The Times Australia
The Times World News

.
The Times Real Estate

.

All told, Australian sanctions will have almost zero consequences for Russia

  • Written by Naoise McDonagh, Lecturer in Political Economy, Institute for International Trade, University of Adelaide

The economic sanctions[1] Australia has imposed in the wake of Russia’s invasion of the Ukraine are an extension of those applied in 2014 after Russia annexed the Crimea.

As with the US, UK and European Union sanction regimes, Australia’s operate across three areas:

  • technological, involving bans on exports of goods for use in oil and gas exploration and weapons production

  • financial, involving bans on financial services and financial trading with designated entities

  • personal, involving travel bans and limits on commercial relations for designated people

The question is whether they will have consequences for Russia’s economy and so act as a deterrent to further military action.

Certain conditions are needed for sanctions to have coercive power.

  • Either there needs to be a large and preferably asymmetric economic relationship between the countries, with the asymmetry favouring the sanctioning country. This might be the case if Russia bought many more goods from Australia than Australia bought from Russia.

  • Or the sanctioning country needs to control critical technologies and/or infrastructure that are essential to the targeted country, and the sanctions will cut-off access.

Neither of these conditions hold for Russia and Australia.

Australia’s leverage is negligible

Of Australia’s total A$873 billion[2] two-way trade with all countries in 2019-20, only a miniscule $1.2 billion[3] was with Russia. For both countries this figure is negligible, so asymmetry is irrelevant.

Nor does Australia control any critical infrastructure or technology of consequence to Russia which cannot be sourced elsewhere.

Read more: Morrison announces sanctions against Russia, warns of cyber retaliation[4]

All told, Australian sanctions will have almost zero real-world consequences for Russia, nor do they imply difficulties for Australian businesses, aside from the tiny fraction who have trade and investment ties with the country.

The only states that have both the potential for effective sanctioning power over Russia and the will to use it are the US, the United Kingdom and the European Union acting as a block, due to large trade relationships and critical dependencies.

Europe has more leverage

Russia is highly dependent on fossil fuel exports, which comprised 39%[5] of total state revenue in 2019. The European Union takes 70%[6] of its gas exports.

Things are not entirely asymmetric because the EU in turn depends on Russia for about 40% of its gas imports.

Sanctions on buying energy would hurt Russia badly, but also result in a very significant price hike across the European Union and to a lesser extent globally – a cost that has made EU leaders cautious[7] about using this most potent of sanctions.

The US has more leverage still

The US has significant power over the global financial system[8] in what amounts to an asymmetric relationship to Russia. This derives from the dominant position of US financial institutions and of the US dollar as the global currency.

This dominance allows Washington to apply sanctions third countries must also enforce, or themselves face becoming financially sanctioned, making these sanctions global in practice – as Iran experienced[9] to devastating effect.

Yet Russia is far larger than Iran economically, so there will be far greater costs from cutting Russia out of the global financial system, if not so much for the US, then for its allies in the European Union, where European banks have tens of billions in outstanding loans[10] to Russian entities.

So far, the US is cautious

Repayments of these loans would be threatened by broad-based financial sanctions, especially banning Russia from the global payments system SWIFT[11] run by the Society for Worldwide Interbank Financial Telecommunications.

While US sanctions announced on February 24 against Russia’s biggest financial institutions[12] will cause considerable economic disruption and costs, they still do not amount to the full expulsion from the global financial system that was imposed on Iran.

Read more: Ukraine: sanctions can still make a difference – but only if done right[13]

British sanctions could significantly hurt Putin’s clique of supporting oligarchs in the UK by shutting down “Londongrad”[14], a term used to describe a city awash with laundered funds from Russian oligarchs.

Freezing the oligarchs’ assets could undermine their support for Putin, but has obvious financial costs to London, and would have to overcome the political influence of Russian elites in London.

Little could deter Putin

Australia cannot hurt Russia using sanctions, and the countries that can hurt Russia have complex calculations to make in calibrating their actions for maximum impact at minimum cost.

That does not mean Australian action is pointless. Australian sanctions exhibit solidarity with allies and add to the international pressure and outcry against Putin’s illegal act of war.

The bigger question is whether any sanctions at all will now deter Putin from following through on his goals, given that the invasion is underway.

References

  1. ^ economic sanctions (www.dfat.gov.au)
  2. ^ A$873 billion (www.dfat.gov.au)
  3. ^ $1.2 billion (theconversation.com)
  4. ^ Morrison announces sanctions against Russia, warns of cyber retaliation (theconversation.com)
  5. ^ 39% (www.bbc.com)
  6. ^ 70% (www.washingtonpost.com)
  7. ^ cautious (www.afr.com)
  8. ^ global financial system (www.economist.com)
  9. ^ as Iran experienced (www.bbc.com)
  10. ^ tens of billions in outstanding loans (www.economist.com)
  11. ^ SWIFT (www.investopedia.com)
  12. ^ biggest financial institutions (home.treasury.gov)
  13. ^ Ukraine: sanctions can still make a difference – but only if done right (theconversation.com)
  14. ^ “Londongrad” (www.dw.com)

Read more https://theconversation.com/all-told-australian-sanctions-will-have-almost-zero-consequences-for-russia-177913

The Times Features

Best Deals on Home Furniture Online

Key Highlights Discover the best deals on high-quality outdoor furniture online. Transform your outdoor space into a stylish and comfortable oasis. Explore a wide range of d...

Discover the Best Women's Jumpers for Every Season

Key Highlights Explore lightweight jumpers for spring and summer, ensuring breathability and ease. Wrap up warm with cozy wool jumpers for the chilly autumn and winter season...

Uncover the Elegance of Gorgeous Diamond Tennis Necklaces

Key Highlights Diamond tennis necklaces are a timeless piece of jewelry that exudes elegance and sophistication. They feature a continuous line of brilliant-cut diamonds, cre...

Dental Implants vs. Dentures: Which Is Better for You?

When it comes to replacing missing teeth, two of the most common options are dental implants and dentures. Both have their advantages and disadvantages, so choosing between them ...

What Neck Pain Really Means (And Why It’s More Than Just Poor Posture)

Neck pain is often brushed off as something temporary — a tight spot after a long day at the desk or a poor night’s sleep. But when the discomfort keeps returning, it could be a ...

The Work of Gosha Rubchinskiy: Fashion, Culture, and Youth

From Designer to Cultural Architect Gosha Rubchinskiy is not just a fashion designer—he's a cultural force. Born in Moscow in 1984, Rubchinskiy began his career in fashion in t...

Times Magazine

The Essential Guide to Transforming Office Spaces for Maximum Efficiency

Why Office Fitouts MatterA well-designed office can make all the difference in productivity, employee satisfaction, and client impressions. Businesses of all sizes are investing in updated office spaces to create environments that foster collaborat...

The A/B Testing Revolution: How AI Optimized Landing Pages Without Human Input

A/B testing was always integral to the web-based marketing world. Was there a button that converted better? Marketing could pit one against the other and see which option worked better. This was always through human observation, and over time, as d...

Using Countdown Timers in Email: Do They Really Increase Conversions?

In a world that's always on, where marketers are attempting to entice a subscriber and get them to convert on the same screen with one email, the power of urgency is sometimes the essential element needed. One of the most popular ways to create urg...

Types of Software Consultants

In today's technology-driven world, businesses often seek the expertise of software consultants to navigate complex software needs. There are several types of software consultants, including solution architects, project managers, and user experienc...

CWU Assistive Tech Hub is Changing Lives: Win a Free Rollator Walker This Easter!

🌟 Mobility. Independence. Community. All in One. This Easter, the CWU Assistive Tech Hub is pleased to support the Banyule community by giving away a rollator walker. The giveaway will take place during the Macleod Village Easter Egg Hunt & Ma...

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

LayBy Shopping