For all the costs that sanctions are inflicting on the Russian economy, the Russian flag still flies over Crimea, Moscow remains undeterred and the ceasefire in Ukraine is at risk. Worse still, Russia is using its own form of economic warfare as a shield and a sword.
Western strategy has focused on blocking future deals with the Russian military sector, restricting Russian banks’ access to long-term capital, depriving elements of the Russian oil sector of technology they need for deep-sea and shale drilling, and freezing the overseas assets of individuals tied to the Kremlin.
But most existing contracts between western interests and their Russian clients have been allowed to continue. Rather than dealing an instant blow, the aim has been to starve the country of capital by sowing doubts among western investors about the wisdom of investing in Russia. Contracts and capital have evaporated, growth has slowed and leading Russian companies such as Aeroflot, the airline, have been unable to acquire necessary investment.