Are Sanctions Working?

In many sports, the referee can call a penalty when a player commits a foul. In economics, when a country breaks the rules, it attracts penalties in the form of sanctions.

Last week, the U.S. unleashed a wave of nearly 300 new penalties aimed at disrupting Moscow’s military-industrial base amid the ongoing Ukraine war. Among those sanctioned are 20 Chinese companies. Russia’s trade with China has surged since the start of the Ukraine war, making it Beijing’s sixth-largest trading partner in 2023. Chinese exports to Russia have risen by more than 60% in the past two years; China is now the nation’s largest supplier of commercial goods.

It is the increasing supply of “high priority” or dual-use components that has drawn America’s ire. This category includes alumina, optical instruments and microelectronic components essential for manufacturing weaponry. China was responsible for about 90% of Russia’s imports of goods covered under the Group of Seven (G7) nation’s “high priority” export control list in 2023, up from one-third before the start of the war.

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The imposition of sanctions covering Chinese entities represents a significant move that could further strain relations between the world’s two largest economies. And it has raised questions about the effectiveness of these penalties as a deterrent against bad actors.

Sanctions have been a key part of the U.S. policy toolkit, but are increasingly becoming easy to evade unless they have strong multilateral support. With over 16,000 sanctions against it, Russia was already the world’s most penalized country. These unprecedented measures were expected to impair the Russian economy and its military-industrial base. Instead, Russia adapted by turning to markets like China and India for its most important exports, allowing sustained economic growth. Russia remains one of the world's largest oil exporters, which is helping it fund military, social and other spending without stressing its finances.