With the Russian ruble now trading at 55 rubles per dollar, well above where it was prior to the invasion, and Russia’s economic output not having collapsed, the initial optimism about the effectiveness of the unprecedented sanctions imposed by the United States and its allies has started to fade. Does that mean the sanctions regime has been a failure? We do not believe so.
Before significant funds are committed to Ukraine’s reconstruction, it is important to determine who will control and direct the money and how the recovery will be structured. Internal and external transparency will be crucial, as well as planning for a project that could take years.
The free world – the “West”, but also democracies in Asia, Africa, and Latin America – must prepare for a future without Putin, a future where Russia justly loses its war of choice and aggression.
A growing number of U.S. and European firms have chosen to voluntarily cease or suspend their operations in Russia. Are these firms’ managers deciding to divest to help Ukraine and punish Russia? Or are they divesting to help their own firms, under pressure from investors? Our results suggest the latter.
In this paper, we propose further financial sanctions to increase the cost to Russia’s invasion of Ukraine, based on further targeting two key vulnerabilities. The first targets Russia’s reliance on the U.S. Dollar and Western currencies as a reserve currency to back the Ruble. The second vulnerability is the Russian economy’s dependence on the Western financial system for a range of services.
In any negotiation, strong positioning is the most important factor. Assistance from Ukraine’s allies would give Ukraine, the victim, more bargaining power to reach an outcome that might be acceptable. Those who focus on Ukraine making territorial concessions or blame the United States for expanding the war only weaken Ukraine’s bargaining position.
Many commentators have written in the last few weeks that there is no solution to the Russia-Ukraine war other than diplomacy. No one is opposed to diplomacy. However, the key question is what kind of a diplomatic solution do we want to reach?
Through this paper, the working group aims to share its expertise and provide assistance to international efforts focused on the formulation of sanctions to increase the cost to Russia and support Ukraine in the defense of its territorial integrity and national sovereignty.
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