Why has Russia taken so long to retaliate against Western sanctions? One possibility is it’s because Putin and his team didn’t see the need to do all that much immediately given economic blowback. A second is that they wanted to wait for the gas for roubles arm wrestling to play out before applying new pressure. Third is they do have a war and internal restructuring going on, so economic counterattacks are lower on the priority list. Fourth is Russia wasn’t yet ready to make a negotiated settlement to the war on the ground impossible, despite that Lavrov snorted at the idea that Zelensky would stick to any position for as long as a day.
Regardless, Putin’s executive order sets up an initial framework for what we like to call sanctions. I wish Russia had posted the actual order; the embedded document below is a summary.
Putin pointedly calls these punishments “retaliatory special economic measures”. This may seem like a distinction without a difference, but Russia and China both take the view that economic sanctions are illegal unless approved by the UN, which clearly is not happening here. When I come across an explanation of how Russia thinks it has threaded this particular legal needle, I’ll be sure to make mention in Links or a post.
The executive order directs Putin’s staff to come back in ten days with initial targets, which at this point are only individuals, and to
…define additional criteria for transactions whose implementation and obligations shall be banned under the Executive Order.
Admittedly this document is broader and less specific than Putin’s announcement that Russia would require payment for gas by unfriendly countries be paid for in roubles, where he included enough additional boundary conditions as to considerably constrain how the process might work (that’s why we were able to outline the mechanism in advance, with the actual version adding only a couple more wrinkles). And it’s clearly intended to be expanded in scope.
The basis for the countersanctions is the violation of international law. The seizure of $300 billion of foreign exchange reserves and the German Gazprom operations, and Poland’s moves to expropriate Novatek’s pipeline infrastructure would all seem to be on the list.
Even though the initial targets are to be individuals, the text indicates the scope is broader: “special economic measures are to be applied to certain legal entities, individuals and organisations under their control.”
The document at points describes individuals at targets and at other points legal entities and organizations; I doubt the underlying Executive Order is imprecise as to what applies to whom, but we’ll have a better idea in due course. But here is the potential zinger:
In addition, the document imposes a ban on exporting products or raw materials manufactured or extracted in Russia when they are delivered to individuals under sanctions, or by individuals under sanctions to other individuals.
Limiting this section to individuals seems almost besides the point, since individuals are seldom in the business of buying Russian products or commodities. However, it’s not hard to see that if and when the list expands to include organizations and companies, Russia could inflict a lot of pain by limiting exports of key commodities. If I were them, materials critical to weapons manufacture would be at the top of the list. Cars might be next given how important auto manufacture is to many economies.
Russia will soon let the West know how bloody-minded it intends to be about this retaliation. If you think things are ugly now, just see what happens if Russia really tightens the thumbscrews.
Update 10:30 AM: Reader CzechAgain helpfully found the text of the decree in Russian, and in comments explained some key legal terms. The bottom line is that the summary below, which is more or less a press release, is inaccurate in depicting the initial list of sanction targets due in ten days as individuals only. It will include companies/legal entities.00 Executive Order on retaliatory special economic measures in connection with unfriendly actions of certain foreign states and international organisations • President of Russia