Would Hitting Russia With Iran-Style Sanctions Work?

How bad could things get for Russia if the West ratcheted up its sanctions? There are possible parallels in another oil rich economy subject to crippling economic punishment: Iran.

Indeed, there are plenty of voices in Washington calling for Iran-style sanctions to be applied to Russia as a means of forcing President Vladimir Putin to withdraw from his territorial belligerence towards Ukraine and perhaps even force his withdrawal from Crimea.

The U.S. led an increasingly onerous, and partly successful, campaign against Iran in an effort to make it abandon its nuclear program. The efforts included restrictions on trade, on dealings with Iranian firms, freezing of some Iranian assets and embargoing the country’s oil exports.

In 2012, when the broadest and deepest sanctions had been levied on the country, Iran’s economy was suffering. GDP contracted 5.6%, the annual inflation rate was running at over 40%, imports had tumbled 13% on the previous year, exports were down by more than a quarter and unemployment was above 12% and rising.

Iranians responded to their economic misery by voting out the confrontational government of Mahmoud Ahmadinejad in 2013, and replacing it with one more ready to hold talks about ending the country’s nuclear program.

So if it worked for Iran, why not go whole hog on Russia as well, rather than restricting measures to a handful of rich individuals closely linked to the Kremlin and a few of their firms?

Well, for a start, it’s much harder to isolate Russia effectively, Suzanne Maloney, a fellow at Brookings specialized in Iran, argued in an article earlier this year. Only by getting most countries to agree did the U.S. finally get Iranian sanctions to bite by 2012.

After all, the U.S. had been levying trade and other restrictions on Iran since the 1979 revolution with little effect–much as it has done to Cuba since 1960. And crucial to this agreement was the fact that Iranian oil was being replaced by other sources, not least an U.S. and Canadian production surge during the past ten years or so, which prevented another oil crisis like the one caused by the Iranian revolution that hit Western economies in 1979 and 1980.

A similar universal determination to apply sanctions to Russia is unlikely. That’s because a quarter of all European Union gas originates from Russia–half of all its imports. Of the EU’s oil and coal imports, a third and a quarter, respectively, come from Russia. The dependency works both ways. The EU represents 55% of Russian exports, including 90% of the oil and 70% of the gas it sells abroad.

How much cooperation would the U.S. get from the EU for Iran-style sanctions? Mr Putin was winning an 80%-plus positive rating in recent polls. How much punishment would their economy have to take to cause Russians to turn against him? Would the EU really be ready to impose many years’ worth of sanctions that would hurt its struggling economy nearly as much as the target’s? Iranian sanctions might sound like a good idea to make a recalcitrant regime mind its manners. But probably not Russia.

WSJ