s proportional to the violence being inflicted upon innocent Ukrainians. What I will say though, is that the sanctions undoubtedly will have significant long-term effects. And I think the bottom line is that so long as Putin continues to be president of Russia, Russia will not be able to benefit from the global economy. It will be a pariah, politically and economically.

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