G7 weighs new sanctions on Russia to end Ukraine war

Existing sanctions are some of the toughest ever imposed on a major economy, but there is still room to increase pressure.

Hiroshima, Japan – By some accounts, sanctions against Russia have left it more isolated than at any point since the aftermath of the Bolshevik Revolution of 1917, when the allies of World War I put the country under a blockade.

At the Group of Seven summit taking place in Japan’s Hiroshima from Friday, the club of rich democracies are expected to tighten the screws further as they attempt to force Moscow to end its war in Ukraine.

While the existing sanctions on Russia are some of the toughest ever imposed on a major economy, the G7 has considerable room to increase pressure – although divisions over key areas like energy and the mixed track record of sanctions generally threaten to undermine efforts to bring Moscow to heel.

“There is definitely plenty of space for the G7 to impose further restrictions and tighten the existing ones,” Rachel Lukasz, a member of the International Working Group on Russian Sanctions at Stanford University, told .

“The most important areas include oil and energy more broadly, non-energy trade sanctions and closing loopholes in this area, and technology sanctions.”

A key focus of the G7 members – the United States, Canada, Japan, the United Kingdom, France, Germany and Italy – is expected to be enhancing the enforcement of existing sanctions, including clamping down on sanctions evasion involving third countries.

On Saturday, G7 finance ministers and central bank governors pledged in a joint statement to counter “any attempts to evade and undermine our sanction measures”.

The EU, which participates in G7 events as a “non-enumerated” member, is considering penalties for companies that help Russia get around sanctions, which would bring the bloc closer into alignment with the US sanctions regime.

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In an interview with the Financial Times published on Tuesday, Josep Borrell, the European Union’s foreign policy chief, said the bloc should crack down on the importation of Indian petroleum products that use Russian oil.

The administration of US President Joe Biden is also pushing to strengthen controls on high-tech exports by reversing the presumption towards prohibiting everything that is not explicitly authorised.

Picking up the slack

Despite predictions of economic ruin, Russia’s economy has held up better than expected against the Western-led sanctions regime, shrinking only by 2.1 percent in 2022.

Although Russia’s trade with G7 countries has plummeted, China, India and Turkey have picked up much of the slack through increased imports of Russian coal, oil and gas.

Some research also suggests that Western shipping companies are involved in violating sanctions on Russian energy exports.

In a study released by the Kyiv School of Economics last month, researchers found that 96 percent of oil shipments from the Russian port of Kozmino during the first quarter of 2023 were sold above the $60 oil price cap set by the G7 last year.

“On the sanctions front, the summit will be about implementation, implementation and implementation,” Agathe Demarais, global forecasting director of the Economist Intelligence Unit, told .

“This follows a flurry of media reports highlighting sanctions evasion from third countries, such as Turkey, Serbia, Kazakhstan and the UAE. Instead of lowering the oil price cap, the G7 will focus on tightening the effective implementation of this measure.”

But Demarais, who is also the author of Backfire: How Sanctions Reshape the World Against US Interests, said it is unclear if the G7 will be able to effectively plug the loopholes “given the scope of the problem and the creativity of the Kremlin to bypass sanctions”.

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Signs of divisions among G7 members have also emerged before the three-day summit.

While G7 is reportedly considering proposals to permanently shut natural gas pipelines turned off by Russia following its invasion of Ukraine, European members are said to be hesitant to back such a move.

Politico on Wednesday quoted an unnamed EU diplomat saying it was “very unlikely” the measure would pass due to European members’ continuing reliance on Russian gas.

Do sanctions even work?

More broadly, the G7 must contend with the limited success that sanctions have had so far at achieving change in Russia as well as other pariah states such as North Korea and Cuba.

In a state-of-the-nation address to mark the first anniversary of the Ukraine war in February, Russian President Vladimir Putin sought to prepare his country for a long conflict that would achieve its successes “step by step”.

Kristy Ironside, a historian of modern Russia and the Soviet Union at McGill University in Canada, said the historical record on the effectiveness of sanctions was “rather pessimistic”.

“I tend to view them rather sceptically: they are an attempt to ‘do something’ when direct options are limited, ie when you don’t want to put boots on the ground,” Ironside told.

“Sanctions, or rather their mere threat work best when there is a high degree of pre-existing economic integration or desired economic cooperation, but that has been limited since 2014. Russia has been sanction-proofing the economy since this, developing domestic food chains, moving currency reserves into yuan, etc.”

“The application of sanctions and the threat of more has not dissuaded Putin from continuing this war,” Ironside added, “and at this point, I think it’s safe to say they won’t.”

But Lukasz, the Russian sanctions group member at Stanford University, said sanctions were already affecting Russia’s military campaign and the G7 must step up efforts to support Ukraine and weaken the Russian state.

“It is impossible to know precisely what impact the sanctions have had on Russia’s appetite to wage this and future wars because we do not observe the counterfactual world without sanctions,” he said.

“But the direction of the impact is obvious: this war has been a disaster for Russia and the Kremlin already, and with the Western support it will sooner or later be turned to a disastrous defeat.”

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