Paradoxically, such harsh and prolonged sanctions have sometimes consolidated the power of the regime that the Americans were trying to undermine. Even in Tehran, fundamentalist leaders gained political legitimacy from the external embattlement. So did Fidel Castro during a decades-long embargo of Cuba.
Nicholas Mulder, a historian and the author of “The Economic Weapon: The Rise of Sanctions as a Tool of Modern War,” notes that, in these and other countries aggressively sanctioned by Western governments, despotic leaders lasted for years or remain stubbornly in place. “Sanctions are kind of like alchemy,” he said. “You apply all this pressure to this black box of a country’s economy and hope that, on the other side of that black box, political change comes out. But making sure that pain and pressure lead to the kind of change you want to see—that’s the real challenge, and often people underestimate how difficult that will be. And that’s why sanctions are often much less effective than you would think.”
In November, 2013, the President of Ukraine, Viktor Yanukovych, abruptly pulled out of a major trade agreement with the European Union. With that sudden reversal, he not only betrayed the wishes of much of his citizenry, he also revealed how beholden he was to Putin. Tens of thousands protested in the streets of Kyiv, and as the situation became increasingly unstable Yanukovych fled Ukraine. (Eventually he resurfaced in Russia.) In February, 2014, Russian forces, wearing unmarked uniforms, began to wrest control of Crimea from Ukraine, and Putin soon declared the peninsula sovereign Russian territory.
The Obama Administration and European leaders did not act militarily, but agreed that Putin’s aggression called for strong economic sanctions. Officials in Washington developed a menu of measures that they hoped would punish Russia and compel it to withdraw from Crimea and eastern Ukraine without seriously harming the rest of the global economy.
Russia, the eleventh-largest economy in the world, could mitigate the effects of sanctions by turning to China or other countries outside of the Western sphere of political influence. Jack Lew, the Treasury Secretary at the time, brought together the department’s sanctions experts and its economists to identify aspects of the Russian economy that were solely dependent on the West. One area of vulnerability was Russia’s access to stock and bond markets in London and New York. By targeting that access, the Treasury Department would make it far more difficult and expensive for Russian enterprises to borrow money or to find foreign investors.
In March, 2014, the U.S., the E.U., and Canada started enacting rounds of sanctions against Russia. An important component of the effort was the authorization of measures that could be implemented down the line—an attempt to signal to Putin what could be in store if he failed to retreat. Daleep Singh, who was then a senior official in the Treasury Department, told me, “The best sanctions are those that never even have to get used.”
Unfortunately, as Singh acknowledged, the steps taken by the West that month failed to deter Putin. On July 16th, the U.S. went further. It imposed limited sanctions on entities including two of Russia’s largest oil companies, Rosneft and Novatek, and two of its largest banks, Gazprombank and Vnesheconombank, along with eight arms manufacturers and the Russia-backed Luhansk and Donetsk regions. Putin seemed unmoved. The next day, forces in eastern Ukraine shot down a Malaysia Airlines flight on its way from Amsterdam to Kuala Lumpur, killing everyone on board. (Russia has denied involvement, despite evidence linking it to the event.)
More Western sanctions against Russia were levied in the next year and a half, including travel bans and asset freezes on Russian officials and separatist leaders responsible for the invasion of Crimea. Americans were not allowed to provide new financing to major Russian financial institutions, and some Russian state-owned companies were prevented from accessing Western financing sources. Almost no restrictions, however, were placed on Western purchases of Russian fossil fuels, that engine of immense revenue for the Kremlin and the business élites.
When Donald Trump assumed office, there were concerns that he might reverse some of the existing sanctions. Congress, which at the time was controlled by the Republicans, preëmptively restrained Trump, passing legislation that imposed further sanctions on Iran, North Korea, and Russia, and blocked unilateral lifting of certain penalties. Inside the Treasury Department, career staff members were confused about Trump’s intentions toward Russia. One former Administration official told me that Trump did not seem interested in sanctioning Russia: “He was focussed on Ukraine and Hunter Biden. He was focussed on Iran. He was focussed on, could he make a deal with China.”
Most of the former Treasury officials I spoke to agreed that the sanctions levied in that era were insufficient. Vladimir Ashurkov, a director of the Anti-Corruption Foundation, which is connected with the imprisoned Russian opposition leader Alexei Navalny, echoed that conclusion. He said, “If the sanctions we have now had been gradually introduced over the eight years that passed since the first hostilities started in Ukraine, in 2014,” the current tragedy might have been avoided. “I think they sort of encouraged Putin’s assertiveness over this eight-year period. By February, 2022, I think he didn’t expect much retaliation.”
The sanctions rolled out in those years also provided Putin with an opportunity he could later turn to his advantage. He and his fellow-élites in Russia learned how to accommodate and compensate for the worst penalties of the Western sanctions regime. The government built an enormous cushion of foreign reserves that could be drawn upon to prop up the value of the ruble. It also established front companies across the world that could, if needed, help with the procurement of crucial technology and components. As a result, the work of Wally Adeyemo and his colleagues this year wasn’t just informed by a long line of previous sanctions programs. It was complicated by them.
Standing behind public-facing officials such as Adeyemo are career civil servants, many with deep expertise, who have chosen to forgo more lucrative jobs in the private sector. One of them is Elizabeth Rosenberg, the Assistant Secretary for Terrorist Financing and Financial Crimes. Earlier in her career, having completed graduate work in Near Eastern studies, she’d covered the energy sector, national security, and sanctions as a trade journalist. But eleven years ago she decided that it was worth taking a pay cut to help create the sanctions she’d been writing about.
In the autumn of 2021, when intelligence reports about Russia’s activities on the Ukrainian border made it plain that Putin was preparing for a large-scale invasion, she and other officials began to model steps that they might want to take, such as restricting Russian oil and gas imports, and the possible impacts those moves might have on the global economy. “Sanctions involve costs. There’s no way around it,” Rosenberg said. “We are cutting ourselves off from the Russian market. We have a responsibility to make sure we are not doing more than we have to.”
A crucial aspect of the bureaucrats’ work is sifting through intelligence data and predicting collateral damage—not just humanitarian costs but those detrimental to U.S. economic interests. Assessments of that damage had to be considered well before any decisions were finalized.
Rosenberg worked closely with Andrea Gacki, the director of the Office of Foreign Assets Control, who earlier in her career was at the Justice Department defending sanctions against targets who had sued the government. Through the fall and winter, the two officials consulted with their foreign counterparts about some of the knottier aspects of what they hoped to do.
Rosenberg and her colleagues travelled repeatedly to the U.K. and Europe. Sometimes her delegation would arrive and learn that the Europeans had budgeted only an hour or two for the meeting. “I would say, ‘No, we’re going to need a lot of time,’ ” Rosenberg recalled. “ ‘We need coffee, we need snacks, we need room availability.’ ” Other times, they would be met with surprise when they asked that representatives of a given country’s justice department and intelligence services attend the discussion, as national-security issues were bound to come up. Hours were spent reviewing whether a particular country had the legal authority to freeze Russian assets, and, if it didn’t, what it needed to do to establish such authority. After most meetings ended, Rosenberg and her team would rush to the American Embassy to send the results of the sessions to Treasury Secretary Janet Yellen.
The U.S. Treasury Department is the only such institution in the world that has its own intelligence agency, situated in the department’s headquarters, on Pennsylvania Avenue. On the night of February 23rd, Rosenberg went through heavy metal doors, placed her phone in a lockbox, and began work on a classified memo to Yellen about proposed sanctions. In an adjoining room, intelligence analysts who are on duty twenty-four hours a day stood behind banks of blinking monitors. Around 10 p.m., one of the analysts announced that Russia had launched missiles at Ukrainian targets. The war had begun. An official in the room that night recalled how the team’s sense of purpose intensified: “I will not forget how that felt.” Sweeping sanctions against Russia went into effect within hours.
Yellen told me, “I’m involved in some discussions with people at the finance-minister level. But when I hang up the phone I say, ‘My senior staff will be in touch with yours,’ and I cast all of this on Andrea and Wally and Liz, and they do the heavy lifting. If this all works out, it’s because of them.”
Some of the plans activated in February were less comprehensive than they first appeared. Dozens of Russian officials hadn’t been touched, and the initial SWIFT ban applied to only seven banks. But the sanctions designers wanted to leave room to ramp up the pressure should Putin not respond as they hoped.
As Rosenberg explained to me, designing and implementing sanctions, which are largely about economic forecasts and banking relationships, often feels like mechanical work. Typical days involve composing and editing memos and passing them up the chain. Humanitarian concerns may feel very far away. “And then you have Bucha”—the site of a massacre of civilians by Russian forces this spring—“and you think, Oh, my God, this is why we’re doing it.”
Not all of what unfolded shortly after the invasion was anticipated, including a mass private-sector exodus from Russia. Within days, the anger of the Western public had moved dozens of companies—among them Apple, Netflix, ExxonMobil, and Shell—to announce that they were withdrawing from the country. Before long roughly a thousand more businesses joined them and, in Yellen’s account, “multiplied the impact” of sanctions.
Singh thought that the pullout would have a lasting effect. “Once a McDonald’s leaves, it doesn’t come back, especially those that had physical infrastructure that they just abandoned in Russia,” he said. “That was big.”
From the Treasury officials’ perspective, more penalties are not always better; heedlessly adding names to sanctions lists may have destabilizing consequences. In 2018, for instance, the Office of Foreign Assets Control sanctioned the aluminum magnate and oligarch Oleg Deripaska and his companies in response to Russia’s invasion of Crimea and other activities. The announcement jolted the global aluminum market, prompting a price spike.
The sanctions or seizures of foreign assets—for instance, the impounding this March by European officials of gaudy yachts linked to Rosneft, the state-controlled oil conglomerate, and to Alexey Mordashov, reportedly the richest man in Russia—are preceded by careful study and legal review. Before an individual or a company appears on a sanctions list, a multidisciplinary team at OFAC, often working with other government agencies, analyzes the potential consequences and tries to minimize unintended results.
Putin countered the sanctions with strategies to create demand for rubles and drive up their value. He required that most Russian oil and gas purchases be paid in rubles, and the Russian Central Bank restricted the ability of the country’s citizens to exchange their money for foreign notes. By the end of June, the price of the ruble had rebounded. A month later, the Russian military had made slow but solid gains. Among its achievements was bombing the strategically important port of Odesa, which disrupted plans to release grain stores there that were badly needed in other parts of the world.