Thread by @MarkGaleotti

The ‘sanctions work/don’t work’ debate is often pretty sterile and distorted by the way some boosters seriously overplayed their likely effects on Russia at the start. A short thread from a non-economist 1/

2/ This was triggered by a characteristically vapid article in today’s govt newspaper Rossiiskaya Gazeta with the title ‘They got what they deserved. The consequences of the departure of European companies from Russia’
rg.ru/2023/08/07/pol…

3/ Essentially, this is about banks and industrial companies losing business because of sanctions. Nothing about the kinda-expropriation of Danone and Carlsberg, for example
bbc.co.uk/news/business-…

4/ However, the sneers hide the very real impact on Russia. In a sanctioned environment, the market is not fungible. In other words, just because Company A is no longer selling you widgets, it doesn’t mean you can simply switch to Company B

5/ Russian supply chains are thus seriously disrupted, often by a single link in that chain. Its car industry is in crisis, for a while in effect producing cars to 1980s tech, because it could not source airbag and GPS tech
rferl.org/a/russia-econo…

6/ Besides, I understand that while they can get paint for their new cars, they have trouble getting the right undercoat. Bad undercoat + Russian weather = a mess. This is just one example of the disruptions

7/ Where they can substitute, often this is slower, more complex, pricier. (eg, missile producers can still get microchips, but certainly not the best, and often by using smugglers or intermediaries, who gouge the price as much as they can)

8/ Or else there are security risks. Western car manufacturers are surrendering markets to the Chinese for eg – at the v time Western govts are beginning to worry about the security implications of Chinese cars (a metaphor generally for Putin's Russia)
wired.co.uk/article/china-…

9/ Those boosters who suggested sanctions would bring Putin to his knees in months, who said they would cripple the Russian economy and send it into freefall…
theconversation.com/just-short-of-…

10/ (The freefall comment, incidentally, came from Daleep Singh, the US the deputy national security adviser for international economics)
cbsnews.com/news/russia-ec…

11/ …these unrealistic expectations essentially set up the sanctions to look as if they were failing, Yet they’re not. These kinds of sanctions, like the mills of God, grind slowly, yet they grind exceeding small.

12/ The damage being done to an economy that hitherto prospered because of its deep connections to global markets, tech and investment, as well as great human capital, much of which has fled, is deeply scarring and will take years to heal, even after the sanctions are lifted.

13/ Meanwhile, even Central Bank chair and undisputed fiscal wizard Nabiullina is worrying about an overheating economy, a bubble that could burst and is cranking up the bank rate in response
nytimes.com/2023/07/31/wor…

14/ Authoritarian regimes will force the citizenry to bear the costs of sanctions, and channel funds into war or whatever their priorities may be. The results are often indirect, from worsening health to declining productivity. But they are indisputable.
themoscowtimes.com/2023/08/07/rus…

15/ But let's not succumb to pessimism or Kremlin spin. I’m inclined to think that the more the Russian regime's propaganda sheets deride the effects of sanctions, the more it fears they are working. /end