Russia’s Response to International Sanctions

Russia’s Response to International Sanctions

Over the last month, Ukraine has mounted an inspiring and effective defense against Russia’s unprovoked military offensive. According to conservative U.S. estimates, more than 7,000 Russian troops were killed in the first three weeks of fighting – a figure nearly three-times larger than the number of American troops killed over 20 years in Iraq and Afghanistan combined. An estimated 14,000 to 21,000 Russian troops have also been injured, further complicating their ability to achieve military objectives.

Frustrated by the fierce resistance, Russia has begun indiscriminately shelling large population centers and deliberately targeting civilian shelters – including a maternity ward – in an effort to beat Ukraine into submission. These callous attacks on civilians have forced 10 million Ukranians to abandon their homes and led nearly 4 million to flee the nation entirely. 

Those who’ve escaped are the lucky ones. In Mariupol alone, some 4,000 civilians have been killed and thousands more are reportedly being forcibly deported to Russia by train where – in a horrific callback to WWII – they may be subjected to provide labor in remote Siberian work-camps. As of writing this article, the work-camp allegations had yet to be verified by Western intelligence agencies. US officials have, however, confirmed that Russia is the first country to use hypersonic missiles in combat and President Biden himself warned that Putin may even deploy chemical weapons on Ukraine as the conflict drags on.

This disregard for international law (and human life) has not only characterized the Russian military’s response to resistance, but Russia’s response to economic sanctions as well. 

Many of their retaliatory measures have been predictable, if for no other reason than those being ‘sanctioned’ always race to find ways to lessen the impact of those sanctions. For example, Moscow has kept its stock market frozen since the onset of the invasion to prevent investors from pulling their funds; ordered exporting companies (which include some of the world’s largest energy producers) to sell 80% of their foreign currency revenues to buttress the ruble; banned the purchase of dollars and other foreign currencies; and limited the amount of foreign currency Russians can withdraw from their bank accounts. 

Other predictable measures are indicative of their simple desire to retaliate against those who sanctioned them and, more specifically, inflict pain on the “weak” spots of the West. Russia has already halted foreign exports of key commodities like grain and fertilizer – both of which are relied upon heavily by the rest of the world – and one can expect them to add other major exports like aluminum, copper, nickel, palladium, zinc, and, of course, energy to that list as well. These moves will inevitably drive the prices of these goods even higher, causing economic pain and food/material shortages across the globe.

Last but not least are the retaliatory measures that, much like the abhorrent military tactics mentioned earlier, fly in the face of international law.

Cyberattacks: Following Russia’s invasion of Ukraine, the US Cybersecurity and Infrastructure Security Agency (CISA) issued a “Shields Up” warning to all organizations “to be prepared to respond to disruptive cyber activity” Russia has long been suspected of engaging in devastating cyberattacks against Ukraine; knocking out part of their electric grid in 2015, hitting government agencies and banking systems the year after, and disrupting airports, railways, and banks the year after that. Aside from Russia’s obvious interest in overtaking them, Ukraine proved a fertile testing ground for these attacks because they have similar grid infrastructure to that in Europe and North America – but limited resources and ability to counter-attack. Now, governments and corporations across the globe are watching closely because the “online front” of this conflict can – and likely will – spill across borders. We’ll focus a future column about how to prepare for these attacks and minimize damage if one were to occur.

IP Theft: One of the most flagrant ways Moscow has promised to retaliate is their pledge to seize the assets of any business leaving Russia and allow its companies and oligarchs to outright steal Western patents. That’s right, Russian lawmakers are already weighing taking over auto plants owned by Ford, GM, Volkswagen and Toyota, as well as multi-billion dollar energy projects owned by ExxonMobil and BP. According to a recent article in The Hill, the Kremlin is also greenlighting a rule to allow Russian firms to steal intellectual property from companies that are home to “unfriendly” nations such as the U.S. and its allies. This means, Russian oligarchs could take over assets such as Coca-Cola’s bottling factories or Ford’s commercial van manufacturing plant and attempt to continue to manufacture and sell those products under the existing brand. Complicating matters further, Russia has allegedly reached out to China seeking economic and military assistance. China has denied these claims, but wasted no time in threatening the West with retaliation should the West decide to sanction them too. What China ends up doing will undoubtedly reverberate around the world and could cause an even larger contraction of global trade. We’ll likely explore what those ramifications would look like in a further column. In the meantime, we’ll keep our eye on all things Russia/Ukraine and work to keep our members – and loyal MailMax readers – informed and alert of any developments.