The Russia sanctions have begun a new era of technocratic war
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The Russia sanctions have begun a new era of technocratic war

In recent months, the Biden administration has repeatedly trumpeted its “unprecedented sanctions” against Russia and extolled their impact. At a press conference at the end of April, President Joe Biden said that the sanctions “are devastating their economy and their ability to move forward.”

Sanctions, long before the war in Ukraine, have become one of the United States’ go-to methods to assert primacy in the world. In the past 20 years alone, Washington has used sanctions to target the finances of terrorist networks or drug dealers, and has taken more far-reaching measures to freeze the economies of whole countries. The US, in short, is now fighting its foreign policy battles through sanctions.

A small group of experts, mostly lawyers and some economists, have crafted Biden’s Russia sanctions, which have now gone further and are more sweeping than any previous administration’s. At the Treasury, Deputy Secretary Wally Adeyemo and Assistant Secretary Liz Rosenberg; at the White House, Daleep Singh and Peter Harrell.

Biden’s sanctions team are technocrats who’ve been profiled in the press and praised for their quick, multilateral approach. They worked together in President Barack Obama’s administration and then, out of government during the Trump years, wrote policy papers thinking through how sanctions could be better.

Now, they see themselves as implementing lessons learned. There’s no doubt that the Biden administration was successful in getting international partners on board with sanctions against Russia in the immediate aftermath of its invasion of Ukraine. But less attention has been paid to why sanctions have become the hammer of choice for this group and how effective these sanctions might be.

Leaders from both parties have turned sanctions into a foreign-policy tool of “first resort,” according to Biden’s Treasury Department’s policy review, published last fall. Sanctions have increased by 933% from 2000 to 2021, and both Democratic and Republican presidents have used them as a stand-in for military methods of asserting US power abroad.

Trump issued 3,800 new sanctions, and Obama 2,350 in his second term. Presidents hold largely unconstrained authority to implement sanctions, and previous administrations have used them to decimate Venezuela’s economy or Iran’s. They’ve also gone after the wealth of officials behind political and human rights crises in Nicaragua, Myanmar, and elsewhere, often with little congressional oversight and little public disclosure about their effects.

A former Trump Treasury official said that when they were in the room with officials from across the federal government during a crisis, meetings would often go something like this: The State Department didn’t want to do anything, the Defense Department didn’t want to do anything. So everyone at the table would turn to the Treasury folks and say, “Do something,” or, “Well, can we sanction them?” (The official requested anonymity to speak candidly about their former colleagues.)

But an economy the magnitude of Russia’s, the 11th largest in the world, has never been sanctioned so comprehensively. Going after a central bank of this size, a major economy’s connections to international banking systems, and many of its sectors, is indeed unprecedented. And to target an economy that large unleashes unintended consequences on Russia, the US, and the globe.

Russia is a major energy exporter, and energy prices are rising and sending inflation even higher. Russia also exports significant amounts of grains, cooking oils, and fertilizer. So sanctioning the country — even with carve-outs and waivers for humanitarian purposes — could have a devastating impact on vulnerable people in poor countries. The United Nations says that economic sanctions will impact Russian and Ukrainian food production, which is exacerbated by the war and Russia’s blockade of Ukrainian ports. One possible outcome, the UN reports, is that “the global number of undernourished people could increase by 8 to 13 million people in 2022/23.”

Egyptian men work in a bakery at a market in Cairo in March. Soaring bread prices sparked by Russia’s invasion of Ukraine have bitten into the purchasing power of consumers in Egypt, a leading importer of wheat from the former Soviet states.
Khaled Desouki/AFP via Getty Images

It’s difficult to account for these types of second-, third-, and fourth-order effects. In fact, last fall, the Treasury Department’s own review of US sanctions policy warned about these outcomes. In the worst-case scenario, the West’s Russia sanctions could contribute to widespread unrest.

Given that it’s untenable for the US and its allies to send troops into Ukraine, and even less tenable for the US to do nothing at all, sanctions may be the West’s least bad option. Even so, the acceptance of sanctions as an unimpeachable instrument for good by Biden’s team stands in contrast to academic studies about sanctions — and to some degree what the president’s key advisers have written previously.

Here’s the story of how Biden and his sanctions wonks came to believe so strongly in this economic weapon, and how they might think through these potential knock-on issues.

How Biden’s sanctions team thinks

Even sanctions experts recognize that sanctions are overused.

In October 2021, Treasury released a seven-page document that was the culmination of a months-long sanction review. The report encapsulated the internal debates: It acknowledged that sanctions are overused, which incentivizes countries to move away from using the dollar. The report also recognized that more exemptions need to be implemented to ensure vulnerable populations don’t shoulder the effects of sanctions, and that sanctions need to be multilateral to work. “Sanctions should be clearly communicated,” the report says, so that targets know when and why they would be “escalated or reversed.”

Treasury officials identified these shortcomings not to say the US should never use sanctions — but because they see sanctions as “an effective national security tool” and wanted to ensure they stay that way, according to Deputy Treasury Secretary Adeyemo, who oversaw the review. Adeyemo has been the administration’s leader on economic statecraft and has traveled Europe to harden the sanctions on Russia.

“I’m happy we did the review when we did, because it’s put us in a better position to be able to use this tool with regard to Russia’s invasion of Ukraine,” Adeyemo told me.

Some experts called the document underwhelming; others called it impressive. But what’s clear is that the document reflected how insular the world of sanctions-making is. A former Trump Treasury official, whose current employer did not authorize them to speak publicly, told me they could have written the whole review in an afternoon. “The principles that they stressed in there were principles that you could also say, like, the Trump administration lived up to,” they said. Another former Treasury official told me it read exactly like the think tank reports that Biden’s sanctions team had written during the Trump years.

The Treasury review argued that sanctions must be paired with a broader diplomatic strategy, a principle Biden’s sanctions team has stressed in and out of office. “I urge policymakers not to confuse the contemporary popularity of sanctions statecraft to address a wide array of major security threats with the notion of their utility in all instances,” Rosenberg, who now runs the Office of Terrorist Financing and Financial Crimes at Treasury, testified to Congress in May 2019 alongside Singh. “They cannot force capitulation and regime change and cannot be a substitute for a holistic strategy to address the threats to our national security.”

Harrell issued a similar warning to the Trump administration that year, writing that sanctioned countries often “refuse to make concessions despite draconian economic costs.”

Now, this “foreign-policy weapon,” as Harrell called it, is being deployed as part of the assault on Moscow. The US is also sending billions of dollars of weapons to Ukraine and sharing high-level intelligence with the Ukrainian government, but sanctions are a key part of a broader economic strategy to move away from a dependence on Russian energy resources.

Adeyemo articulated more clearly than any other Biden official how sanctions fit within US objectives. “The overarching goal of our foreign policy strategy is to end the invasion in Ukraine, and the way that sanctions are helping to support that is about reducing the level of resources that Russia has to project power and by cutting off their military-industrialized complex,” he told me.

US Deputy Treasury Secretary Wally Adeyemo speaks during a joint news conference with the European Commissioner for Financial Stability, Financial Services and the Capital Markets Union in Brussels, Belgium, on March 29.
Johanna Geron/Pool/AFP via Getty Images

His description was a subtle contrast to the way some administration leaders have stated those goals. Biden has said that sanctions reflect “the power to inflict damage that rivals military might” and are “sapping Russian strength.”

“We all worry about the overuse of sanctions, but I think that this is clearly not a case of overuse,” an administration official who spoke on condition of anonymity told me. “This is a case of responding to a clear and egregious violation of basic tenets of international law and human rights. I think this is a case of indisputable agreement that the world needs to respond and sanctions are an appropriate tool.”

Biden has also bluntly stated that “sanctions never deter.” But Secretary of State Antony Blinken and national security adviser Jake Sullivan both said before the war that the threat of sanctions was about deterrence. In April, Blinken described sanctions as a tactic to strengthen Ukraine’s hand in negotiations with Russia, while the White House has said some are about imposing “severe and immediate costs” and others are about holding “the Russian government and Russian oligarchs accountable” for the war.

Adeyemo’s rationale seems to be the clearest yet: Sanctions are serving one narrow purpose. But “as long as Russia’s invasion continues, our sanctions will continue,” he said in a recent speech to economists.

From the time that US intelligence began warning about Russia’s troop buildup on Ukraine’s borders in November, Biden’s sanctions team was already drafting the blueprint for an economic war on Russia’s sophisticated economy.

Partially that’s about how limited the sanctions team and this administration see other options. The US wants to do everything short of going to war with a nuclear power.

Moreover, this group of sanctions-makers came of age as the forever wars in Iraq and Afghanistan showed the limits of US military power abroad and as Washington learned to rely on sanctions.

In 2004, Bush’s Treasury established a new agency to run sanctions, the Office of Terrorism and Financial Intelligence, and in 2009 Obama kept on its first undersecretary Stuart Levey. (His successor, David S. Cohen, now serves as the deputy director of the CIA.) Within the agency, the Office of Foreign Assets Control oversees sanctions. Considering its power, OFAC as of 2019 had a comparatively small budget of $46 million and about 200 employees. Several former Treasury officials told me that the office is understaffed. “We do need more resources and different resources at OFAC,” Adeyemo told me.

Adeyemo and Harrell studied at Yale Law School during the second term of George W. Bush along with Jon Finer and Brian Deese, who are both top advisers in Biden’s White House. Biden withdrew troops from Afghanistan last summer, cementing his turn against America’s longest war. (The administration, however, continues to impose sanctions on the central bank in Afghanistan, causing malnutrition, especially among children.)

Across Washington, sanctions have been internalized as a more politically appealing alternative to war. “One of the reasons I think that it’s attractive is that there’s not necessarily an upfront cost,” said Rachel Ziemba, a fellow at the Center for a New American Security. “It’s hard to come up with examples of [sanctions] working. There are not a lot, which in and of itself says something.”

As historian Nicholas Mulder said recently, “somewhere between about 10 to 30 percent of the time do sanctions work, at least somewhat, to achieve one of their stated goals.”

But the sanctions team remains committed to the tool. Daleep Singh — a markets expert who held positions at Goldman Sachs and the Federal Reserve Bank of New York — is a key mover of sanctions as a deputy national security adviser in the White House. Singh’s presence has “accounted for some of this big-picture view” on the macroeconomic effects, according to sanctions expert Edoardo Saravalle. (Last month, it was reported that Singh will take a leave of absence from the White House.)

Deputy National Security Adviser Daleep Singh speaks during a press briefing at White House on February 24.
Brendan Smialowski/AFP via Getty Images

He and the rest of the sanctions team share a similar profile. During the Trump years, they in turns conducted research, held university roles, and did corporate work, as many Biden officials did. Harrell and Rosenberg published policy papers together. Harrell served as an outside legal counsel to Microsoft. Rosenberg, who worked as a senior adviser to the Bidenworld firm WestExec Advisors, consulted for ExxonMobil. Adeyemo worked as president of the Obama Foundation and before that as a managing director at the investment powerhouse BlackRock.

The core sanctions team consists not of operatives or strategists, but of pragmatic professionals. “Peter, Liz, Daleep, and all these guys — this is not meant as a demerit at all — they are very skilled technocrats,” said one of the former Treasury officials. “It means that they look for sophisticated ways to tweak and adjust US regulation.”

The circle of sanctions experts was small before this crisis, and has since expanded in a whole-of-Treasury approach, bringing in other government agencies like the Commerce Department and USAID. Throughout, the sanctions team says they’re continuing to refine their approach and apply lessons — all with the belief that they can address a foreign policy problem with expertise and diligence.

Our new era of technocratic war

Most sanctions ramp up over weeks, months, or years, but the Russia sanctions came together days after Russia’s assault on Ukraine and were initially harsh — part of the administration’s “start high and stay high” approach. “We know where Russia’s pressure points are,” Singh told NPR, reflecting on what he had learned since 2014. “So that’s why instead of taking a gradualist approach, we’re prepared to start with sanctions at the top of our escalation ladder and stay there.”

Just two days after Russia’s invasion, the US, the European Commission, and major European countries imposed sanctions on Russia’s Central Bank. The next day, Japan joined. The central banks of petro-states like Venezuela and Iran have been sanctioned before, but a country the size of Russia took it to a whole new level. And since then, new sanctions are being rolled out almost every week against individuals, companies, and banks. Russia’s energy sector is perhaps the last arena that the US has yet to comprehensively sanction with its partners and allies. All told, 30 countries that consist of more than half of the global economy have joined the coalition.

The Biden administration official who spoke on condition of anonymity emphasized that major Russian financial and banking institutions have been sanctioned without causing major global disruptions. “We’ve really carefully kicked the tires on these measures before we’ve done them,” the official said. “We’ve managed this in a way that has been remarkably effective at minimizing collateral costs.”

The central bank sanctions had to have been prepared methodically and well in advance, says Daniel Fried, a former ambassador to Poland who coordinated sanctions on Russia in Obama’s State Department. “And I thought, ‘Damn, they’re good,’” he told me.

In 2014, Fried traveled Europe with Singh, then a senior Treasury official, in advancing sanctions against Russia during its initial invasion of Ukraine. “Jack Lew, the Treasury secretary, basically sent Daleep [Singh] on my delegation to make sure that ‘Wild Man’ Fried wouldn’t trash the world financial system with my sanctions on Russia,” said Fried, who then quickly realized that Singh was a huge asset and supported his work.

Lew told me the Treasury Department had studied “how Russia was interconnected to the European global economy” to ensure that sanctions didn’t kick off a recession. “State was pushing to do more, and Treasury was making the case to do it in a surgically targeted way, to have the maximum impact you’re looking for with the minimum unintended consequences that could undermine the whole effort,” Lew said.

The combined effort put pressure on Putin that, according to Lew, brought Russia to the negotiating table and culminated in the 2014 Minsk agreement. “If State and Treasury are knit up, who’s gonna stop us?” Fried added.

Now, the stakes are higher. The sanctions against Russia aren’t just about Ukraine, but may impact the future of sanctions — a coercive tool that policymakers think might be the route of first resort in a potential conflict against China. Julie Friedlander, a former career Treasury official, said that if sanctions fail to achieve Biden’s goals in Europe, new questions will be raised about the tool. “Can we really pretend to have faith in this kind of maximum pressure and financial sanctions again?” she said. “Maybe we have to realize that we’ve been barking up the wrong tree.”

Pedestrians walk past a screen displaying Russian President Vladimir Putin during a news broadcast about Russia’s invasion of Ukraine, in Tokyo, Japan, on May 4.
Kazuhiro Nogi/AFP via Getty Images

It’s also not been articulated yet what lifting sanctions would look like. Singh said last month that “we’re not at the point at which we’re talking about sanctions relief.” And an administration official declined to speculate about what circumstances might lead to sanctions being lifted. Limited congressional oversight means the president is not required to spell out goals, say how the administration is tracking them, or describe humanitarian fallout from sanctions.

Critics worry that the administration is overselling how effective sanctions will be. In March, for example, Rosenberg spoke to anti-money laundering (AML) specialists. She went so far as to say, “The fate of Ukrainian democracy and the strength of democracies to push back against autocracy writ large depends on whether we do our jobs — and whether you do AML and Russian sanctions compliance work well.”

Unintended consequences of sanctions

Those who praise the Biden administration’s coordination of sanctions also express concern about their unintended consequences. “I do think that no one has really had the time to plan out what the longer-term implications are going to be of essentially annihilating the Russian economy,” Friedlander, now a senior fellow at the Atlantic Council, told me.

The truth is that Russia will adapt — it already has, and the ruble has begun to bounce back.

Research indicates that sanctions aren’t a very effective tool unless formulated within a broader foreign policy strategy. A 2019 report from the Government Accountability Office found that government agencies aren’t great at assessing whether sanctions are working. “We need more accountability around sanctions policy — when and how they’re successful,” said Michael Wahid Hanna of the International Crisis Group.

“US and European policymakers have never clearly defined how weakening or diminishing the economic welfare of ordinary people creates the conditions for a possible political or diplomatic resolution to something as significant as a military conflict,” said Esfandyar Batmanghelidj of the economic research institution Bourse & Bazaar.

The intensive sanctions on Russia will also change the way countries think about the free movement of capital. Adam Posen of the Peterson Institute for International Economics has argued that these sanctions on Russia will have a corrosive effect on the world economy that might result in the “end of globalization.”

Above all, the humanitarian effects may be staggering and could elevate international food prices by up to 22 percent, with vulnerable people bearing most of the war’s costs. As a result of US sanctions, Iranians suffered from limited access to medicine, especially early in the pandemic. In Venezuela, sanctions contributed to the collapse of the health care system.

Humanitarian exemptions are built into sanctions for foods, agricultural items, and medicines, as well as licenses for some international organizations and nonprofit groups to operate in Russia. “Even so, they don’t always work to mitigate those unintended impacts in the way that the designers and implementers of sanctions law or executive orders intend,” a Democratic congressional aide told me.

Lew explained that sanctions at this level will inevitably hurt Russians. “When you’re in a war, like the war that Russia has created here, it’s impossible to protect all the quote-unquote innocent people, and there’s a question of what innocent means when your country is doing things like that,” he told me.

People stand in line to withdraw US dollars and euros from an ATM in St. Petersburg, Russia, on February 25. Ordinary Russians faced the prospect of higher prices and crimped foreign travel as Western sanctions hit.
Dmitri Lovetsky/AP

Since OFAC is so understaffed, former Treasury officials explained, it can be difficult to create enough licenses and waivers for humanitarian reasons.

The humanitarian consequences “can never be a secondary issue,” said Adeyemo, who says he and his team are “thinking about how we can get more consistency around our humanitarian carve-outs.”

Banks tend to overcomply with sanctions: they want to avoid potential hits to their reputations, and are generally overcautious. More than 250 companies have already left Russia, including airlines, banks, consulting firms, and retailers. One bank executive told me that they were working 15-hour days since December to understand the overlapping layers of Biden’s sanctions.

There are concerns the humanitarian fallout becomes collateral or peripheral to the immediate crisis. “If you really want to amp the pressure up as much as possible, you’re obviously going to affect the population,” Friedlander said. So when the Biden administration announces that they’ve taken the humanitarian dynamic into account, as the White House often does in press releases, it’s only part of the story. “You’ve taken it into account but then you bagged it,” she explained. “And then you try to mitigate it afterward.”

Narges Bajoghli, an anthropologist at Johns Hopkins School of Advanced International Studies who is writing a book on sanctions, says the fact that the sanctions team uses military terminology suggests that the humanitarian consequences are, to some extent, intentional.

“It’s similar to the way in which the humanitarian aspect is thought about in some ways in a hot war situation,” she said, “where, yes, it’s unfortunate, but it’s a necessary byproduct of going up against the state.”

Reference-www.vox.com

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