Serhiy Lyamets: What's wrong with sanctions. Three aspects (continued)
In my previous article, I wrote that sanctions are mainly an information weapon. They are used for political purposes to influence the minds and hearts of voters. In particular, in times of war, they play the role of a propaganda and counter-propaganda tool.
WHY SANCTIONS DON'T WORK
This is where the main vulnerability of sanctions lies, the basic reason for their ineffectiveness. If solving the problem, inflicting a real blow, immobilising the aggressor is only the second priority, then achieving this goal is secondary.
For example, the leaders of EU member states promised that European sanctions would put strong economic pressure on Russia and leave it without the resources to wage war. However, in fact, it is the EU that has provided Russia with an economic cushion to continue its aggression for several more years.
The situation with Russian missile components from the US, Japan, South Korea, and Australia is similar. The announced ban on supplies to Russia is elegantly circumvented through third countries (China, Turkey, UAE, Morocco, Kazakhstan, Kyrgyzstan, Armenia and Serbia).
Why don't the sanctions work? Have the allies betrayed Ukraine? Everything is quite obvious. There is no betrayal. The sanctions are not working because they are working.
They achieve exactly the goal that their creators intended. The effect is sufficient, and many "consumers of sanctions services" get emotional relief, but are not interested in the deeper issues. But why the official bodies of the allies did not cut off the flow of components during the three years of the full-scale war (the annexation of Crimea took place in 2014), although they could have done so, is a really intriguing question.
Michael McFaul's recent interview with Russian blogger-in-exile Yuri Dud is extremely interesting in this regard. McFaul was the US ambassador to Russia at the intersection of the Medvedev-Putin presidencies, and after the full-scale invasion began, he created The International Working Group on Ukrainian Sanctions at Stanford University, which is known in Ukraine as the Yermak-McFaulgroup. This international expert group has developed numerous products, including roadmaps for individual and financial sanctions, and has promoted the confiscation of Russian sovereign assets and increased effectiveness of sanctions.
McFaul acknowledged the ineffectiveness of sanctions from a practical point of view, because the war is not over. I noticed another interesting point. In this conversation, Yuri Dud asks McFaul about an apparent inconsistency: why the Russians who left Russia in protest were hit the hardest by sanctions, if these are the very Russians who do not support the war? McFaul answered: "It's all about Putin." In other words, it's all about emotions.
By the way, this is the reason why Russia and Iran are also imposing retaliatory sanctions. From a practical point of view, they hinder Russia itself. But, despite their senselessness, they work exactly as they should: they influence the population. "Friend or foe" is an incredibly powerful platform. Information influence is the basis of politics.
This is fully applicable to Ukraine. "We shouldn't expect any economic effect from sanctions, because they have a different purpose – a political one. They are meant to show both the citizens of Ukraine and the rest of the world the political attitude towards these entities," says Ihor Umansky, twice Minister of Finance.
A little information to develop this thought. Since 2014, sanctions have been applied on an industrial scale. However, their economic efficiency is low. Let's compare several groups of facts.
First. According to the State Treasury, the state budget received funds obtained in connection with the implementation of the Sanctions Law:
- in 2023 - UAH 114 million,
- in 2024 - UAH 830 million,
- in 2025 (as of 8 August) - UAH 5.8 billion.
Is this a lot or a little? We need to understand what to compare it to. To do this...
Here is the second group of facts - data from the Ministry of Justice. According to former Deputy Minister of Justice Inna Bahatykh, the HACC (High Anti-Corruption Court) has recovered the assets of 87 sanctioned persons in favour of the state. Among other things, these are assets belonging to Russian oligarchs Deripaska, Rotenberg and his son, Yevtushenkov, Khudaynatov, Usmanov, Shovkov, MPs, collaborators, companies associated with the Russian military-industrial complex, etc.
In particular, the following were seized:
- 305 real estate objects;
- 119 corporate rights/stakes in enterprises;
- rights to trademarks and industrial designs, property rights to music, graphic images, and TV programme scripts;
- 2,871 items of movable property;
- over 165,000 tonnes of iron ore products;
- 62,595.183 tonnes of potash (mineral fertilisers);
- 552,037.513 tonnes of bauxite;
- claims under contracts worth UAH 10 billion;
- UAH 3 billion in cash and government bonds.
Inna Bahatykh is very optimistic about the economic impact of the sanctions: "I don't like to impose my opinion, but I think there is an obvious positive here, because Deripaska no longer owns Mykolaiv Mining and the unique Glukhiv quartzite quarry; Shovkov no longer owns the titanium deposit of DemDZK; the Rothenbergs no longer control Ocean Plaza; Khudainatov is no longer in the Ukrainian Shell network; Boguslayev is no longer in Motor Bank; Lukyanenko is no longer in Sumy NPO (Sumy Mashine-Building Science-and-Production Association); Kalashnikov is no longer in Motordetal-Konotop. I could go on and on. I am waiting for the decision on VS Energy and other assets of the "Luzhniki guys", on Friedman and Morshyn (Mineral Water Plant “Oscar”), on Medvedchuk's assets."
All this is really important, but from an informational point of view. However, it is very strange that the state's revenues from confiscation are catastrophically low. The lion's share of these funds came from the privatisation of Aeroc and the management of Ocean Plaza.
Here is the third group of data, with very telling conclusions. Olena Duma, the recently dismissed head of the National Agency for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes (ARMA), believes that sanctions are necessary, but they must be effective.
"I had a lot of comments on the sanctions policy. Analysts took both the experience and proposals that we have developed in ARMA to implement in the state. The bottom line is that the sanctions policy does not work," she said.
Given the choice between these two opinions, I tend to trust the opinion of Ms Duma. She was the head of ARMA for two years and dealt directly with confiscated assets.
For the sake of objectivity, I will present the fourth group of data. The report of the Accounting Chamber of Ukraine on the activities of ARMA states that from the beginning of the invasion until May 2023, more than UAH 70 billion (over USD 2.5 billion) of Russian assets were transferred to ARMA. This is most likely the result of the sanctions. It is not yet known how much property was transferred to the State Property Fund.
In particular, according to the Accounting Chamber's report, between 2022 and the first half of 2024, 549 out of 684 court decisions were not enforced, and assets worth more than UAH 39.4 billion still remain unaccepted for management, which has led to the loss of additional financial opportunities. And there are draft laws in the parliament, one of which provides for the return of the right to ARMA to sell assets already under the Agency's management, including sanctioned assets (incidentally, the right to sell may open up the possibility of dubious transactions and the sale of confiscated property into the right hands without an official tender).
From the above facts, I make the following case. Ukraine has extremely low economic efficiency of sanctions. Sanctions in Ukraine really do not work. But this is not a coincidence or a consequence of the chaos in Ukraine's state system, but rather a regularity. After all, the main purpose of sanctions is to influence information.
I would also like to draw attention to the selectivity with which sanctions have been imposed in Ukraine (this is the same problem as with international sanctions, which constantly reveal "holes"). In particular, Ihor Umansky drew attention to the fact that so far sanctions have not fully covered Russian top officials. Ukraine also selectively imposed sanctions against smugglers.
"The lists ... do not include the main smugglers of cigarettes and alcohol. The main 'schemers' are not there," Umansky said.
I think this is no accident either.
How trust in sanctions is being lost
A side effect of this approach is that trust in sanctions is being lost. They are desanctified – from being something sacred and very right, they become something very dirty and even disgusting. Over time, they have the opposite effect.
Surprisingly enough, this property also has its roots in human biology. We remember that a physiologist can train a dog to develop a conditioned reflex; for example, to make it salivate in response to a light bulb being switched on. However, the conditioned reflex weakens over time. This effect is called "extinction".
The more often a country's authorities "push the button" of sanctions, the weaker the conditioned reflex. Too often, reinforcement leads to frustration and inhibition. Until one day, instead of emotional solidarity, they start to cause irritation.
This is exactly what is happening with sanctions in Ukraine. The gap between the pomp of words and the lack of real effect is becoming more and more noticeable. Even for patriotic compatriots who are trying their best not to let these thoughts exist in their heads.
I can assume that in Ukraine, the sanctions mechanism has already developed a resource of trust, and the marginal effectiveness is about to go negative (where each new package of sanctions will cause irritation), provoking the transfer of sanctions to the category of despised and undesirable.
ASPECT TWO. LEGAL CONSEQUENCES OF INFORMATION WEAPONS
Sanctions have two more important aspects. The one I will discuss next was supposed to come third, but I have deliberately moved it to second place. I do this to make the contrast with what I have discussed above more vivid.
The emotional effect of sanctions is felt instantly, while the consequences "catch up" much later. In particular, the legal consequences.
In February 2022, after Russia's invasion of Ukraine, the US, EU, UK, Japan, Australia and Canada simultaneously launched a campaign to find and block assets that met certain criteria (e.g., money of Russian elites). In its first year of operation, the Task Force found and froze $58 billion worth of Russian assets. Some countries (including Canada) have passed laws that allow for the confiscation of such assets for the benefit of Ukraine's recovery. Others have stated that they are working on such a mechanism.
EU countries, the UK, Japan and the US have begun to block assets of Russian elites on a massive scale. The biggest news was the seizure of assets of the Russian Central Bank totalling about $300 billion, mostly in the European Union.
Despite the loud start and even the adoption of laws allowing for confiscation, our Western allies have not confiscated the assets of Russia and Russian elites. On the contrary, they have been incredibly cautious. From an emotional point of view, inherent in any country at war, Ukrainians either preferred to ignore this behaviour or talked about the West's double standards. However, in my opinion, the most likely explanation for this behaviour of the allies is the fear of a tsunami of counterclaims. In countries where the courts are actually (not just on paper) separated from other branches of government, these fears are not unreasonable.
In addition to the courts, there is a danger of upsetting the delicate balance of interests for the sake of short-term victories (even if they are dictated by the best intentions). The case of $300 billion held by the Central Bank of the Russian Federation is illustrative. This money remains blocked, and loans for current assistance to Ukraine are issued against the interest earned on it. However, confiscation is out of the question. This hesitancy is not even due to the high probability of paying high amounts of compensation to Russia as a result of confiscation. The point is in the fundamentals of international law. The assets of the Central Bank of Russia are the property of the sovereign, and the seizure of sovereign funds is the highest level of conflict on the planet. The forced withdrawal of a part of the Central Bank's reserves could de facto fundamentally undermine confidence in the global financial system and have an unpredictable impact on global financial markets. Countries that have so far believed in the high security of their funds held in reserve currencies would immediately start looking for safer havens for their capital. Confiscation of $300 billion in favour of Ukraine would put the fate of trillions of dollars held by central banks around the world at stake.
Thus, the world's leaders are clearly aware that the second most important vulnerability of sanctions is the long-term negative consequences of hasty decisions. The bureaucratic systems of maturedemocracies undoubtedly "know" this from history. Bitter experience has become a great teacher. Western democracies are cautious not because they are weak and indecisive, or do not realise the severity of the threat from Russia (although we think that is the case). For centuries, they have been accumulating experience in both wars and post-war settlements. They already know that yesterday's enemies become tomorrow's allies, as the history of old Europe shows. Because of this, Western democracies have developed considerable skill in building a system of balances that cannot be upset even by war.
In particular, they are aware of the risks involved, and therefore carefully work out the legal nuances of each package of sanctions. Young states, such as Ukraine, are running headlong through the legal minefield, guided by momentary emotional impulses. Ideally, the Ministry of Justice of Ukraine should have carefully endorsed all draft decisions of the National Security and Defence Council on sanctions. So far, this seems not to be happening.
Future problems can already be predicted. The fact is that for many years in a row, Ukraine has been institutionally preparing to join the EU. As part of this preparation, Ukraine has signed dozens of international agreements. Among them is the obligation to recognise the decisions of international courts and tribunals. By imposing sanctions on an ever-increasing scale, especially against Ukrainian citizens, NSDC officials recklessly ignored this fact.
I could be wrong, but it seems that over the past three years, Ukraine has issued future claims against itself worth billions of dollars. The return of property plus compensation, or compensationalone, are highly likely. When the time comes to pay, the international mechanisms to which we have solemnly committed ourselves will kick in.
(To be continued)