The United States and its Western European allies have in recent days repeatedly increased economic sanctions against not only the Russian regime, but against millions of ordinary Russians.
It has done this by cutting much of Russian trade and Russian finance out of international markets. Moody’s and S&P Global have both downgraded Russia’s credit rating. The US has frozen Russian reserves and cut many Russian banks off from SWIFT, the international banking communications system. Europe is planning on big cuts to its purchases of natural gas from Russia. The US is mulling a stop on all purchases of Russian crude. The ruble has fallen to a record low against the dollar. Russia is at risk of defaulting on its foreign debts for the first time in more than a century. Many of the sanctions appear targeted at only certain wealthy Russians, but these moves greatly increase perceptions of geopolitical risk for anyone with Russian investments or investments connected to Russia. That means many investors and corporations will “voluntarily” cut back their activities in Russia to reduce risk and because they figure they might be targeted next. Ground-up pressure is mounting also: corporations like Coca-Cola and McDonald’s are being pressured to close their operations—and thus lay off all their workers—in Russia. This means a real decline in overall investment in Russia far beyond just some Russian banks and oligarchs.
The trickle-down effect to ordinary Russians will be immense. Purchasing power, incomes, and employment will be significantly impacted, and many Russians will suffer serious setbacks to their standards of living. The Russian ruling class will be affected too, but given they live much further from subsistence levels, they’ll fare much better overall.
And yet if history is any guide, the sanctions won’t work to get the Russian military out of Ukraine or to achieve regime change in Russia.