The faulty assumptions behind sanctions

Oliver Bullough


As I write this, some first reports of Russian troop withdrawals from Belarus and the Ukrainian border are coming in. Hopefully, as you read this, those reports will have been confirmed and an end to this wearying crisis will be visible. It’s too early to draw all the conclusions, but not too early to start examining the assumptions that might underpin them.


It’s pretty clear that the ultimate decision on whether to invade Ukraine and upend the entire European order rests with Vladimir Putin, which is an alarming one, because he seems to have gone pretty weird in the last couple of years, and was already quite odd before that. If last summer’s peculiar essay on the historical unity of Russians and Ukrainians hinted towards this, it was confirmed by the photographs of him sitting 15 feet away from his own ministers at a ludicrously long table as if they’re the only visible members of an otherwise imaginary cabinet.

  • “His circle of contacts is getting smaller. It affects his mind,” a former Russian official told the FT. “He used to see things in 360 degrees, now it’s more like 60.”

Quite a lot of the discussion about using sanctions to alter the Kremlin’s behavior assumes that since the (extremely wealthy and very limited) circle around Putin keeps so much of its wealth offshore, it will restrain his wilder instincts in order to avoid provoking sanctions so as to protect that wealth. If he’s not seeing anyone anymore, and is instead getting his information from the internet like a strange uncle somewhere, then does that still hold true?

A second assumption underpinning sanctions is that kleptocrats are vulnerable because they move their money through and keep their assets in Western jurisdictions.

  • “We will make sure that those who share responsibility for the Kremlin’s aggressive and destabilizing action will share in bearing a heavy cost. Their assets in the U.K. will be frozen,” said the U.K.’s foreign secretary in describing the legislation that allows new sanctions against Russia last month.

EU countries are yet to agree on what sanctions would look like, but disagreements are more about which sectors to target, rather than over the principle of hitting the assets of individuals. Similarly, Washington has said it could sanction people all the way up to Putin himself if he sends troops deeper into Ukraine.

It’s time to examine that assumption too. As Ukraine’s Anti-Corruption Action Center has been pointing out, Western countries should be blocking kleptocrat-owned assets, including in countries like Germany that don’t always feature in everyone’s list of wealth havens. But it should be doing that anyway, not just because Russia might launch another war.

We shouldn’t be thinking about kleptocrats’ businesses solely as a pressure point to deter them from terrible things, but as already-bad things to shut down anyway. After all, we don’t target organized criminals only when they commit acts of violence, but all the time. Although U.S. prosecutors are good on this, the same is not true on the eastern side of the Atlantic. Even when European countries have agreed on sanctions, they have been poorly enforced, and sometimes not enforced at all.

  • “The big question is that the enforcement of sanctions in the U.K. and in the EU has been pretty pathetic,” one lawyer told me. “It’s quite depressing how poor enforcement has been.”

After the Ukrainian revolution of 2014, I put together a detailed investigation of an oligarch’s business, which continued to be run – via his family members – in EU member states, despite him being sanctioned. I can’t tell you who it was (hello, U.K. libel lawyers, how are you doing?), but I can tell you that the sanctions against him made precisely no difference to how his empire operated, and his kids continued to live like celebrities and travel between North America, Europe and the Gulf. The stereotype is that Britain is the most venal European state, but in fact many EU members are almost as bad, and will need a lot of coaxing to do the right things

There are good reasons to be optimistic about the White House’s strategy towards kleptocracy, as laid out here by Ian Gary, of the FACT Coalition. The administration is pushing ahead with better regulations for U.S. shell companies, with tackling money laundering via real estate and private investment funds and implementing its anti-corruption strategy.

  • “There are numerous powerful and wealthy forces arrayed against these optimistic scenarios. The illegal and shadowy illicit global economy is an affront to the rule of law and threatens democracies around the world. U.S. leadership must stand strong in the fight against financial crimes and global corruption,” Gary notes.

Of course, if the Democrats lose control of Congress this year, presumably a lot of this will become harder, but hopefully some action can be taken before then, not least because it is helping to drive improvements in other countries.

A third assumption underpinning sanctions is that they would work, but is that really true, considering how much effort the Kremlin has put in to defend its economy from Western pressure? It has built up $460 billion worth of foreign exchange reserves, which is worth around 30 percent of its economy and – in a back-handed compliment to the prowess of U.S. prosecutors – it has largely diversified out of U.S.-dollar denominated assets. Considering European countries’ continued reliance on Russian gas (which is itself a strong argument for more renewable energy), this does suggest Russia could survive for longer on its savings than Europeans could keep warm.

But there is an argument for action hidden there, within what looks like a recipe for despair. The way this “fortress Russia” has been built is to be overwhelmingly beneficial to the country’s richest people. There is no limit on them moving money out of the country (some $72 billion left Russia last year, the highest outflow since 2014), which helps keep the ruble weak (benefiting exporters) but inflation high (harming ordinary people). Meanwhile, building up these huge foreign exchange reserves has suppressed economic growth (again, harming ordinary people) so Putin can have the freedom to fall out with as many foreigners as he likes.

Once again, the real victims of the oligarchs are the non-oligarchs, and the sooner we do away with oligarchs, the better for everyone. And the way to do that is to resource our law enforcement agencies, empower them to go after financial criminals, and impose transparency on offshore-owned property.

Sanctions are good, but only in the sense that the kineso switch that makes the Mandalorian’s new spaceship go superfast is good. If it’s an emergency adjunct to an already-potent system, only to be called on in times of extreme peril, then great. If it’s a button bolted to the dashboard of a rotten old jalopy,  it’s not going to get you out of trouble, and you’d be better off rebuilding the engine, wheels, and driveshaft, as well as buying some more fuel.


Anyway, I have been talking about Russia and Ukraine for week after week, and you’re probably bored, so let’s go elsewhere. The world has a huge number of problems – inequality, corruption, environmental degradation, creeping authoritarianism – and the obvious solution to all of them is to privatize outer space. Duh.

  • “A clear, morally-justified, and efficient system for assigning and governing property rights in space — in land, in other resources, in the vacuum itself, and in anything else that might be found — would present vast benefits,” intones the Adam Smith Institute in a 71-page report that reads like an April Fool, but was in fact published last week.
  • “Alongside growing debate about past and future property-related concerns here on Earth, questions about the possibility and governance of space ownership are becoming ever more pressing.”

So many questions. Why would someone claim ownership of a vacuum? How would they stop someone stealing their bit of vacuum, if someone was so minded to do so? If the solar wind blew their bit of vacuum somewhere else, would it still be theirs? If an earthling can own assets in space, could I set up an off-planet Martian shell company and use it to tax-efficiently structure property in Manhattan? Are there good trust lawyers on Venus? Also, on what planet is this issue “ever more pressing”, because it doesn’t feel like it is here on Earth?

A surprising number of people are talking about the privatization of space, but I still can’t see how it’s even a trillionth bit as pressing an issue as the very earthbound ones of poverty and global warming, and the connected question of whether it’s possible to solve both simultaneously. This is a very interesting analysis of that question by looking at who exactly is emitting the carbon dioxide, and who exactly is poor (spoiler: they are very much not the same people).

  • “The consumption of the bottom half of global carbon emitters was contributing only one-tenth of global carbon emissions. Meanwhile, the lifestyle of the middle 40 percent accounted for 43 percent of global carbon emissions. Consumption of the top 10% was contributing almost half of all emitted carbon dioxide” the report states. “The average carbon footprint in the top one percent was more than 75 times higher than that in the bottom 50 percent.”

The analysis shows that poverty alleviation is possible without substantial increases in carbon emissions, which puts the pressure back on the big per capita emitters to stop stalling and start cutting their output of greenhouse gases.

  • “The inequality is just insane,” one author of the study told Carbon Brief. “If we want to reduce our carbon emissions, we really need to do something about the consumption patterns of the super-rich.”
  • “We often hear that actions taken in Europe or the U.S. are meaningless when compared to the industrial emissions of China, or the effects of rapid population growth in Africa. This paper exposes these claims as wilfully ignorant, at best,” another scientist said.

So, here’s my modest proposal: let’s not worry about giving everyone an equal chance in space, and instead let’s worry about giving everyone an equal chance on Earth. It’s a wild viewpoint. Here’s another proposal: if we stopped super-rich people jetting off into space, for $450,000 a pop, then we’d both cut emissions and oblige them to spend money on something that might help someone else. Win-win.


I have many favorite Onion articles, but perhaps the one I think about the most is this one from 2008, headlined “Recession-Plagued Nation Demands New Bubble To Invest In”, which seems almost bizarrely prophetic of the entire direction of fiscal policy since the financial crisis.

  • “Perhaps the new bubble could have something to do with watching movies on cell phones,” said the Onion’s fictional investment banker. “Or, say, medicine, or shipping. Or clouds. The manner of bubble isn’t important – just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct.”

Anyway, here’s a story about how Non-Fungible Tokens – those bits of the internet you can buy, which are exactly the same as other bits of the internet except that they’re, you know, yours – might have attracted the attention of an entirely non-surprising collection of crooks, who have been selling copies of other NFTS, or making NFTs out of content that doesn’t belong to them, or more of that kind of thing. And here’s NFTs being used to dodge taxes, and to launder money, and to steal money, and so on and so on. 

Last month, the trading platform OpenSea limited the number of NFTs that could be minted for free after noticing that fully four-fifths of everything for sale was plagiarized, spam or fake. But then it reversed the decision after everyone complained. Presumably its clients were demanding another bubble to invest in, which no one is even thinking about correcting anymore.

  • “There’s a spectrum of activity that is happening that basically shouldn’t be happening – like, legally,” said Cameron Hejazi of the NFT trading Platform Cent.

It all makes me feel, like, terribly old.


I blame an oligarchy reader for alerting me to the existence of the Rivers of London series, which was so addictive that it knocked out at least a week of last year. But I have no one to blame but myself for discovering that the same author also writes comic books. I’d like to say I’ve read all The Economic Weapon (the book on sanctions I mentioned last week), and I have started it. But being honest, I’ve mainly been reading comics about wizard police officers and river goddesses, and I’m not sorry.