17.03.2022

First Iran, now Russia

Sanctions, whether ‘targeted’ or not, inevitably affect the mass of ordinary people, argues Yassamine Mather, while those at the top use them to tighten their grip on power

As the Ukraine war continues, together with the destruction of towns and cities, once again sections of the left are proposing sanctions - perhaps ‘targeted’.

Various arguments are put forward. It is better than ‘military intervention’, and pressure on the oligarchs will encourage them to put pressure on Putin to change his policy or even go for a different leader - regime change by oligarchs!

Of course, the west’s insistence on sanctions has similar aims: regime change by putting pressure on the enemy’s citizens; a siege that would lead to dissatisfaction, protests and possibly a ‘colour revolution’, paving the way for pro-western allies to come to power in Moscow (or Baghdad, Tehran …). We all remember sanctions against Saddam Hussein. These took the shape of financial and trade embargos imposed by the United Nations security council on Iraq’s Ba’athist regime, starting just four days after Iraq’s invasion of Kuwait in 1990, and lasting until the Bush-Blair military overthrow of the regime in 2003. A detailed 1999 Unicef study called the ‘Iraq Child and Maternal Mortality Survey’, using data from nearly 40,000 households, found that 500,000 children died as a result of sanctions.

As far as the current conflict is concerned, so far this plan has not succeeded either. Putin’s popularity is rising and the example of Iran’s Islamic Republic shows that the imposition of more than a decade of sanctions, far from endangering the survival of the regime, actually makes it stronger.

There are obvious reasons why sanctions empower their ‘targets’ and this is common to oligarchs in Russia and senior ayatollahs and leading commanders of Iran’s Islamic Revolutionary Guard Corps (IRGC). In Russia the oligarchs, and in Iran the senior clerics who are commanders of the IRGC, made astronomic fortunes after the imposition of neoliberal economic policies in their respective countries. These policies led to privatisation of major industries and banks, with the result that these people now own most of the country’s resources - one could say they run the economy. In other words, those who were supposed to be ‘targeted’ made huge gains. Inevitably, however, sanctions led to the closure of large chunks of the economy: hundreds of thousands of workers lost their jobs, as the said oligarchs closed down unprofitable workplaces.

The other immediate effect of any sanctions - however ‘smart’ or ‘targeted’ - is a fall in the value of the national currency. On February 28, immediately after Russia was cut off from the global bank payments system, the rouble dropped nearly 26% to 105.27 per dollar, and the fall continues. Ordinary Russians have seen their meagre savings crash in value as a result. Russia, like Iran, imports most of its basic medical, industrial and electronic goods.

However, those close to power in the government or military have access to foreign currency reserves. So they can buy commodities with cheap, previously purchased dollars and sell them for up to 10 times what they paid for them. Sanctioned senior clerics, commanders of the IRGC and other leaders made billions of dollars in Iran this way. No doubt Russian oligarchs will have the gumption to do the same.

Likewise the ‘smart’ sanctions against Russia have led to price rises (in particular on basic food items), job losses and the serious risk of mass unemployment - all this, alongside the withdrawal of most western-based firms, has increased a sense of isolation.

The state has imposed a kind of rationing in staple food items such as flour and sugar. But the annual price rise for sugar and cereal prices was about 20% higher last month in comparison with a year ago. Similarly, the price of electronic goods increased by 29% in the first week of sanctions.

The removal of a number of Russian banks from the Swift payment system means that Visa, MasterCard, American Express, Apple and Google Pay have all limited their services and, according to Russia’s central bank, this in itself will lead to a situation where the economy will shrink by around 8%. New banks are added to the Swift ban every week. Ordinary Russians living abroad, together with students and people who work abroad (many of whom are no supporters of Putin), have had their accounts frozen by western banks because they were receiving money from relatives, universities or employers in Russia.

In the UK and European Union, Russian students have had to apply for emergency funds from their universities. It was the same with Iran: hundreds of thousands opposed to the regime, not least those living in exile, have found their bank accounts frozen because at some stage in the last few years a relative inside Iran had sent them even a small amount, with disastrous consequences for the individuals concerned. Swift traces every transaction globally and the banks freeze accounts that engage in any transaction from Iran.

Likely results

Today Washington is also threatening Chinese companies and banks which might trade with Russia. As in the case of Iran, some medical equipment, including incubators used for keeping premature babies alive, are considered ‘dual-use’ (ie, they can potentially be used in the military or in nuclear industries).

Airbus and Boeing have suspended the sale of aircraft components to Russia. This will no doubt affect the safety of passenger aircraft, which is already notoriously poor. The US is also warning technology companies, such as China’s Semiconductor Manufacturing International Corporation (SMIC), not to sell electronic chips to Russia.

According to a report in The New York Times, US commerce secretary Gina Raimondo said her country could take “devastating” action against Chinese companies that defy sanctions on Russia: “We could essentially shut SMIC down because we prevent them from using our equipment and our software.”¹

A timely report on the effects of sanctions has been published by two professors at the University of Oxford. Referring to surveys they conducted in the aftermath of the Russian annexation of the Crimea in March 2014, the authors point out that these show that concern about sanctions decline over time, since

Russia was able to respond effectively to the effect of sanctions. When thinking about the current situation, we should bear in mind that Russians’ prior experience of coping with sanctions might inform their responses today.²

The authors have also looked at how sanctions relate to willingness to protest. They found that in 2014, “there was a weak and negative effect of sanctions on the propensity of respondents to protest” and by 2018 “those who were concerned about sanctions became more likely to contemplate protest, but we do not find that sanctions interacted with any other social predictor, including age, in driving this willingness to protest”.³

The authors’ conclusion could have been written about Iran or Saddam’s Iraq:

The Russian regime has a strong narrative of its own to explain the war as a response to western aggression against the country’s ‘legitimate’ (in the minds of the war’s proponents) entitlement to Ukrainian territory. This is a view that state-controlled media reinforces. While there are certainly many Russians who are hostile to the war, sanctions are not likely to affect the bulk of opinion. If anything, a ‘rally round the flag’ response may occur. Moreover, while sanctions may erode support for Putin in the medium term, they may not lead to mass defection from him. Those most concerned about sanctions may be more inclined to protest, but any such protest will take place in an increasingly repressive political environment.⁴

In other words, even the imperialist aim - that sanctions will weaken support for Putin - does not work. But, suppose they do affect the oligarchs, what can we expect in a country where, after decades of privatisation and corruption, running the economy is controlled mafia-style by various criminals?