Economic Sanctions Don’t Work. Here’s The Latest Example.

Economic sanctions of the kind imposed on Russia sound powerful when they’re announced and do have some impact, but in the long run, they never work.

Costs are imposed on everyday citizens and consumers. Some losses are incurred by those whose accounts are frozen or whose businesses are handicapped. But the strategic goals that justified the sanctions are never achieved.

At most, they are slowed down temporarily. The massive and unprecedented sanctions imposed on Russia have not slowed the Russian military advance in Ukraine by one minute. Meanwhile, inflation is surging in Russia and the United States because of the sanctions.

More to the point, it’s just a matter of time before the affected parties devise workarounds to the sanctions. In the end, the costs are real but the effect of the sanctions is nil. It’s a lose-lose proposition.

For example, cutting off Russian exports of oil and natural gas is pointless because Russia will just sell the same energy to China and India. But, the price will go up. It’s a world market after all.

A few Russian oligarchs may lose their yachts, but Putin doesn’t like the oligarchs anyway. We’re doing Putin a favor by clipping the oligarchs’ wings. Putin’s power comes from the military and security services, not the oligarchs.

Americans cheered when the Moscow Stock Exchange was shut down in the first wave of sanctions in late February. Those cheering probably have no idea how small the market capitalization of stocks on the Moscow Stock Exchange really is. It’s minuscule compared to western markets. It sounds powerful, but it’s not.

Shutting the exchange was inconvenient but not even close to decisive in terms of financial war. Now, according to this article, even that temporary impact has ended. The Moscow Stock Exchange is again open for business.

Not all of the tickers can be traded and western investors are banned from dumping Russian stocks. It’s not a full reopening, but it’s still a reopening.

Investors may not realize that the New York Stock Exchange was closed for five months from August to December 1914 at the outbreak of World War I. These things happen in wartime, but they don’t affect the war and they don’t last forever.

There’s a lot less than meets the eye in Biden’s sanctions. That will become apparent to Western investors in the weeks ahead. It will be even more apparent to the Ukrainian military as the Russian war machine rolls on.

The biggest loser from U.S. economic sanctions will be U.S. consumers and investors as prices soar, growth lags, and stocks collapse.

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