Russia’s invasion of Ukraine could yet become the biggest military action in Europe since 1945. It also marks a new era of high-risk economic warfare that could further splinter the world economy. The measures the West has imposed on Russia are so potent that they have triggered chaos in its $1.6trn economy and prompted the president, Vladimir Putin, to issue nuclear threats. The instant immiseration of a big economy is unprecedented and will cause alarm around the world, not least in China, which will recalculate the costs of a war over Taiwan. The West’s priority must be to win the economic confrontation with Russia. Then it must create a doctrine to govern these weapons in order to prevent a broader shift towards autarky.
The fact that Russia did not take the threat of sanctions seriously at first is no surprise. For years they have been plentiful but ineffective. Reluctant to use hard power, America and Europe have reached for economic penalties instead. Some 10,000 people or firms are subject to American sanctions, affecting over 50 countries with 27% of world gdp, and covering everything from torture to cryptocurrencies. Often they make little difference. Autocrats can evade targeted measures. Full embargoes on Iran and Venezuela have been crippling but not toppled regimes. The deterrent effect has been weak, as malefactors have assumed that America would never apply “maximum pressure” on a big economy.
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